David R. Henderson  

Galbraith on Helping Farmers

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In his book John Kenneth Galbraith: His Life, His Politics, His Economics, Richard Parker tells us that Galbraith's first specialty in economics was agricultural economics. As a result of earning his Ph.D. in ag econ at Berkeley and having the right connections, Galbraith ended up teaching ag econ at Harvard in the early 1930s. Here's how Parker describes Galbraith's approach to his research in the area:

Galbraith's audience might be economists, but his constituency was the American farmer. Implied throughout (when not explicitly stated) is the belief that stable incomes and reasonable profits for farmers and an ongoing central obligation of government to assure decent incomes and profits (not just when markets fail) should be agreed on.

In other words, Galbraith was working to promote the interests of farmers, even when markets weren't failing. His goal was to make sure that farmers had "stable incomes and reasonable profits." It's not surprising, therefore, that he advocated price supports for agricultural crops.

Because Parker is such a fan of Galbraith and possibly because he seems to have, at times, a tenuous grasp of economics, he doesn't seem to think that he needs to justify Galbraith's approach. He doesn't even seem to think that there's an issue here that most economists would immediately wonder about: how do you justify transferring wealth from the rest of society to farmers?

Government policy to assure farmers' incomes imposes deadweight losses on taxpayers, consumers, or both (depending on the form the policy takes). Why should farmers be a favored constituency? Parker doesn't say. More important, he doesn't give any idea of what was going on in Galbraith's mind that led him to tilt his research toward a special interest group. Maybe it was simply the fact that Galbraith grew up on a farm. But one thing that economists typically learn, no matter what program they're in, is to put aside narrow parochial interests and think about the general welfare. Galbraith didn't seem to do so. Why? It's a puzzle.


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COMMENTS (14 to date)
Arthur_500 writes:

The Great Depression, the Irish Potato Famine, etc, etc all showed that farmers could be vulnerable to losing everything. The loss of farmers would be a great loss to the population as there would be no food to eat.
In my lifetime I watch, and have lived in, farmland that was converted to housing. The value of that land as housing far exceeds the value of that land as farmland. Farmers can't pay taxes and must sell off the land.
This conundrum of the value of food versus the value of development remains unsolved. Because of the lag time the markets are inefficient. Is there a place for gubment intervention?
One community in southern Massachusetts has designated itself as a farming community. Wealthy people have built million dollar homes on farms that remain working. One unintended consequence is that the people who work the farms could never afford to live in the town.
Alas, for all these years we still remain unable to resolve this conundrum and/or foresee the unintended consequences of gubment.

Tom West writes:

I think the public accepts this transfer because they don't trust that it's necessarily in the natural economic interest of farmers to ensure that they can supply all the national food needs at all times.

It may well be profit-maximizing to structure one's farming such that, in the unlikely event of war or even foreign crop failures, the nation may face famine. Incentives might be required to get farmers to act in a fashion not directly in their own self-interest.

Thus the public may well accept intervention what they see as increasing their food security, even at cost to themselves and to the benefit of farmers.

Tom West writes:

Addendum: this assumption about the need for the general public to pay a premium for food security would be almost automatic for anyone who saw the effect of famine on Germany (and to a lesser extent, England) in WWI and England in WWII.

MikeP writes:

More important, he doesn't give any idea of what was going on in Galbraith's mind that led him to tilt his research toward a special interest group.

That is actually very surprising.

It may be debatable, and it is likely wrong, but the economic argument for supporting farmers is really trivial, as the prior two commenters note. Farmers have extremely high-variance income with a high correlation among farmers' incomes. A few bad years could wreck an awful lot of food production.

Yes, you (and I) can blah blah blah about private insurance and commodity futures and hedging and more efficient allocation and blah and blah and blah. But there is clearly a potential role for government policy to explicitly smooth farmers' income and thus provide at least perceived security to the nations' food supply.

That the author didn't even include a throwaway paragraph carrying that core argument in a biography of an agricultural economist is astonishing.

Alex Godofsky writes:
It may be debatable, and it is likely wrong, but the economic argument for supporting farmers is really trivial, as the prior two commenters note. Farmers have extremely high-variance income with a high correlation among farmers' incomes. A few bad years could wreck an awful lot of food production.

Yes, you (and I) can blah blah blah about private insurance and commodity futures and hedging and more efficient allocation and blah and blah and blah. But there is clearly a potential role for government policy to explicitly smooth farmers' income and thus provide at least perceived security to the nations' food supply.

This is ridiculous, and it's even more ridiculous that people take stuff like this seriously.

1) The idea that America - America - needs government intervention to provide "food" security is absurd on its face given how much we export.

2) Please provide an example of a time when we didn't have enough food because lots of fertile land was left fallow (NOT because droughts, etc. had made it actually impossible to grow enough food!).

MikeP writes:

It may be ridiculous, but it is not patently so and is the basis of farm policy for 80 years.

1) How much did the US export in the 1930s when the socialists were ascendent and the crops were failing?

2) That's the best argument against farm policy there is (I called it "more efficient allocation"), but it will not fly too far in the presence of an interventionist.

...it's even more ridiculous that people take stuff like this seriously.

We live in a country that subsidizes sugar for goodness' sake, as well as airplane exports and home "ownership". This level of ridiculous is par for the course.

Jack PQ writes:

(1) There is a coherent, though dubious, case to be made that food security is a component of national security and that US farming thus provides a positive externality. But that Mr. Parker does not even bother to provide an argument (dubious or not) is amazing.

(2) Farm support in the 1930s and farm support today are different beasts. Back then it might have been "mom & pop" farms lacking financial credit and access to insurance. Today, it is corporate welfare.

MingoV writes:

@Tom West: The claims that farmers have a unique business that needs government protection are wrong. Government protection of farmers will not protect the nation from famine; it will only protect the farmers' bank accounts. If all available farm lands were planted, we could increase food production by at least one-third, so the sale of some farms to developers is not devastating.

Every smart farmer knows that unpredictable circumstances can lead to low crop yields. Two things keep such situations from being catastrophic: crop diversity and saved money. I grew up among farmers who never received a dime in federal subsidies*, and their farms had survived for generations.

*Crops such as potatoes, beets, carrots, lettuce, cucumbers, tomatoes, peppers, beans, peas, etc. do not get subsidies. Those are reserved for agribusiness crops such as wheat and corn.

John Jenkins writes:
*Crops such as potatoes, beets, carrots, lettuce, cucumbers, tomatoes, peppers, beans, peas, etc. do not get subsidies. Those are reserved for agribusiness crops such as wheat and corn.
I think you might have this backward, that is, agribusiness gravitates to the subsidies ( and, of course, then lobbies for even greater subsidies!).
Mark Brophy writes:

What is food security? It must be something like energy security, Social Security, national security, middle class security, and border security. It seems like we're an insecure fearful nation.

How does a government persuade the people in the richest large nation to be insecure? It must be a determined propaganda campaign honed through decades of similar efforts to justify government programs.

What's the point of being rich? Doesn't it enable us to avoid the insecurity of living hand to mouth like poor people? If we think like poor people, can it be truthfully said that we're rich?

Tom West writes:

First off, let me say that I'm not defending agricultural subsidies, I'm explaining why someone like JK might not have felt any need to explain why he felt it necessary. He probably also didn't feel any need to explain why one needs an army, given he'd lived through two world wars.

Secondly, the idea that you can instantly put land into agricultural use is plain silly. Make no mistake, it would take at least a year or two to make major changes.

Thirdly, yes, the US & Canada are the two countries on earth that *least* need to worry about food security.

Fourth, of *course* food security is going to put money in farmers pockets. Spending on an army puts money in soldier's pockets. In neither case do we expect farmers or soldiers to provide our "insurance policy" for free.

Fifth, in the US, food security is almost certainly just a cover for transfers to rural constituents.

Lastly, as is evidenced by the last crisis, in the event of wide-spread difficulty, countries that expect that foreign farmers will be permitted to ship them food just because they offer the best price will be sadly disappointed.

Carl writes:

MikeP wrote:

But there is clearly a potential role for government policy to explicitly smooth farmers' income and thus provide at least perceived security to the nations' food supply.

What does it mean to say "there is clearly a potential role"? Are you saying that the policy is good? Or that the policy is bad but a canny government could pull off the trick?

You seem to admit that the "because we will all starve" argument is a fairly woeful one. But it's the perceived food security which needs to be shored up? Perceived by who? People who aren't as clever as you? Well, why not tell them (and us) about it instead of pandering to people's ignorance and the tendency of government/special-interests to take advantage of it?

MikeP writes:

Well, why not tell them (and us) about it instead of pandering to people's ignorance and the tendency of government/special-interests to take advantage of it?

At other times I do. But here and now my point is that there is at least a plausible argument that Galbraith and his ilk could make, and it is surprising the author did not make it.

I don't have to agree with the argument, nor do I have to prove it wrong, to make that point. Consider it an ideological touring test.

Tracy W writes:

In NZ, farmers aren't subsidised (they can do some tax payment smoothing) and generally haven't been subsidised, except in the final years of the Muldoon government, which subsidised and regulated everything. Apparently Muldoon thought The Path to Serfdom was a guidebook.

In NZ farmers are also a major export earnings source, which really inclines me towards the public choice theory of subsidies - the reason NZ farmers don't get subsidies is because there's no larger group to pay them the subsidies while barely noticing the higher taxes.

I've never heard of a shortage of food in NZ, leaving aside affordability issues during the 1930s and 1880s depressions. And of course the Great Marmite Crisis after the recent Christchurch quake.

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