Agricultural Policy Reform in the United States.

• Author: Innes, Robert

This book was published as one of many backdrops for the 1995 Farm Bill debate, compiling papers presented at the AEI's 1995 conference on agricultural policy. Former Agriculture Secretary Clayton Yeutter introduces the book with an optimistic call to end anachronistic farm commodity programs that remain as carry-overs from the days of the Great Depression. The first two chapters elaborate on this view, one generally shared by economists of all persuasions.

First, Brian Wright discusses both ill-conceived and economically justified motivations for agricultural policy. On the "justified" side of the ledger, Wright argues that good farm policy should: 1) provide the public good of agricultural research, 2) provide environmental amenities and regulate environmental externalities, 3) assist disadvantaged consumers, 4) promote the nation's "food security" by holding food stocks, 5) prevent monopoly inefficiencies, 6) collect and disseminate information, and 7) protect consumer health and safety. On the "ill-conceived" side of the ledger, Wright questions motivations for virtually all of our present-day agricultural commodity programs, programs which distort markets in order to raise and/or stabilize farm incomes. While characteristically thoughtful in his discourse, I believe that Wright goes too far when he concludes that imperfections in agricultural credit and risk markets necessarily do not justify any government corrections. Economic theory provides a case for efficiency-enhancing government interventions in these markets (due to problems of moral hazard and asymmetric information). While the jury is still out on the empirical strength of these theoretical arguments, the U.S. farm depression of the early 1980s is testimony to the economic importance of risk and attendant threats of bankruptcy in agriculture.

Bruce Gardner echoes Wright's critique of commodity programs. In doing so, he thoughtfully decimates economic rationales for current dairy policy and provides a useful discussion of recent history in U.S. farm program expenditures. Gardner goes a step further than Wright by expressing skepticism about the ability of government to do anything right, even when market failures exist and government interventions can, in principle, significantly improve economic efficiency. In view of this distrust of government - and "the sixty year vigorous pursuit of interest-group agendas" in farm policy [p. 79] - Gardner advocates only "limited public...