Two farm policy ideas

Despite the delays in getting a farm bill passed, the final products is not much different than what it has been in the past. Yes, the names of the programs have changed and the details of how payments get calculated have altered. But, these basic fact remain: the federal government remains heavily involved in production agriculture and hundreds of millions of dollars flow from taxpayers to farmers in ways that distort production decisions and lead to inefficient outcomes.

How do we get beyond this status quo? It will require new ideas.

Here are a couple that I've recently run across (although the ideas themselves have been around a while).

The first is an idea discussed by Graig Gunderson of the University of Illinois and three folks from the USDA, Betsey Kuhn, Susan Offutt, and Mitchel Moorehart. In a piece published by the USDA Economic Research Service back in 2004, they make the case for the devolution of agricultural policy - returning to the states the power to make their own farm policies. They write:

Current agricultural policy is concentrated at the Federal level, rather than at more decentralized levels. In light of agricultural diversity among States and the possible advantages to more local control of government programs, it is time to consider whether this concentration of power may impede the ability of agricultural policy to effectively address the new face of agriculture in the United States.
The authors suggest that about a third of federal spending on agricultural policy can be returned to the states via block grants, and they suggest various means for deciding on the allocations.

Second, Greg Colson, Octavio Ramirez, and Shengfei Fu of the University Georgia, in an article just released in Applied Economic Perspectives and Policy, make the case for crop insurance savings accounts as an alternative to subsidized federal crop insurance. They write:

This research explores the viability of an alternative design for crop insurance based upon farmer-owned savings accounts that are regulated, monitored, and marginally assisted by the government. Such accounts could be an effective risk management tool for many farmers and could operate without major government subsidization. Relative to the current program, the proposed design should exhibit minimal moral hazard and adverse selection problems, and since farm-level risk does not have to be priced, the proposed design eliminates the premium rating difficulties that weaken actuarial soundness and trigger the need for substantial external subsidies. In addition, administrative costs should be considerably lower.
Neither of these proposals is perfect or a cure-all, but they both have some promise in shaking up the status-quo and moving in a more promising direction.