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.

 

Biggest food policy developments of 2014

Over at Reason.com, Balyen Linnekin has a post where he asked several "experts" to indicate what they thought were the

most interesting food-policy development so far this year—for better or worse—and where they see us heading for the rest of the year.

He asked me to contribute, and I tried to think of a topic that would likely be ignored by others and yet might have non-trivial effects on consumers and agricultural producers.  Here was what I had to say:

After California voters passed an initiative in 2008 banning certain livestock production practices, notably battery cages in egg production, the California legislature, fearful that its poultry producers would now be at a competitive disadvantage, passed a law requiring imported eggs to meet the same standard. Earlier this year, the Missouri attorney general (now joined by five other states) filed a federal lawsuit challenging the California law. Proponents of California's law point to state's rights to set their own minimum quality standards. Opponents posit that the law violates the federal interstate Commerce Clause and they argue that farmers and ranchers should be free to sell to consumers in any state, presuming they can find willing buyers. The outcome could have significant implications for states’ abilities to set their own food safety/quality standards and for the free trade of agricultural products across state lines.

Other commentators mentioned things like the new nutritional labeling standards, the implementation of the food safety modernization act, raw milk and feral hogs, and sriracha.  It seems we all ignored the new farm bill.

I liked this comment on my statement:

So, California is arguing for states' rights (What, are they racist?!), and their opponents are citing the interstate Commerce Clause, hoping that the federal courts will use it to protect an individual's right to buy or sell what they want.

Did I wake up in Bizzaro World this morning?

Comparison of farm technology adoptions

Earlier I posted a graph showing the trend in adoption of the tractor over horses and mules.  It took the better part of 50 years for near full adoption of the tractor.

Presumably, farmers adopted when the perceived benefits exceed the perceived costs.  How does the above compare to a more recent farm technology?  Biotechnology.  Here is data from the USDA

What it took a half a century for the tractor to do, herbicide tolerant (HT) soybeans did in less than a decade. 

Apparently, from the farmers' perspectives, the tractor wasn’t as compelling better than the mule (all factors considered) as was HT soybeans over conventional soybeans!

There are, of course, many reasons for the difference, but they do cast a lot of doubt on the presumption and claims of many anti-biotech advocates that farmers don't perceive themselves better off with the new technology.  Would many be willing to make the claim that, despite their revealed preference as exhibited in their adoption behavior, that farmers perceived themselves (or actually were) worse off with the tractor than they were the mule?  Then, how can that sort of claim be leveled at farmers adoption biotechnology? 

Farm technology adoption: tractor edition

In a paper recently published by the American Economic Review, Rodolfo Manuelli and Ananth Seshardi write on the slow adoption of the tractor in American agriculture:

The abstract:

Many new technologies display long adoption lags, and this is often interpreted as evidence of frictions inconsistent with the standard neoclassical model. We study the diffusion of the tractor in American agriculture between 1910 and 1960-a well-known case of slow diffusion-and show that the speed of adoption was consistent with the predictions of a simple neoclassical growth model. The reason for the slow rate of diffusion was that tractor quality kept improving over this period and, more importantly, that only when wages increased did it become relatively unprofitable to operate the alternative, labor-intensive, horse technology.

A couple thoughts.  It is amazing that, what today seems ubiquitous on the farm, took almost 50 years to reach near full adoption.  The decline in use of horses and mules is quite dramatic.  It is also interesting to see how changes in relative prices (in this case, wages, and the quality-adjusted tractor price) have big impacts on technology adoption.  From a broader perspective, this historical look is a good reminder that the benefits of technologies developed today often take a long-time to fully be realized, and that adoption rates are influenced by a whole host of factors that may, at first blush, seem to have little to do with the technology.  It also reminds us of the risk of rejecting food and farm technologies today.  When we get 50 years down the road, we can't suddenly decide we wish things were different.  It takes time.

Have American Diets Improved?

We are constantly told things like: "Americans have a national eating disorder" (that's Michael Pollen in Omnivore's Dilemma) or that Americans live in a "toxic food environment" (that's Kelly Brownell in the book Food Fight).

How does that hyperbole match up with the facts?  

Maybe Americans were eating poorly in the past.  But are they eating better today?

Recently released research by Tim Beatty, Biing-Hwan Lin and Travis Smith in the American Journal of Agricultural Economics suggests the answer is "yes" - we are eating better.

They write:

Conventional wisdom maintains that the quality of the American diet has been deteriorating for at least the past two decades. In contrast, we document a previously unknown pattern of improvement in U.S. dietary quality. We find statistically significant improvements for all adults over the period 1989–2008, at all levels of dietary quality.

and

Although we find that higher-income individuals consistently have higher dietary quality than low-income individuals, we also find some evidence that the gap is shrinking over the sample period.

and

We also show that most of the improvement in dietary quality can be attributed to changes in food formulation and changes in demographics. Moreover, we find that changes in food formulation help explain considerably more of the improvement in dietary quality for low-income individuals than for higher-income individuals.