Agriculture's Pest Is Politics

The Governing of Agriculture, by Bruce L. Gardner, Lawrence, Kansas: Regents Press, 1981, 176 pp., $17.50/$9.50.

The Governing of Agriculture by Prof. Bruce L. Gardner (not a relative of mine, unfortunately for me) is an extremely important book for all who understand and value liberty. It presents a convincing case for letting free markets allocate resources in agriculture. Its short length is at once one of its principal merits and perhaps its only shortcoming. On almost every page, the thoroughly absorbed reader will hanker for more discussion and more evidence in support of the arguments advanced; but by the same token, the small investment in time needed to read the entire work ought to make the book attractive to those who place a high value on time.

To the uninitiated, American agriculture is quite an anomaly. It is often regarded as the most competitive of all economic sectors, and yet it is one of the most regulated and controlled by the government. These are not necessarily incompatible notions, however, as Gardner shows. Agriculture is competitive in the sense that it consists of many hundreds of thousands of decisionmaking firms that are relatively free to enter and exit the industry and individually are unable to influence the market prices of their inputs and outputs. But it is also true that practically all decisions made by the farmer are affected by the thousands of governmental policies and regulations lurking everywhere. Gardner's book enables the reader to see the big picture, to understand why policies and regulations were imposed, and especially to see that in the aggregate these policies and regulations have diminished the per capita income of the average American family.

The primary thrust of the book is revealed by a couple of brief quotations from the first chapter:

US agriculture is today in the process of becoming a regulated industry. The types of regulation include governmental involvement in the pricing of farm products, regulation of farm output and techniques of production, direct governmental provision of services (land and water development; research and extension; storage of products), and regulation of the content, grading, and labeling of food products.

Over and over again, governmental action with regard to agriculture has been undertaken out of dissatisfaction with prevailing market prices. And over and over again, these actions have come to grief because it has been found that the attempt to establish different prices has created either surpluses or shortages.

Why is it that agriculture is so tightly regulated by such a variety of policies? Many of them, such as price- and income-support programs, were initially understandable because per capita farm income was far below that in the nonfarm sector. Gardner believes the current income situation does not warrant income transfers, however. Adjustments in farm size, capital infusions into agriculture, efficiency-inducing technological advances, and especially a diminution of labor use in agriculture have made returns to labor and capital virtually equal with the nonfarm sector.

Gardner deftly disposes of other rationales for regulation as well, including: the theory that unregulated markets for farm products cannot cope adequately with instability, the theory that agriculture has other special characteristics that unregulated markets cannot properly handle, the theory that farmers cannot obtain fair returns in an unregulated marketplace, the theory that governmental intervention is necessary to countervail the actions taken by other governments, and the theory of the threat by large-scale mechanized farming. If anything, in an attempt to be fair, Gardner allocates more than adequate space to describing the case for these theories. But then, with a judicious blend of economic logic and empirical evidence, he demolishes the arguments one by one. He shows that either government intervention has been largely ineffective in reaching the goals sought or private institutions (for example, private-sector stockpiling, insurance schemes, futures markets, and commodity "put" options to combat price and yield risk and instability) would be much more efficient in solving the problems that exist.

The chapter on the "public interest in agriculture policy" is especially powerful and revealing. Gardner shows, admittedly roughly, how the commodity programs in wheat, feed grains, rice, cotton, tobacco, sugar, milk, etc., transfer wealth among producers (landowners, principally), consumers, and taxpayers. In general, producers (landowners) gain at the expense of consumers and taxpayers. More importantly, the gainers gain less than the losers lose, resulting in a net social loss that amounts to between $2 and $6 billion annually. Gardner gives us a most compelling argument that unregulated markets, buttressed by services that would be offered by the private sector if the government were out of the picture, would be far more effective in promoting the public interest than the hotchpotch of public policies currently governing agriculture.

The book is thoughtful, methodologically innovative, and thoroughly convincing. It should be widely read. Its message may become increasingly influential as current policies become ever more costly to consumers and taxpayers and as we attempt to extricate ourselves from the morass of agricultural policies that have become so onerous to producers, as well.

Delworth Gardner is a professor at the University of California, Davis, in the Department of Agricultural Economics.