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Last updated: Jul 27th, 2011

Agricultural Subsidies:

Agricultural subsidies refer to government subsidies (payments) to the agriculture industry. Subsidies can take several forms, such as buying up crops at guaranteed prices (which amounts to price fixing, a form of market intervention) or outright payments to farmers or farming corporations, subject to certain conditions.

As a general rule, I tend to be opposed to agricultural subsidies for several reasons. One is that I tend to not like the idea of market interventions, as they undermine the free market and often cause a substantial amount of economic harm. A second is that they are costly. A third is that they are arbitrary, which causes deep problems in the long-run as industries restructure in order to game or exploit the subsidy structure, which leads to ballooning costs and shrinking benefits. Agricultural subsidies, in general, are thus highly unsustainable.

Alternatives to agricultural subsidies:

I think that taxes are a more sound way to regulate agriculture. For example, if the government wishes to protect small farmers, a tax based on the size of a farming operation could have this effect, while allowing the free market to continue to operate, and without making any outright payments to any farmers. As another example, if the government wishes to encourage organic farming practices, the government could tax synthetic inputs to the agricultural systems, such as synthetic fertilizers, or synthetic pesticides and herbicides.

All tax revenue gathered through agriculture-related taxes could then be used to pay for government expenditures on agricultural programs, and if the revenue exceeded expenditure (which in my opinion is an ideal goal to strive towards), the tax revenue could be used to offset other taxes, such as income tax or sales tax, or used to close deficits and pay down debt.

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