Category Archives: Free Trade
JayG wrote something today about how this summers drought is hitting farmers very hard; which is absolutely true. And it’s already having an impact on food prices, and that impact is just going to grow.
The crop that’s being impacted worst is dent corn, which makes up the majority of livestock feed in this country; particularly beef feed. This is exacerbated by the governments ethanol mandates, which take even more of the feed corn crop out of the feed market.
Over the next couple months, we’re going to see beef prices crash, as ranchers and feedlots come to the end of their stored feedstocks and slaughter more steer than normal (so they don’t have to keep feeding them), and then SOAR to highs we haven’t seen in years over the fall and winter.
Jay points out that some are “blaming subisidies” for the state of things… which I think is silly, you can’t blame subsidies for weather (well… usually… Microclimate and regional climate adjustments due to overplanting can sometimes be blamed on subsidies… but that’s not what we’re talking about here).
But honestly, there’s something that no-one wants to admit, no-one wants to say, and no-one wants to hear in this country….
We have too many damn farmers.
Probably by more than half, at least for some crops.
In particular we have too many grain farmers. In even greater particular, we have far too many corn and wheat farmers.
We have a natural market for corn and wheat that would support… something like half… of the farmers that we have now.
All of those people who are only making money because of subsidies; we really don’t need them growing corn or wheat.
Either they need to grow something else, or they need to sell their land and stop being farmers.
Even the argument that it “keeps our food prices low” is false; because it actually keeps them higher most years. If there were no subsidies, the market would find its natural level of supply, demand, and price; and the resources inefficiently allocated to subsidized crops would simply be allocated elsewhere (and I’m not even going to get into the second order effects of this regime like obesity, HFCS vs. sugar pricing, ethanol etc…).
But we don’t want to hear it.
We are constantly being presented with images of the “struggling family farmer”… And have been for over 100 years.
Shouldn’t that tell you something?
There are plenty of very profitable and prosperous farmers in this country, and plenty of large farming corporations that do quite well…
And who are they?
They’re farmers that grow crops which don’t get subsidies, who have found ways to be economically efficient; or they are farm corporations who have found ways to extract the maximum amount of government benefits.
Again… shouldn’t that tell you something?
When a business is failing, that doesn’t tell you “we need to subsidize it”, it tells you we need to reduce its regulatory and tax burdens and operational restrictions (stop artificially reducing its competitiveness); or we need to let that business die.
Farming is no different from any other business. If it’s not competitive, we shouldn’t be encouraging people to do it (unless it’s of importance to national security, and thus can’t be outsourced or offshored; and even then that’s an iffy one, and we should still be encouraging competitiveness internally ) and we shouldn’t be rescuing or subsidizing it.
Why on earth have we been subsidizing these non-viable crops for 80 years?
Oh wait… I know… it’s because to get elected president, you need to win the majority of Iowa, Kansas, Nebraska, Missouri, Minnesota, Illinois, Indiana, Michigan, and Ohio; and to be elected to congress (outside of a major urban constituency anyway) or win those states in the general election, you have to support subsidies for grain farming.
Right now, these farmers are in an equilibrium trap, where because of government subsidies they can just barely get by; but because of inefficiency, actual market conditions etc… they can’t get ahead
The way to deal with equilibrium traps, is to break out of them completely. You can’t do that by keeping on doing what put you in the trap to begin with; and they’ve been doing that for 80 years.
If we stopped subsidizing these crops, people would take huge losses in the first few years; particularly as their land prices fell dramatically. It would hurt. A few hundred thousand people would take a big hit…
An aside about numbers: there are about 2.3 million “farms” in the united states. 65% of all crops are produced by 9% of all farms (which farm 59% of the agricultural land), and 85% of all crops are produced by 15% of all farms.
Of the appx. 2.3 million “farms”, about 2.1 million are considered “family farms”. About 1.9 million of those farms are considered “small family farms”, which have gross revenues of less than $250,000 per year, and produce less than 15% of all crops. Of those, about 35%, produce about 9% of the total crops in this country and are generally considered viable. 40% are essentially “hobby” or “part time” farms that produce less than 3% of all crops per year. It’s the 25% or so of those 2 million farms, which only produce 3-4% of all crops, and which are basically non-viable, that are the biggest issue.
Oh and 10% of all farms receive 75% of all subsidies, for producing about 25% of all crops. Corn, wheat, cotton, rice, soybeans, dairy, peanuts, and sugar, make up 97% of subsidies. Corn and wheat alone make up 52%, cotton about 14%, rice and soybeans another 23%). The VAST majority of those subsidies go to large corporate feed grain farms in Iowa, Illinois, Nebraska, Kansas, and Ohio, and to Cotton farms in Texas (Texas produces 30% of all cotton in the U.S., with Arkansas, California, Mississippi, and Georgia accounting for another 40%); NOT to small family farmers
And then, we would be better off as a nation; and THEY would be better off as individuals. They, and their children, would no longer be trapped into a just barely livable, just barely getting by, dependent on the government economic condition for decades. They would move to more productive more useful employment. They would be better off eventually, as would the country as a whole.
The problem? Many of them don’t want to. They WANT to be farmers, even though they KNOW it’s a bad business. They love being farmers. They’ve been farmers for generations in their family. It’s all they know, it’s what they’re passionate about, it’s part of their culture and they can’t see ever doing anything else.
Well… I want to be an Aerospace Engineer, and design and build airplanes; or even boats (many boat designers are also aerospace engineers. It’s a very similar field of study). It’s what I trained for, and I love it and am very passionate about it.
But it’s not viable for me.
There are more than enough airplane designers out there for the market as it exists today; so I can’t find employment as an airplane designer. The fact is, very few new airplanes are being designed.
Now, I’m the first to say that we should get the excessive regulatory burden out of the way of the aircraft industry, and if we did that it’s likely that more aircraft would be designed and more aerospace engineers could find jobs…
But would you say that just because I can’t find a job in the field I was educated in, that we should subsidize that field just so I could?
…Well… Sadly, some would… Or at least they would, if the field I was in was politically or socially favored… But anyone with any sense or integrity knows better.
We have romanticized the idea of the “family farmer” in this country for far too long.
The fact is, it is no longer economically viable, nor is it necessary, for many of these people to be farmers, and we should stop enabling the equilibrium trap constantly keep them locked into farming, but always on the edge of failing.
On August 14, 1990, Milton Friedman gave a speech at the International Society for Individual Liberty’s 5th World Libertarian Conference on the subject of libertarianism and humility. There are many adjectives which can be ascribed to libertarians but “humble” usually isn’t one of them. Among the quotable parts of the speech, Friedman said the following:
On the one hand, I regard the basic human value that underlies my own beliefs as tolerance based on humility. I have no right to coerce someone else because I cannot be sure that I am right and he is wrong. On the other hand, some of our heros…people who have, in fact, done the most to promote libertarian ideas, who have been enormously influential, have been highly intolerant as human beings and have justified their views, with which I largely agree, in ways that I regard as promoting intolerance.
In searching for the above transcription of what I thought was very profound and wise, I found a couple of bloggers who thought this particular quotation as “an inadequate defense of liberty” or one of the “failures” of Milton Friedman.
I happen to disagree with these notions.
Maybe because I have been humbled in realizing that I had been wrong on some issues of great importance. By far the most difficult (yet ultimately liberating) post I have ever written was the post in which I declared that I was wrong about my support for the war in Iraq. I was so certain that regime change in Iraq would bring about peace in the Middle East and freedom would take hold. I thought the Ron Paul and big “L” Libertarian position on preemptive war was naïve and dangerous but now I believe the opposite to be true (for reasons I stated in the aforementioned post).
Having experiencing this, I can’t help but think that Friedman was right to say that each of us should be open to the possibility we may be wrong. If we aren’t open to this possibility, what is the point of debating an issue? Obviously, if I argue that X is correct and my opponent says Y is correct, I’m going to do my best to convince my opponent that I am right and s/he is wrong (meanwhile, my opponent is doing the same).
But what if I realize in the course of the debate that my opponent is at least partially right about Y being correct and/or that my reasoning is flawed or the facts do not support X? As a normal human being, I might not concede right away but if I am being intellectually honest, I’ll revise my thinking based on new information or new reasoning I hadn’t considered.
If Milton Friedman was willing to be open to the possibility of being wrong, how could I, someone whose mind will never in the same league as his, be so stubborn?
One thing I notice in watching Friedman debate people who are diametrically opposed to his positions was how patient he was with them. Something that many of us libertarians seem to forget is that much of what we believe to be true is counterintuitive to at least half of the people we encounter on a daily basis because many of these people have not been exposed to our philosophy. Friedman understood this. He knew that much of what he was saying was new territory for many who would hear his lectures or read his books.
Before he could make the case about any of his ideas to others, he had to be satisfied that the facts backed up his theory. These two sentences from the NPR obituary for Friedman summed up his approach beautifully:
Friedman was an empiricist, whose theories emerged from his study of the evidence, not the other way around. He also was a champion of the free market and small government.
We are supposed to believe this to be a weakness? I find this to be so refreshing!
Here’s a follow up to a story I linked back in 2009 concerning the Institute for Justice’s legal challenge to the National Organ Transplant Act of 1984 and the act’s applicability to bone marrow transplants. This is very good news for the roughly 3,000 Americans who die every year while waiting to find a bone marrow match:
Arlington, Va.—The Ninth U.S. Circuit Court of Appeals today issued a unanimous opinion granting victory to cancer patients and their supporters from across the nation in a landmark constitutional challenge brought against the U.S. Attorney General. The lawsuit, filed by the Institute for Justice on behalf of cancer patients, their families, an internationally renowned marrow-transplant surgeon, and a California nonprofit group, seeks to allow individuals to create a pilot program that would encourage more bone-marrow donations by offering modest compensation—such as a scholarship or housing allowance—to donors. The program had been blocked by a federal law, the National Organ Transplant Act (NOTA), which makes compensating donors of these renewable cells a major felony punishable by up to five years in prison.
Under today’s decision, this pilot program will be perfectly legal, provided the donated cells are taken from a donor’s bloodstream rather than the hip. (Approximately 70 percent of all bone marrow donations are offered through the arm in a manner similar to donating whole blood.) Now, as a result of this legal victory, not only will the pilot programs the plaintiffs looked to create be considered legal, but any form of compensation for marrow donors would be legal within the boundaries of the Ninth Circuit, which includes California, Alaska, Arizona, Hawaii, Idaho, Montana, Nevada, Oregon, Washington and various other U.S. territories.
Rowes concluded, “This case isn’t about medicine; everyone agrees that bone marrow transplants save lives. This case is about whether individuals can make choices about compensating someone or receiving compensation for making a bone marrow donation without the government stopping them.”
Those of you that have been around the libertarian blogosphere for any length of time will recognize the name Dale Franks. His main writing gig is over at QandO, where he spends the bulk of his time writing about the economy. In addition, he’s a bit of a gunblogger, and runs a separate blog for motorcycles.
At one point a few years ago I had noticed a link to a book Dale has written called Slackernomics: Basic Economics for People Who Think Economics is Boring. Given that I’m not the type who thinks economics is boring, but had enjoyed his blogging, I wanted to get a chance to read it. At that time, the book was only available in print at a price above $20. It took a spot on my “buy when I get around to it list”, and sat there for quite some time, but I never pulled the trigger. Then, more recently, it became avaiable for the Kindle at only $2.99 — I no longer had an excuse not to buy it. So onto the Kindle it went, and after several long months of sitting there taking up space, I’ve finally gotten around to reading it.
Slackernomics is a primer on basic economic theory that, as the title suggests, is written for people who think economics is boring. It’s written in a convivial tone, and the illustrative examples that Dale uses reminds one more of Freakonomics than of Adam Smith. Don’t let that fool you, though — the book is not a “sideshow” like Freakonomics — it gets to the heart of the matter. I liken it to be similar to Henry Hazlitt’s “Economics in one Lesson”, but written for people who may not be interested in the more formal writing style of Hazlitt. In addition, having been written many decades after Hazlitt’s book, it’s obviously much more up to date.
The book covers everything from price theory, minimum wage & rent control to monetary theory and the business cycle, Keynesianism, taxes / deficit spending, savings & investment, and economic statistics. He continues with a great defense of free trade and a bit of entrance into politics (touching a tad on public choice theory). In all, for being a relatively short book, he hits all the major notes that anyone looking for an introduction to economic thought would need to learn.
But the big question, for readers of this blog, is whether it’s worth it to buy. “Am I going to learn anything new?” And I can honestly say that despite the fact that I read economic books & blogs for leisure, and that I’ve blogged a fair bit about economics myself, I learned some new things from Slackernomics. Dale’s fourth chapter, unwinding the mess of the myriad of economic reports and statistics he’s constantly posting on Twitter, Google+, and at QandO, was wonderful. I’ve looked at many of these reports merely reading analysts *reaction* to the numbers (Higher jobless claims? How unexpected!), but rarely understood which group (public or private) was putting out certain reports nor how they all fit together. For me, a layman who is conversant on a lot of economic theory but not as perhaps on the technical reports, I have never seen an explanation of the reports that come out each week and each month as simple and readable as that chapter. That was more than worth it for my $2.99.
So my recommendation is simple: at $2.99, if you have a Kindle (or a device with a Kindle app), it’s hard to pass it up. You’re almost assured to get your money’s worth from the book. Even further, if you know someone in high school or college that may not have received good schooling in economics (which is, unfortunately, most of them), and who isn’t exactly about to tackle The Wealth of Nations, find a way to get them a copy of Slackernomics. Dale’s writing style will keep them interested.
All in all, it’s a book that lives up to its title, and goes well beyond.