There's some truly nutty stuff going on with subsidies. One example is cotton subsidies. Right now we're subsidizing cotton by direct payments and crop insurance. In 2004, the WTO ruled these subsidies to be unfair in a dispute brought by Brazil. To reconcile the dispute, the US started paying Brazil about $150 million per year, instead of ending the subsidies. So now we're paying twice for cotton subsidies.
It's hardly the most freaky, imho. The biggest one, to me, is how the enormous subsidies that US farmers receive directly contribute to global obesity and healthcare costs.
Here's a primer on what sugar (or more precisely, fructose) does by Dr Lustig (of UCSF, if memory serves):
One of the amazing things about our food subsidies is that they skew towards subsidizing things like row crops: wheat and corn, and indirectly subsidize grain-fed meat.
And they don't subsidize things like vegetables.
Now, what do Americans not eat enough of? And it's partly because they're too expensive compared to cheap grains and cheap grain-fed meat?
To be fair, the subsidies exist (if only theoretically) to ensure that America can feed itself in a large scale war. In WWII, the Allies had a lot of success with cutting off Germany's external trade, which significantly reduces their ability to make war. America wants to make sure that if that happens to them, there won't be a famine.
Vegetables aren't a priority in that situation, because they can be easily grown in backyard gardens. On the other hand, row crops tend to be carbohydrate-heavy (perfect for a famine), cheap to produce, and they benefit significantly from economies of scale.
Not amazing. Those subsidies have quite a logical nexus actually.
Most fruits and vegetables can't be stored or transported like grains - unless they are picked before being ripe & at peak nutrition.
Playing games on the supply side is a fool's errand. Incentives become unpredictable, if not counter-productive. Boost demand and incentives will work themselves out. Pay people to live healthy lives and they will drive the farmers to produce healthy foods. Put money on the behaviors you want to see more of - and you will see it. Pay to encourage price stability (farm subsidies) and you'll see price fixing. Pay people who get and stay fit and they will drive the markets to healthier plateaus.
Year-round fresh fruits & vegetables for 300M people can not be grown in the US. You can't subsidize farmers enough for them to make the sun shine longer and breed apples with a 6 month shelf life. You also ought to consider the global effects of shipping fresh food a few thousand miles or more, not to mention the human costs of raising and harvesting all those tasty luxuries.
Grains (and other starches) are stable, travel well (though they can grow closer to everywhere), and can provide an adequate base of energy and fiber within a diet tailored to a healthy individual.
If you want economic incentives done better, tax the fat and transfer it to the fit.
Look what happened with corn subsidies. Now corn is in EVERYTHING we eat. Literally everything. The beef, chicken, and pork you eat has all been fed corn. Every processed food has corn starch or corn syrup or some other product of corn. Most of the words you can't pronounce in the ingredients list are derivatives of corn. And it's all because of ridiculous bills and subsidies and money getting thrown around in big agro. Recommended Read: Omnivores Dilemma
Stiglitz makes a good point about how farm subsidies made sense in the '30s when most farms were small and family owned. They were an antipoverty program then, and only since then were their rules exploited by ever-larger farms.
This kind of rent seeking should not surprise anyone. The market moves a lot more quickly than government. Today's reasonable policy is tomorrow's corporate welfare.
The lesson I take from this: other things being equal, err on the side of fewer programs and regulations instead of more. If you want to help the needy, it's better to use broad-based direct assistance (like food stamps or the EITC) than a more complicated program that singles out some sub-group like farmers.
Give poor people money to buy food, they will likely optimize in fat+ ways. Pay people to be healthy. The needy can be healthy. Put a floor under everyone and then progressively incentivize health.
It makes sense when you understand how DC works, and how corrupt the government is .How many representatives have "farms" and get subsidies? There is no insanity here, it's by design.
Saying that things are "illogic" is insulting.Things make perfect sense, journalists just dont want to admit that US politicians are rotten to the core.
A statistic showing that many representatives have farms would be a lot more interesting than an insinuation that many of them probably do.
The excessively subsidized farms discussed in the article were collecting an average of $30,000 a year. That's nice money, but I can't see a significant portion of the body wasting their influence chasing that around.
That's how the us constitution was set up to suit the rich landed gentry not the huddled masses in the city. Its why agricultural states with tiny populations have more representation in the senate than they should.
Honestly, I was expecting to read some sort of defense of this corruption here in the comments.
There's a certain part of HN that is totally all about rent-seeking. It's what startups do when they create platforms that are only a slight twist on things in order to get everyone to use them, and then if they get enough market share, they can take in rents disproportionate to any value they add.
Sure, there's a lot of productive and ethical startup stuff too. But there's just the undercurrent that if someone is making good money in the marketplace, it's because they are a success and should be emulated. Many people fail to question whether the business is really founded in ethical practices.
I guess, so far anyway, when something is that corrupt and unethical as the U.S. food policy, then even those who knee-jerk to defend anyone rich are not gonna be defending this nonsense. Everyone has a limit to their ability to be in denial about the corruption in our economy…
>There's a certain part of HN that is totally all about rent-seeking.
I find that modern day capitalism is ALL ABOUT rent-seeking.
That's what has halted major advances and innovations in favor of Tumblr's and Instagrams and reduced the number of Promethean Elon Musk like figures to people like Zuckengerg et al.
>I guess, so far anyway, when something is that corrupt and unethical as the U.S. food policy, then even those who knee-jerk to defend anyone rich are not gonna be defending this nonsense. Everyone has a limit to their ability to be in denial about the corruption in our economy…
Well, there's a counter explanation, that they don't think they are defending rich people in this case (e.g they don't consider subsidised farmers that).
It's helpful to realize that questions of price supports (or import tariffs) on agricultural products go pretty much to the very birth of modern economic thought. Smith discusses them in his Wealth of Nations, and one of David Ricardo's first economic essays concerned the Corn Laws (restrictions on grain imports to Great Britain).
Virtually no one in Congress has ever been hungry because they had little or no money and couldn't buy any. But they have lots of experience having people give them money to obtain more for the giver. So you wind up with feed the rich and starve the poor as good politics.
[+] [-] tghw|12 years ago|reply
http://en.wikipedia.org/wiki/Brazil%E2%80%93United_States_co...
[+] [-] ddebernardy|12 years ago|reply
Here's a primer on what sugar (or more precisely, fructose) does by Dr Lustig (of UCSF, if memory serves):
http://www.youtube.com/watch?v=dBnniua6-oM
I wouldn't be surprised if US agribusinesses ultimately end up on the receiving end of lawsuits across the world -- much like tabacco companies did.
[+] [-] greglindahl|12 years ago|reply
And they don't subsidize things like vegetables.
Now, what do Americans not eat enough of? And it's partly because they're too expensive compared to cheap grains and cheap grain-fed meat?
[+] [-] chad_oliver|12 years ago|reply
Vegetables aren't a priority in that situation, because they can be easily grown in backyard gardens. On the other hand, row crops tend to be carbohydrate-heavy (perfect for a famine), cheap to produce, and they benefit significantly from economies of scale.
[+] [-] shadowOfShadow|12 years ago|reply
Most fruits and vegetables can't be stored or transported like grains - unless they are picked before being ripe & at peak nutrition.
Playing games on the supply side is a fool's errand. Incentives become unpredictable, if not counter-productive. Boost demand and incentives will work themselves out. Pay people to live healthy lives and they will drive the farmers to produce healthy foods. Put money on the behaviors you want to see more of - and you will see it. Pay to encourage price stability (farm subsidies) and you'll see price fixing. Pay people who get and stay fit and they will drive the markets to healthier plateaus.
Year-round fresh fruits & vegetables for 300M people can not be grown in the US. You can't subsidize farmers enough for them to make the sun shine longer and breed apples with a 6 month shelf life. You also ought to consider the global effects of shipping fresh food a few thousand miles or more, not to mention the human costs of raising and harvesting all those tasty luxuries.
Grains (and other starches) are stable, travel well (though they can grow closer to everywhere), and can provide an adequate base of energy and fiber within a diet tailored to a healthy individual.
If you want economic incentives done better, tax the fat and transfer it to the fit.
[+] [-] joelle|12 years ago|reply
[+] [-] bjt|12 years ago|reply
This kind of rent seeking should not surprise anyone. The market moves a lot more quickly than government. Today's reasonable policy is tomorrow's corporate welfare.
The lesson I take from this: other things being equal, err on the side of fewer programs and regulations instead of more. If you want to help the needy, it's better to use broad-based direct assistance (like food stamps or the EITC) than a more complicated program that singles out some sub-group like farmers.
[+] [-] shadowOfShadow|12 years ago|reply
[+] [-] camus2|12 years ago|reply
Saying that things are "illogic" is insulting.Things make perfect sense, journalists just dont want to admit that US politicians are rotten to the core.
[+] [-] maxerickson|12 years ago|reply
The excessively subsidized farms discussed in the article were collecting an average of $30,000 a year. That's nice money, but I can't see a significant portion of the body wasting their influence chasing that around.
[+] [-] splat|12 years ago|reply
[+] [-] walshemj|12 years ago|reply
[+] [-] quadrangle|12 years ago|reply
There's a certain part of HN that is totally all about rent-seeking. It's what startups do when they create platforms that are only a slight twist on things in order to get everyone to use them, and then if they get enough market share, they can take in rents disproportionate to any value they add.
Sure, there's a lot of productive and ethical startup stuff too. But there's just the undercurrent that if someone is making good money in the marketplace, it's because they are a success and should be emulated. Many people fail to question whether the business is really founded in ethical practices.
I guess, so far anyway, when something is that corrupt and unethical as the U.S. food policy, then even those who knee-jerk to defend anyone rich are not gonna be defending this nonsense. Everyone has a limit to their ability to be in denial about the corruption in our economy…
[+] [-] coldtea|12 years ago|reply
I find that modern day capitalism is ALL ABOUT rent-seeking.
That's what has halted major advances and innovations in favor of Tumblr's and Instagrams and reduced the number of Promethean Elon Musk like figures to people like Zuckengerg et al.
>I guess, so far anyway, when something is that corrupt and unethical as the U.S. food policy, then even those who knee-jerk to defend anyone rich are not gonna be defending this nonsense. Everyone has a limit to their ability to be in denial about the corruption in our economy…
Well, there's a counter explanation, that they don't think they are defending rich people in this case (e.g they don't consider subsidised farmers that).
[+] [-] wnevets|12 years ago|reply
[+] [-] dredmorbius|12 years ago|reply
http://socserv2.socsci.mcmaster.ca/~econ/ugcm/3ll3/ricardo/p...
All that's old is new again.
[+] [-] coldcode|12 years ago|reply
[+] [-] JoeAltmaier|12 years ago|reply