Free market economics at t-nation

[Dave Van Skike]

that sounds about right. good work.

[Jason Steele]

Originally Posted by Neal Winkler

Today t-nation posted an article about grass-fed beef, and during the intro, the author had this to say:



Is the first sentence true? Even if it is true, it doesn't follow that no corn would be raised, as farmers would find cheaper ways to produce corn in the absence of subsidization. Of course, I'm not defending corn, not to mention that IMO subsidization of corn is both immoral and illegal (there is no constitutional authority for the federal government to create a Dept. of Agriculture).

At any rate, let's assume that it is true that it takes a dollar more to produce a bushel of corn than the corn is worth. Given the fact that in the absence of subsidization farmers could find ways to make corn production profitable (they just currently don't because they don't need to), there is no telling what the ratio of grass-fed to corn-fed beef would be on the free market. So, the claim that corn-fed beef would not exist on a free market is dubious. Of course it's possible that farmers COULDN'T find ways to make corn profitable, it's certainly the case that subsidization makes things possible would of never come about on the market, but again, one cannot be sure either way.

If memory serves, farmers were on the verge of not growing crops in the post-Depression era because supply was greater than demand, thus the price for agricultural products was abysmally low, and they wanted their piece of the pie too. Good ol' FDR (yes that is sarcasm) instituted many of the limits on farm production that are still in use in one form or another today. By limiting said supply for decades has steadily driven the price of corn (and other agricultural commodities) higher, and the advent of governmental mandates for biofuels has driven it even higher (don't get me started on that one). True free market pressure would bring the price back down to a theoretically agreeable price for both producer and consumer.

It seems like a bit of a stretch of the Commerce Clause to institute such mandates, but I'm no Constitutional authority (although I do agree with the sentiment that the average person's interpretation is just as legit as a supposed experts opinion).

Feel free to correct any of the above, I am but an amateur economist.

[Tom Rawls]

The way the corn subsidies work, actually the large commodity companies--like ADM--are the one who are getting a great deal. They buy the corn at below cost, then the govt tops up their payment to the farmers.

This system goes back to Richard Nixon and his sec of ag Earl Butts (not FDR). The policy was to subsidize farmers to grow more, and have lower prices at the supermarket. It has worked.

If you didn't have the subsidies, farmers would plant less, prices would go up, and voters would expect the govt to solve the problem. This little "socialistic" system is the pet of allegedly conservative Republicans in the Midwest.

[Yael Grauer]

Yes it is true and the book the Omnivore's Dilemma goes into very specific detail regarding this.