Farm Subsides Strangle Free Market Innovation

This is something that needs a lot of attention as our future depends on an expanding food supply. If the system that's now in place prevents new entrants and protects those that hold the reigns of control, then our future farmers and the innovations that new blood will bring will be stifled.

Without innovation and new thinking, growth will be just more subsides and the status quo, and that will not be acceptable as the population demands more for less.

Farm Subsidies: A Burden on the Young
Source: Matthew Mitchell and Christopher Koopman, "The Growing 'Grain Drain'," U.S. News & World Report, September 24, 2013.
October 2, 2013

The vast majority of economists oppose farm subsidies. Why do economists -- who so often disagree with one another -- speak with one voice on this issue? One explanation is that farm subsidies are not only inefficient, in the sense that they make the overall economic pie smaller, but they are also inequitable in that they transfer resources from relatively poor consumers and taxpayers to relatively wealthy farm owners, say Matthew Mitchell, a senior research fellow, and Christopher Koopman, a program manager, at the Mercatus Center.

Furthermore, farm subsidies may actually be a burden to the young and aspiring farmers that they are intended to help.

• Bo Bigler, a 25-year-old aspiring farmer, complains that, "The price to buy into it, it's too much; the cost of land is unreal ... the only way that somebody can get into it is if a ranch was handed down to them, unless they're millionaires to begin with."
• According to the Department of Agriculture, for each farmer under age 35, there are six who are 65 years old or older. And this imbalance continues to grow.

So what is causing this "grain drain"? Many of these young Americans are citing the cost of entry as the primary reason for choosing to enter other professions. Proponents of increased farm subsidies argue that more generous government assistance is needed to entice more young people to farm.  However, this is likely to make matters worse.

• Nearly four decades ago, economist Gordon Tullock described this phenomenon as the "transitional gains trap."
• According to Tullock, many government programs (including farm subsidies) that privilege particular firms or industries only help the initial beneficiaries who were there at the programs' inauguration.
• Over time, the value of these benefits is built into the price of assets like farmland, leaving later generations to pay higher prices to enter the privileged industry.

What, then, are we to do? Perhaps the first step is to recognize that today's farm subsidies make land more expensive for tomorrow's new farmers.