Reasons to subsidize some of California ag.

Secretary of Agriculture Vilsack talked to Ezra Klein on the phone, and couldn’t come up with any practical reasons to subsidize agriculture. He relied on an assertion that rural folks are, like, totally awesome and great people and the repository of American values.  Ezra Klein sensibly replied that so are most people, including city dwellers*.  Klein is a better person than I am, so he didn’t offer the perspective that rural folks also include unsavory types (like narrow-minded bigots and meth-heads) right along with the awesome ones.  But we don’t have to debate the quality of rural souls, because even if they are all shining angels, we don’t generally support people for awesomeness.  We pay them to produce something that society wants or because we want to correct a classic market failure.   There are substantive reasons that I would subsidize some forms of ag in some parts of California.  I shouldn’t have to do Secretary Vilsack’s work for him, but here goes.

I would support subsidies for a type of Californian agriculture that looks a lot like the original vision of the Reclamation Act.  I don’t support indirect subsidies, like:

  • artificially cheap water, or
  • allowing negative environmental externalities (like fertilizer or pesticides in tailwater), or
  • tariffs on imported crops,or
  • guaranteed price floors, or
  • payment to not-grow a crop.
  •  

    But I would like to see a certain type of agriculture in the state, and would be willing to spend our collective money to directly pay farmers (of the sort I like) to exist.

    Promoting dense, interlinked communities that support a lot of additional jobs.

    If agriculture escapes the expansion treadmill, it can provide a decent, outdoors, self-directed life for people willing to work extraordinarily hard.  It converts sunshine and water into storable calories at a fairly constant rate (except for disasters).  As the first producer of a resource, it can support a large number and variety of secondary jobs, in processing and support.  It has been and should be possible to support densely interlinked towns with a variety of jobs on agriculture.  You can see the remnants of those towns along the 99, with attractive abandoned main streets.  That model isn’t necessarily economically efficient, however, and gets undercut by large-scale agriculture.  Farms and towns like that are, however, pleasant things to have in one’s state, for the quality of life they provide their residents and for local tourism.  So long as we are wealthy, I want us to buy more of those.

    Entry point for migrants

    I don’t think of farming as unskilled labor, but it is a sector that can use the labor of people who don’t have formal educations.  Agricultural skills from their countries of origin may be useful in agriculture here.  I subscribe to the “Give me your tired, your poor” vision of America.  If we are to accept immigrants, it is good to have work available to them that doesn’t rely on formal schooling or draws from their existing skills.  I am also in favor of paying farm laborers decent wages, which would likely increase the cost of food.

    Farms look nice.

    I suppose the technical way to say this is that farms produce positive externalities: preserving open space and being visually interesting.  What I really mean is that I love the look of a working landscape.  I’ve got it bad; I even like the monotonous industrial ag by the 5.  Of course the smaller farms are more intriguing, with orchards that bloom and jumbled up machinery and little lambies that wave at passing cars.  I want to see small farms around, because they are often places that have absorbed decades of attention and work.  Farmers develop systems, and systems are always fascinating.

    Providing food security.

    Strangely for someone who predicts a third of the state’s irrigated agriculture will be retired in the next few decades, I take food security very seriously.  I don’t think we’re at risk of not providing enough calories for our people, first because we export lots of them out of the state and second because we waste 90% of the calories from field crops converting them into meat and dairy.  Even with two-thirds of the irrigated acreage in the state, we can grow plenty of calories for direct human consumption as soon as prices tell farmers to do so.

    However, I would like us to retain the capacity to do that.  I have never understood the argument that we should specialize in something else that makes more money and use the extra money to buy food from elsewhere.  That may be rational in average or good years, but it leaves us fundamentally vulnerable when things go bad.  First, when food is scarce, it become infinitely valuable; even if we are relatively wealthy, what would we have to spend to extract it from another country?  If they have barely enough (which is when we’d need it), they won’t sell it at any price and what?  We take food from another hungry country by force?  This is morally untenable and not practically do-able.  Besides all that, why?  Why let ourselves get into the position of ever depending on some one else for the most immediate and powerful of necessities.  Money itself is not exchangeable enough in famine, and you can’t eat it.  I’m sure this sounds like a straw man but I have had economists earnestly promote this notion to me, so you begin to understand the source of my scorn for them.

    Working landscapes can also support wildlife.

    Farms can support biodiversity, if they are managed to do so.  More farmed acres might be managed to do so if farmers’  livelihoods didn’t depend on pure industrial production.

    Improves my urban quality of life.

    Having small agriculture nearby increases my quality of life, primarily by offering me greater diversity of produce than I’d otherwise have.  There are plenty of food-porn sites that will rhapsodize about farmers’ market shopping and fresh food, so I don’t have to do that here.  Besides, supermarkets have pretty good produce departments these days.  Nevertheless, I find shopping at farmers’ markets to be a nicer experience with a greater variety of produce over the course of the year, especially when a cute market Betty offers me samples.  Those markets are only possible when there are farmers nearby growing produce for local consumption.

    Building on comparative advantage.

    California has fantastic natural advantages for agriculture, in climate and soil.  We’ve invested heavily in infrastructure to develop that further.  You probably think I mean the water projects, but I’m actually thinking of our ag colleges.  It sounds silly to say the self-evident out loud, but it is important to produce food and fiber; places that are good for that should do so.  This is likely true of agriculture in the rest of the country, and Vilsack should have been able to say specifically why, but we all know that I don’t care about those other places.

    Overall:

    It is hard to argue that we should support (essentially) small truck farms, because what we would be getting in exchange is largely abstract.  We would be maintaining food-production capacity.  We would get the view of small farms.  Urban dwellers would get some qualitative experiences, like shopping at farmers’ markets or having intricate ag-based towns in the state.  We would also get resilience, since complex systems with diverse elements do better under stress than simplified systems.  So it is hard enough to say that the collective state should buy these abstract things.  It is even harder to make the case when economists offer specious counter arguments.

    The counter argument from traditional economics is that the market itself has proved that people don’t want those abstract things as much as they want cheap food.  This is why I have severe doubts about markets; markets only let people express choices for narrow economic efficiency.  It is difficult to express any other choice in a market; if I deliberately pay more because I want to support boutique agriculture, is it clear that I’m doing that so they’ll pay laborers decent wages and clean up their ag run-off?  Or will some middleman snag those extra dollars, and the grower never gets that information from me.   But in a market, you can always send the signal that you want cheap food.  Purchasers’ ability to signal their preferences is asymmetric in a market, perpetually biased towards economic efficiency.  I won’t address incomplete information, because it is patronizing when advocates say that “if the public really knew, they’d support what I think.”   But I add that people have inconsistent time preferences.  They may want the abstract things I mentioned on an on-going basis, but sharply prefer to spend less on groceries in the moment.  This is why I doubt that markets reflect people’s true feelings.

    Finally, direct payments to farmers (to be the kind of farmers I want) are necessary because they consistently work with very high risk.   They absorb climate variability, which will become even more volatile.  If they are not perfectly resilient, we’ll lose a few with every shock.  Since I value their capacity, I think we should pay them to bridge them through disasters.  (I know insurance could handle this, but humans are not very good about risk and insurance, so handling that should not be left to the individual (in any context, car or health or crop failure).)

    I don’t know what structure payments like that could have.  But if the vision were clear, direct subsidies could be shaped to deliver that.**  If we were buying the type of ag we want, we could also include ways to help new farmers enter the ag sector.  I know a fair number of people who think they want to farm.  I don’t believe most of them, but none of them get to try, because it is so hard to buy large farms (to compete at the economically efficient scale) and they can’t afford health insurance.

    Those are my reasons to subsidize some forms of agriculture, and none of them have anything to do with inherent awesomeness of country folk.  They are self-interested reasons urban people should spend money to stabilize and promote ag.  Secretary of Agriculture Vilsack can thank me later.

     

     

    *This, btw, is why I have no truck with farmers who argue that their way of life is precious and endangered and Californian.  Yes, well, that is equally true of some cool ethnic community in Los Angeles.  But there are many, many more of the Los Angeles precious communities.   I don’t accept the premise that one is better than the other, so I go by volume.

    **Which is why I was so disgusted with the outcome of the Ag Vision process.  It didn’t come up with a vision.  It said, what we’re doing now, plus some strategies that will presumably get us to a nebulous better ag sector later.  I want a clear vision (6 million irrigated acres on the east side and Sac Valley, with locals in stable complex towns that sell produce and grains to me), and then strategies to get from here to specifically there.

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    7 Comments

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    7 responses to “Reasons to subsidize some of California ag.

    1. Mr. Kurtz

      Once you subsidize something, you mis-price something, and create all sorts of dependencies and irrational responses. California agriculture succeeded largely on the basis of “non program” crops. The US cotton and rice programs damaged, rather than helped California growers, since it encouraged market flooding production in high cost rival states, where the subsidies made the difference between planting and not planting.
      The decline of rural towns across America will not be stopped by giving handouts to certain members of the business community, and ignoring others. Painful as it is, it may well be that many of the the little towns are simply obsolete, like phone books and slide rules. But Americans are unusually creative and energetic, so they may be reinvented in some way I can’t imagine. Aside from requiring phone carriers to provision their entire service area with broadband as part of residential service tariff (something shamefully neglected, still), there is little government can do to make things better for these places.
      We certainly are fortunate to have such a successful and innovative ag industry in California. And there are a lot of wildlife/aesthetic benefits to “working landscapes”. But it is a risky business, like running a restaurant or playing the guitar, and a lot of individuals will fail, even if the industry grows and prospers.

    2. TChris

      (excised by OtPR)
      (excised by OtPR)
      We need to talk more about how cool this blog is.
      You can delete this comment if you are embarrassed about my gushing…

      [Edited for dignity. Honestly, TChris. There’s no need for that. Thank you, though.

      Weather’s getting nice. We should go canoeing again. Did I tell you I bought a new bike? Electra Ticino 1, in grey.]

    3. onthepublicrecord

      you mis-price something, and create all sorts of dependencies and irrational responses

      1. That assumes the market price is the “right” price, which is wrong. The market price leaves out externalities (like damaged rivers), and forces costs to be borne in other ways (like inhumane working conditions for laborers, or extra misery for cattle). If you believe my paragraph about how the market does not capture customer preference, then market prices are as wrong as prices set other ways.

      2. Other people may call those dependencies and irrational responses their “jobs” and “communities” and “quality of life.” Those are perfectly respectable policy choices for a political system to favor, even if they aren’t economically efficient. Economic efficiency is only one value among many. So long as we are wealthy, we may spend that wealth on buying stable small ag for the reasons I listed.

      The US cotton and rice programs damaged, rather than helped California growers, since it encouraged market flooding production in high cost rival states

      This is why I don’t favor indirect subsidies. I always marvel at people who say that subsidies don’t work. They work plenty well, populating the west and creating vast corn surpluses. They don’t always match our intended policy outcomes, but that is because desired policy outcomes change over time and subsidies haven’t, and because the subsidies are often indirect (like cheap water, which promoted water use when what we really wanted was the west settled).

      there is little government can do to make things better for these places

      We could make policies and payments that insure that growers don’t have to accumulate large pieces of land to afford their inputs, like machinery which needs even more land to make worthwhile. We could remove barriers to entry for would-be farmers (for whom I don’t predict a high success rate), like single-payer health care. We can backstop them and their workers during drought.

    4. Bob

      Hi On,
      Thank you for attempting to answer this important question. My a priori bias is definitely anti-subsidy. That said, I’m happy to see you oppose indirect subsidies.

      That said, there is a reason that we do indirect subsidies. It will always be easier to sell the public on indirect subsidies like lower energy bills for senior citizens and low gas taxes than direct cash payments directly to people for having certain demographic features.

      So starting off with the fact that your solution seems like a hard sell, let me comment on your reasons.

      >Promoting dense, interlinked communities that support a lot of additional jobs.

      I’m not really convinced that increasing ag jobs relative to other jobs is a valid goal.

      >Entry point for migrants

      There are other entry-level jobs. There will always be entry level jobs as long as there is a workforce willing to fill them. Also, again I don’t really know that we should have a public policy goal of increasing the number of low-paying jobs. If anything, it seems like we should try to do the opposite.

      >Farms look nice.

      So does wilderness.

      > Providing food security.

      This is the first reason I can sort of understand. That said, I don’t know how close we are to not having enough food to eat. Also, we’ve done ok without energy security. We do get recession-inducing price spikes, but we manage.

      >Working landscapes can also support wildlife.

      But not as much as wilderness can support wildlife. Predators in particular tend to be targeted in all countries. Reserves primarily exist in many places to protect certain species from encroaching small-scale farms.

      >Improves my urban quality of life.

      I agree! And the food is much better!

      But that’s why we pay an unholy amount of money in advance to a local farmer for a farm share. In return for awesome food, we are exposed to the risk that the crop won’t do well and returns will be low.

      In other words, there already is a mechanism to compensate people for the advantages they confer on our lives. That is internalized in the costs we pay.

      >Building on comparative advantage.

      Eh. Ok. I imagine California has a lot of advantages though. Why encourage specifically agriculture?

      >It is hard to argue that we should support (essentially) small truck farms, because what we would be getting in exchange is largely abstract.

      Eh. I wouldn’t say what you are saying is abstract so much as qualitative. I agree that people tend to underweight the value of qualitative factors and overweight the quantitative ones.

      >Purchasers’ ability to signal their preferences is asymmetric in a market, perpetually biased towards economic efficiency.

      This doesn’t seem true to me. If it is, how did Hummer become a success story however temporarily? Why does Verizon have the most subscribers in the country coupled with the highest prices?

      I like having a farm share, and I pay for the privilege. It is true that I can’t communicate through my purchase my preferences to the farmer, but in aggregate things do seem to be communicated anyway through customer switching behavior. We don’t always end up with the cheapest of everything regardless of other considerations. (I admit that it often feels that way though.)

      >I won’t address incomplete information, because it is patronizing when advocates say that “if the public really knew, they’d support what I think.”

      It’s patronizing, but actually perfectly valid. “We’re from the government, and we’re here to tell you what you should eat and how it should be produced is patronizing, and it presumes that a government hack knows more than an individual does about what that individual wants, but a government hack who specializes in understanding one particular thing 10/hours per week is going to become a pretty knowledgeable. I wouldn’t necessarily be averse to taking some of their recommendations to heart when I might otherwise be buying on the basis of which comes in the more pretty bottle.

    5. onthepublicrecord

      So does wilderness.

      Wilderness doesn’t have lambies. Thank you, lambies.

    6. onthepublicrecord

      Also, so good to see you, Bob. It has been a while.

    7. Mr. Kurtz

      People certainly do enjoy community and many of the other things provided by small town life. They do not enjoy other things there; say, being gay, having reactionary schools, or shopping for a limited selection of expensive goods. It is information (largely television), changes in business models, and changes in our society that are destroying the old small town model. We are now having to re-invent how we can re-create places or institutions to give us the feeling of community that is as essential to human nature as our need for theater, music, and communal eating. Our species has done this with reasonable success for a very long time, and probably will continue to do so.

      In the first volume of Caro’s biography of LBJ, there is a very moving account of the way Rural Electrification changed the lives of the rural poor, almost instantly. That, and the Farm-to-Market road system were indirect subsidies that actually did a lot of good. Imagine what our environmentalist friends today would say about such ideas, which killed thousand sin road accidents, electrocuted countless owls, changed land use patterns, and basically moved rural America from the 16th century to the 20th, without even an EIR.
      I am no fan of indirect subsidies, and suspect that private capital might have provided all the benefits these programs did, some time after World War II. But you gotta take, or at least admire, a play from the other guy’s play book once in a while.