Farm subsidies and entrenched wealth

Lynne Kiesling writes Farm subsidies and entrenched wealth at Knowledge Problem:

Veronique de Rugy has a great argument for ending farm subsidies in the April issue of Reason (and yes, do read the whole thing, well worth your time). Farm subsidies are the canonical example of the dynamics of Mancur Olson’s Logic of Collective Action — concentrated benefits and dispersed costs lead to the persistence of inefficient government policies. So canonical, in fact, that I used them just last week in my micro principles class to teach my students about public choice theory and applying economic tools and reasoning to studying decisions we make collectively through political processes.

One feature of Vero’s argument that distinguishes it from others is that it follows this process to its logical, disturbing conclusion for income distribution. Farm subsidies have existed for 80 years, and while their initial intent was to assist struggling farmers during the Depression, their success at doing so has created an entrenched group of land-owning farmers who are now wealthy, but fight against attempts to reduce their subsidies.

While the number of farms is down 70 percent since the 1930s—only 2 percent of Americans are directly engaged in farming—farmers aren’t necessarily struggling anymore. In 2010, the average farm household earned $84,400, up 9.4 percent from 2009 and about 25 percent more than the average household income nationwide.

What’s more, a handful of farmers reap most of the benefits from the subsidies: Wheat, corn, soybeans, rice, and cotton have always taken the lion’s share of the feds’ largesse. The Environmental Working Group (EWG) reports that “since 1995, just 10 percent of subsidized farms—the largest and wealthiest operations—have raked in 74 percent of all subsidy payments. 62 percent of farms in the United States did not collect subsidy payments.”