Kenneth L. Robinson

Unstable Farm Prices: Economic Consequences and Policy Options

that a high proportion of the worlds population subsists on diets which even in good crop years are only marginally adequate. In the United States, food prices, and especially the prices of grains, have risen to levels thought highly improbable only three or four years ago. Does the new environment call for equally dramatic shifts in policy? This is the question I have been asked to discuss. I am under no illusion that one more paper on the subject of U.S. agricultural policy will significantly alter the course of human events. In a world of shortages, however, it is reassuring to know there is still a surplus of at least one item, namely advice on policy matters. The threat of redundancy obviously looms large over anyone who has the temerity to accept an invitation to address the American Agricultural Economics Association on this topic. Whoever does so must expect to operate in an area where the marginal utility of additional information is very low; my hope is that I have been able to identify an area where it is still positive. The subsequent analysis is based on the premise that price instability in grains rather than the threat of shortages or surpluses will be the dominant issue facing policy makers in the United States over the next few years. I will argue first, that price instability is not all bad, or to put it slightly differently, that within the profession there is a tendency to overvalue price stability as an objective of policy and sec nd, that only modest changes in our existing institutions and policies are required to deal with the current situation. The discussion will be confined mainly to problems associated with instability in the prices of grains and soybeans. Cotton, tobacco, peanuts, rice, sugar, and perishable commodities will be ignored except insofar as they are affected by policies adopted for grains. There are compelling political as well as economic reasons for doing so. Agricultural policy debates in Washington have been dominated for over fifty years by the question of what to do about the prices of a small group of commodities, principally wheat, corn, cotton, and dairy products. Recent events have not altered this situation. Congress lost interest in trying to deal directly with the prices of perishable commodities in the late 1940s following the disastrous experience with suppor programs for potatoes and eggs. In the intervening years, administrators as well as politicians have shown great reluctance to take on new programs involving perishable commodities because of regional conflicts among producers, resistance to the acceptance of effective controls, and concern about the potential high costs of government interv ntion. Furthermore, there is the practical problem of what can be done to stabilize the prices of such commodities as potatoes, onions, apples, and eggs. In theory, it might be possible through the use of such instruments as marketing orders to reduce fluctuations in prices or to even out returns to producers (although not market prices) by taxing commodities in high priced years to build up a fund out of which payments might be made in low priced years, but in practice such programs would be difficult to implement even if sufficient support could be mobilized to get the necessary enabling legislation enacted. In contrast, with storable commodities such as grains and cotton, a well-tested array of policy instruments is available which could be Invited address. K. L. Robinson is a professor of agricultural economics at Cornell University. The author is indebted to his colleagues, B. F. Stanton and W. G. Tomek, for their constructive comments on an earlier draft.

The Distributional Consequences of Recent Inflation

Income redistribution is an inevitable byproduct of inflation, simply because all prices do not move upward at the same rate. The most recent period of accelerated inflation in the United States, that is the period beginning in 1972 and continuing up to the present time, has been characterized by extremely diverse changes in income within agriculture because the prices for different commodities have peaked at different times and have risen by widely varying amounts. Income redistribution also has occurred because factor price ratios have changed. Appreciation in land values has redistributed income from new en-

CIVIC COMMUNITY APPROACHES TO RURAL DEVELOPMENT IN THE SOUTH: ECONOMIC GROWTH WITH PROSPERITY

The free market-based policies of the corporate community model have skewed economic development across the South. For many small, rural communities, the consequences of global capitalism have resulted in declining real wages, high underemployment, and increasing rates of income inequality. Backed by recent scholarship and grassroots movements that suggest both civic engagement and the presence of smaller-scale, locally controlled enerprises can help determine whether communities prosper or decline, this paper explores the links between social structure and rural development in the South. The goal is to expand our understanding of civic community theory as an alternative to the neoclassical economic model of development. Using a local problem-solving framework, we suggest that a departure from the traditional, neoclassical path of development is in order. We conclude that rural policy makers must establish a role for civic community in the rural development process if they wish to protect the welfare of workers and communities, while increasing the prospects of economic growth with prosperity.

Cost and Effectiveness of Recent Government Land Retirement Programs in the United States

Recent land-retirement programs have succeeded in achieving their major objective, which was to reduce existing or potential surpluses of grains, but the cost has been relatively high per unit of production. By altering land-retirement programs so as to pay only for land retired, and not for idle equipment and labor as well, and by concentrating payments in those areas where land costs are low relative to annual output per acre, measured in terms of grain equivalent, the government might reduce total public costs substantially. Relatively simple administrative criteria are suggested to aid in deciding where land should be withdrawn if the primary objective is to minimize the public cost of achieving a given adjustment in grain production.

The Impact of Government Price and Income Programs on Income Distribution in Agriculture

T HE distribution of income among farmers, regions, and factors of production unquestionably has been influenced to some degree by farm-price-and-income programs, especially during the past decade; but it is obviously difficult to isolate and measure the net effects of such programs apart from market forces and technology, which also have influenced relative returns. Furthermore, as the title implies, only the effects of farm-price-income programs are to be considered. It is possible, of course, that other types of government activity, particularly those relating to agricultural research, education, credit, and general economic policies (which presumably affect the rate of economic growth and employment opportunities), have had at least as much impact on the distribution of agricultural incomes as have price programs; but, because of limitations of time as well as of data, these other programs will have to be ignored.

The Use of Agricultural Export Restrictions as an Instrument of Foreign Policy

One of the consequences of international specialisation and trade is to increase the vulnerability of trading partners to trade restrictions. The risks associated with dependence on imported grain as well as oil are now widely recognised. Grain, like oil, can be used as a weapon of diplomacy against countries which import a substantial proportion of their requirements. Either party may use the threat of cutting off trade as leverage to obtain concessions. This has created a new element of uncertainty, and a source of instability, in world markets. Thus I believe it appropriate in a volume dedicated to the memory of one who contributed so much to enhancing our understanding of the external implications of agricultural protection and trade policies to examine in some detail the issues that arise from attempts to use restrictions on food exports as an instrument of foreign policy.

Discussion: Agricultural Adjustment Reconsidered

and livestock farming, perhaps more labor would be required per unit of product. Perhaps some persons are being held in farming by ignorance and poverty and need help; on the other hand, a good many million have left farms since 1932, at the same time that several million were moving from the cities onto farms. The statistics suggest that farm-urban mobility is very great. A final word about the two papers before I yield the floor. Both advocate subsidies of one sort or another to farmers; neither explains why this subsidy should be paid. Both speak of a farm problem; neither says what it is. Perhaps the only farm problem today is the one of our own making and will disappear when, as Clawson foresees, farm policy comes increasingly to be written and approved by nonfarmers.