NCPA - National Center for Policy Analysis

Is There a Case for Agricultural Subsidies?

July 20, 2011

Proponents of many farm programs argue that agriculture is more in need (that is, more deserving) of government support than other sectors.  But the fact is, in many respects, the conventional wisdom so often expressed in discussions about the plight of the U.S. farmer is incorrect, says Barry K. Goodwin, the William Neal Reynolds Distinguished Professor in the Departments of Economics and Agricultural and Resource Economics at North Carolina State University.

  • A large share of agricultural subsidies goes to a small segment of society that tends to be wealthier, less financially leveraged and of higher income than the nonagricultural sectors of the aggregate economy.
  • Moreover, farmers do not generally face more risk than business owners in other sectors, nor do farms fail more often than other forms of business.
  • In fact, farm businesses rarely fail.
  • Conventional wisdom maintains that agriculture, as a rule, operates under disadvantageous economic circumstances relative to other sectors of the economy.
  • While some notions are based in fact to varying degrees, others are simply incorrect, at least with respect to U.S. agriculture today.

Prices for many agricultural commodities are relatively volatile, but no more so than prices for commodities such as steel, copper, gold, natural gas, oil and other metals and minerals that receive no comparable protections through policy.  Volatility is a basic feature of agriculture in a market economy, though it is not clear that the instability endured by agricultural producers significantly exceeds that of other small businesses.  Any objective consideration of agricultural policy and its role in the agricultural economy must confront the conventional view with empirical facts, says Goodwin.

Source: Barry K. Goodwin, "Is There Any Case for Ag Subsidies?" American Enterprise Institute, July 2011.

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