September 24, 2013

The Growing 'Grain Drain'

Matthew D. Mitchell

Affiliated Senior Scholar

Christopher Koopman

Senior Affiliated Scholar
Summary

Matthew Mitchell and Christopher Koopman at the U.S. News and World Report.

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The vast majority of economists oppose farm subsidies. Greg Mankiw calls them "insane"; Paul Krugman says they are "grotesque." 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. 

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

NPR recently highlighted the financial barriers young Americans are facing in their attempts to farm, noting the rising cost of farmland as the major problem. 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 35, there are six who are 65 or older. And this imbalance continues to grow. The USDA has also reported that the average age of principal farm operators has increased from 54 in 1997 to 57 in 2007. As the current farming population continues to get older, fewer young Americans are choosing to follow their fathers and grandfathers into the fields. 

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. As economist David Friedman puts it, the "government can't even give anything away."

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