Hal Hamilton
Center for Sustainable Systems
433 Chestnut St., Berea KY 40403 USA
Phone: (606) 986-5336; Fax: (606) 986-1299
hhamilton@centerss.org
-----Original Message-----
From: Ikerd, John E. [mailto:IkerdJ@missouri.edu]
Sent: Wednesday, October 27, 1999 11:03 AM
To: 'Harris, Craig'; Bluestem Associates; sanet-mg@ces.ncsu.edu; 'Hal
Hamilton'; ':jvworstell@futura.net'
Subject: Another perspective on the issue of subsidies (was French
farmers)
Hal, Craig, Bart, Jim...
I think the defense of the need for, and legitimacy of, public "subsidies"
to support sustainable agriculture, and the fact that instead we are
subsidizing an unsustainable agriculture, have been made very well. So, I
won't elaborate on these discussions, other than to state simply that "the
market" will not ensure an ecologically sound or socially responsible
agriculture - nor will it sustain the economic viability agriculture over
the long run. Instead I want to focus on the source of the fallacy that the
market is capable of meeting all of the needs of society and if something
requires public funding, or a subsidy of any kind, that it's not
sustainable.
In general, the "market" will not provide the necessary incentives for a
sustainable society. Markets reflect only the short-run self interests of
individuals and sustainability is about the long run interests of humanity.
Economists have mislead society -- probably because they are mislead
themselves - into believing that the broad interests of society are served
best through the pursuit of individual self interest. But, there is neither
logical nor empirical support for this proposition.
The belief that pursuit of self interests is lead to serve the public
interest, as if by an "invisible hand," has its foundation in the writings
of Adam Smith, in his book, An Inquiry into the Nature and Sources of the
Wealth of Nations, published in 1776. Smith's "observations" of the world
of 200+ years ago were only later translated in fundamental economic laws
that were to hold for all times by economists where were searching for
scientific rigor to justify their "discipline." However, none of the
critical assumptions needed to transform "greed into good" hold today,
because Smith's observations of 200 years ago do not describe the world of
today. The necessary assumptions are atomistic competition (a large number
of small sellers and buyers), perfect information (unbiased information, no
misleading advertising), homogeneous products (no superficial
differentiation), and freedom of entry and exit (no barriers, including
large investments, preventing people from getting into or out of a
business). Obviously, none of these assumptions describe the economy of
today. The "invisible hand" has been mangled by the machinery of
industrialization. Economists argue that everything is OK because the
economy continues to produce large quantities of cheap, new stuff. That's
the economic definition of "efficiency" - lots of new, cheap stuff. But,
there is no evidence that resources are being efficiently allocated among
alternative uses or that the long run needs of society are being met just
because the economy is producing lots of new, cheap stuff.
In addition, economics is fundamentally incapable of dealing with the needs
of society as a whole. Economics assumes that society is nothing more than
a collection of individuals - economics is incapable of addressing issues
based on interpersonal comparisons of satisfaction. Families, communities,
states, nations, humanity - these things have no meaning in economics apart
from the summation of the individuals of which they are composed. The whole
is simply the sum of the part and nothing more. Human relationships, the
very essence of "society," have no meaning in economics. Economists see
society primarily as a "constraint" to the pursuit of individual
self-interests.
Finally, economics doesn't really deal with the environment. Environmental
issues are fundamentally ecological issues. I'm told that the first law of
ecology is that "you can't do just one thing" -- that everything is
interconnected, a part of the same whole. To economists, the environment is
something "external," outside of the realm of the decision maker. The
economic producer may extract raw materials from the environment, dump stuff
into the environment, or public concern for the environment may constrain
the decisions of the producer, but the environment is always something
"outside." There is nothing in economics that deals with the humans as "a
part of" the environment. Economics provides the optimum way to "use up
resources" - there is nothing in economics that relates to sustaining the
productivity of resources over the infinite long run.
We cannot build a sustainable human society through pursuit of our
short-run, individual self interests - through markets or contemporary
economics. If we are to sustain humanity on earth, we must pursue a higher
self interests - self interests which reflects our interdependence with
other people and with our natural environment. We can pursue this higher
self interest through our individual actions, but ultimately, we also must
pursue it collectively as members of families, communities, nations, and
society in general - yes, through government.
The legitimate function of government is to allow us collectively to do
those things that we cannot do individually. Government taxing and spending
are the means by which we collectively buy those goods and services that,
for one reason or another, it doesn't make sense for us to buy individually
- the clearest examples being national defense, roads and bridges, and
schools. There is a whole section of economics that deals with the
legitimate role and function of "public goods and services," although this
area of study is given little attention in most economic educational
programs today. It is easier to bash government spending as a waste of "our
hard earned money" than it is to explain to people that there are some
things that we have to do together if they are to be done, and that we also
have to pay for the things we buy together.
Subsidies are the means by which we collectively pay "part of the cost" of
things we deem to be in the pubic or societal good, in situations where
there are private as well as public incentives for those things to be
produced. In other words, without subsidies, some quantity might be
produced, but not enough to meet the full needs of society, or an adequate
quantity might be produced, but not by means consistent with the needs of
society in general. So we as a society, through our various governments,
provide a subsidies so that producers will produce the quantities needed by
a means consistent with the greatest good for society as a whole. However,
economists don't talk much about the legitimate role of subsidies - it's
easier to bash subsidies as needless interference in the market.
I am not defending government as it currently exists - in any community,
state, or nation. There is undoubtedly much waste and misdirected use of
tax payer dollars. The reasons are legion - not the least of which is the
indefensible influence of corporations and powerful individuals of the
public policy process. A predominance of public officials who lack any
understanding of the legitimate role and function of a public sector is
another. However, none of the current shortcomings of government negates
the legitimacy of government in general in serving the public interest.
The market will not provide the necessary incentives to sustain human live
on earth over the long run. This will require legitimate and effective
collective action on the part of society as a whole - through some form of
government involvement. First, we will need collective action to reshape
the economy of short run self interest so that it meets our legitimate needs
as individuals. Collectively, we must restore competition, provide
unbiased information, eliminate superficial differentiation, provide for
ease of entry and exit, and do the other things necessary for markets to
function effectively. But even then, we must continue to do those things
collectively that are necessary to meet the needs of families, communities,
and nations as "wholes" - rather just try to meet the needs of collections
of individuals. And we must collectively take responsibility for the
stewardship of our natural and human resources so as to leave opportunities
for future generations to meet their needs as well. The markets simply will
not do those things.
We will not have truly effective government until we learn to pursue a
higher concept of self interest - self interest that reflects the value we
receive from relationships and stewardship as well as the value of meeting
our current individual needs and wants. But, we will never eliminate the
need for government - the need to do things collectively for the good of the
whole.
John Ikerd
-----Original Message-----
From: Harris, Craig [mailto:Craig.Harris@ssc.msu.edu]
Sent: Tuesday, October 26, 1999 7:19 PM
To: Bluestem Associates; sanet-mg@ces.ncsu.edu; 'Hal
Hamilton'
Subject: RE: Ag Subsidies (was French farmers)
just for perspective, in recent years government payments
have constituted
between 40 and 50 percent of net farm income in the united
states
craig
craig k harris
department of sociology
michigan state university
429b berkey hall
east lansing michigan 48824-1111
tel: 517-355-5048
fax: 517-432-2856
> ----------
> From: Hal Hamilton[SMTP:hhamilton@centerss.org]
<mailto:[SMTP:hhamilton@centerss.org]>
> Sent: Tuesday 26 October 1999 12:22 PM
> To: Bluestem Associates; sanet-mg@ces.ncsu.edu
<mailto:sanet-mg@ces.ncsu.edu>
> Subject: RE: Ag Subsidies (was French
farmers)
>
> Bart wrote:
>
> "My core belief, however, is that subsidies
distort the agri-food
> economy to the degree that sustainability becomes
vastly more elusive."
>
> Hal asks: Although you can demonstrate that
subsidies provide incentives
> for
> decisions by producers that may be different from
incentives provided
> solely
> by the market, what is your evidence that market
incentives yield
> sustainability? My assumption is that market
incentives lead to
> externalizing costs whenever possible. If I can
produce more corn by
> dozing
> the fencerows, I'll do it, and let the birds nest
somewhere else.
>
> Hal Hamilton wrote:
>
> >I hate to acknowledge it, but the Swiss
and French Jura, where some of
> the
> >best cheese in the world is made, would
be depopulated without subsidies.
>
> Bart wrote: If the demand for such local high
quality food is *real*, it
> will be
> reflected in prices. If it is sustainable,
subsidies will be
> unnecessary.
>
> Hal answers: I'm talking about Swiss Gruyere and
French Compte. The
> demand
> is real. The prices are relatively high.
Industry is pressuring the
> farmers to increase production to meet increasing
demand. The farmer
> coops
> are resisting this pressure because their mental
model of success is
> something like "adequacy" instead of "continual
growth." Quite
> extraordinary, really. And that's why the Jura
mountains are such a
> wonderful region for tourists, hikers, bicyclists,
etc.. It's beautiful.
> But, unfortunately, the market return to the
farmers, even with a premium
> product, does not support a middle class lifestyle
with modest scale
> production. So there are subsidies for young
farmers (something like
> $50,000 grant to get started or buy out the
parents), subsidies for
> producing in the mountains, so the landscape is
protected, and so forth.
> My
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