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No matt, you have not explained it at all from an economics perspective - in fact, your own stated facts don't support the notion that bigger farms have some ki
by sonnyblarney 8y ago
No matt, you have not explained it at all from an economics perspective - in fact, your own stated facts don't support the notion that bigger farms have some kind of leverage from the subsidies over smaller farms.
A 'unit subsidy' doesn't at all help larger entities more than smaller ones - there must be some other dynamic at play.
A unit subsidy should be the economic equivalent of broadly elevated demand.
Either 1) larger farms simply do have some economies of scale, thus flushing out smaller ones - in which case subsidies are not super relevant and this would be happening anyhow or 2) there's some kind of direct advantage the larger producers have in yielding a per-unit subsidy, I can't imagine what that would be, but you seem to have a lot of expertise so perhaps you can elucidate.
- supermatt 8y agoI replied to you regarding this in another thread. In short, its #2. It's to do with volume. By producing a large volume of an unprofitable product you would usually lose more money than someone producing a small volume of an unprofitable product. However, because of the subsidies, this has been reversed, and you now make more money than someone creating a smaller volume. This is exactly how these large farms have been established (they were incorporated to take advantage of these very subsidies), and they have used the large "profits" to further grow. The margins have further reduced, but they are still "profitable" because of the volume.