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> For example, the government subsidizes large agribusinesses instead of letting innovators and entrepreneurs find cheaper ways of providing people with food.

> For example, the government subsidizes large agribusinesses instead of letting innovators and entrepreneurs find cheaper ways of providing people with food. The primary subsidy afforded to farmers is effectively assistance in paying insurance premiums. Insurance that exists to keep farms afloat during bad years in an environment that is highly volatile. The intent is not to make food cheaper (although that may happen as a side effect), but rather to ensure there are still farmers around next year to grow the next crop. I am not sure that really limits the desire of innovators and entrepreneurs to seek out ways to provide cheaper food. I would argue that there is still great incentive to do exactly that. Someone who can successfully do so is in a great position to become the next large agribusiness. Those who have large agribusinesses today do so because they were the innovators and entrepreneurs of the past who figured out how to sharpen their pencil to a finer point than their neighbours. The insurance system probably limits innovation in finding ways to survive bad years independent of government support, but I'm not sure how much that relates to the particular topic at hand.

pdonis 7y ago
> The primary subsidy afforded to farmers is effectively assistance in paying insurance premiums. But the vast majority of the subsidy goes not to small individual farmers, who might need such insurance (although even on the assumption that they do, private sector insurance companies and speculators could provide it more efficiently than the government does), but to large agribusinesses who have more than enough resources and diversity to self-insure. So the entities who are getting the subsidy don't actually need it. But it makes a great way for politicians to stealthily transfer wealth to their donors and supporters. > The intent is not to make food cheaper (although that may happen as a side effect) It doesn't make food cheaper, it makes it more expensive and creates a mismatch between supply and demand. > I am not sure that really limits the desire of innovators and entrepreneurs to seek out ways to provide cheaper food. It might not limit the desire, but it certainly limits the ability. It's hard to compete with large businesses that get government subsidies they don't actually need.
- randomdata 7y ago
  > But the vast majority of the subsidy goes not to small individual farmers, who might need such insurance You are quite right that there is no preferential treatment for smaller farmers. It is simply for each dollar in premiums required, 60¢ is paid for by the farmer, 40¢ is paid by the government. It is true that those who pay the most in premiums (i.e. the largest farms) will receive the most in subsidies. It is designed to be a fair system without preference for any particular farm. > large agribusinesses who have more than enough resources and diversity to self-insure. On the flip side, small farmers have off-farm jobs so a loss on the farm is not likely to sink them. They still have their day job to pay the bills. > private sector insurance companies and speculators could provide it more efficiently than the government does I'm a tad bit skeptical. Private insurance has done well to serve individual events like a house fire or automobile accident, but when things happen on a grand scale like a major flood or widespread fire, it seems they fall back to government bailouts. The trouble with insurance on the farm is that it isn't usually just one farmer with failure. It is all the farmers at the same time. Private insurance hasn't proven a model to handle such cases, and if you're going to rely on the government to step in anyway as we've seen many times in the private insurance space when disaster strikes a large area, why not codify that action? > It's hard to compete with large businesses that get government subsidies they don't actually need. I am quite interested in your elaboration on this as I am not seeing how large businesses are advantaged by the subsidy in a way that small business are not. Proportionately, the subsidy given to each farmer is equal.
  - pdonis 7y ago
    > for each dollar in premiums required, 60¢ is paid for by the farmer, 40¢ is paid by the government I have no idea where you are getting this from. There are no actual "premiums". There is no actual insurance involved. The "insurance" is, as you originally said, "effective"--for certain crops, if their market price is below a certain price set by the government, the government pays farmers the difference as a subsidy. But only for certain crops, and those crops (the biggest one is corn) are mostly grown by large agribusinesses, not small farms. (The corn subsidy is even worse because much of the corn produced doesn't get eaten, it gets turned into ethanol to put in gasoline, for no good reason.) > small farmers have off-farm jobs I don't know which small farmers you are talking about. Most small farms are family owned businesses and provide the entire income for the family members who participate. Family members who have off-farm jobs are the ones who have left the farm and switched to other careers. > Private insurance has done well to serve individual events like a house fire or automobile accident, but when things happen on a grand scale like a major flood or widespread fire, it seems they fall back to government bailouts. First, while that may be true, it doesn't mean the government provides the insurance more efficiently. Second, private insurance companies are often restricted by the government in the premiums they can charge. For example, while flood insurance in regions which flood frequently is not cheap, it is cheaper than it would be in a free market, because in a free market the premiums would be based solely on actuarial data on the frequency of flooding and the expected losses from flooding, which would go up as more things of value were built in such areas. But the government, due to political pressure, doesn't allow the premiums to get that high, which means that people who choose to live in such areas, or companies that choose to build infrastructure there, don't see the full costs involved and so have less incentive to find somewhere else to go. > I am not seeing how large businesses are advantaged by the subsidy in a way that small business are not They are advantaged by being able to lobby to have the subsidies go to crops that they can more easily grow. But they are further advantaged by the mere existence of the subsidies, since they don't need them while smaller farms might.

pdonis 7y ago

> The primary subsidy afforded to farmers is effectively assistance in paying insurance premiums. But the vast majority of the subsidy goes not to small individual farmers, who might need such insurance (although even on the assumption that they do, private sector insurance companies and speculators could provide it more efficiently than the government does), but to large agribusinesses who have more than enough resources and diversity to self-insure. So the entities who are getting the subsidy don't actually need it. But it makes a great way for politicians to stealthily transfer wealth to their donors and supporters. > The intent is not to make food cheaper (although that may happen as a side effect) It doesn't make food cheaper, it makes it more expensive and creates a mismatch between supply and demand. > I am not sure that really limits the desire of innovators and entrepreneurs to seek out ways to provide cheaper food. It might not limit the desire, but it certainly limits the ability. It's hard to compete with large businesses that get government subsidies they don't actually need.

randomdata 7y ago
> But the vast majority of the subsidy goes not to small individual farmers, who might need such insurance You are quite right that there is no preferential treatment for smaller farmers. It is simply for each dollar in premiums required, 60¢ is paid for by the farmer, 40¢ is paid by the government. It is true that those who pay the most in premiums (i.e. the largest farms) will receive the most in subsidies. It is designed to be a fair system without preference for any particular farm. > large agribusinesses who have more than enough resources and diversity to self-insure. On the flip side, small farmers have off-farm jobs so a loss on the farm is not likely to sink them. They still have their day job to pay the bills. > private sector insurance companies and speculators could provide it more efficiently than the government does I'm a tad bit skeptical. Private insurance has done well to serve individual events like a house fire or automobile accident, but when things happen on a grand scale like a major flood or widespread fire, it seems they fall back to government bailouts. The trouble with insurance on the farm is that it isn't usually just one farmer with failure. It is all the farmers at the same time. Private insurance hasn't proven a model to handle such cases, and if you're going to rely on the government to step in anyway as we've seen many times in the private insurance space when disaster strikes a large area, why not codify that action? > It's hard to compete with large businesses that get government subsidies they don't actually need. I am quite interested in your elaboration on this as I am not seeing how large businesses are advantaged by the subsidy in a way that small business are not. Proportionately, the subsidy given to each farmer is equal.
- pdonis 7y ago
  > for each dollar in premiums required, 60¢ is paid for by the farmer, 40¢ is paid by the government I have no idea where you are getting this from. There are no actual "premiums". There is no actual insurance involved. The "insurance" is, as you originally said, "effective"--for certain crops, if their market price is below a certain price set by the government, the government pays farmers the difference as a subsidy. But only for certain crops, and those crops (the biggest one is corn) are mostly grown by large agribusinesses, not small farms. (The corn subsidy is even worse because much of the corn produced doesn't get eaten, it gets turned into ethanol to put in gasoline, for no good reason.) > small farmers have off-farm jobs I don't know which small farmers you are talking about. Most small farms are family owned businesses and provide the entire income for the family members who participate. Family members who have off-farm jobs are the ones who have left the farm and switched to other careers. > Private insurance has done well to serve individual events like a house fire or automobile accident, but when things happen on a grand scale like a major flood or widespread fire, it seems they fall back to government bailouts. First, while that may be true, it doesn't mean the government provides the insurance more efficiently. Second, private insurance companies are often restricted by the government in the premiums they can charge. For example, while flood insurance in regions which flood frequently is not cheap, it is cheaper than it would be in a free market, because in a free market the premiums would be based solely on actuarial data on the frequency of flooding and the expected losses from flooding, which would go up as more things of value were built in such areas. But the government, due to political pressure, doesn't allow the premiums to get that high, which means that people who choose to live in such areas, or companies that choose to build infrastructure there, don't see the full costs involved and so have less incentive to find somewhere else to go. > I am not seeing how large businesses are advantaged by the subsidy in a way that small business are not They are advantaged by being able to lobby to have the subsidies go to crops that they can more easily grow. But they are further advantaged by the mere existence of the subsidies, since they don't need them while smaller farms might.