Freedom in Our Lifetime

This WSJ article offers a textbook case of a “good” idea gone wrong because of the unintended consequences. Last week, a commenter on this blog defended the Federal government’s early involvement in agriculture:

“As for agriculture, again, you don’t seem to understand either history or the functioning of free markets. Making recommendations about what to plant involves integrative knowledge of local soil chemistry and microclimates, local planting, harvest and transportation infrastructure, prior statistical outcomes, future global needs, disease and pest incidence, as well as real time national market data.” –dollared

He is right that I am largely ignorant of the history of government’s role in agriculture. I cannot vouch for every individual program intended to “optimize” the agriculture industry. Some might work, but others have devastating unintended consequences, as in the case of urea(a nitrogen-rich bsidies in India. Defenders of government intervention in any industry must be prepared to admit their mistakes when grandiose plans lead to devastating, often life-threatening consequences. But admitting mistakes is not always enough when political interests created by a subsidy prevent new reform:

“Mr. Singh’s government, recognizing the policy failure, announced a year ago that it intended to drop the existing subsidy system in favor of a new plan. But allowing urea’s price to increase significantly would almost certainly trigger protests in rural India, which contains 70% of the electorate, political observers say.

The ministers of fertilizers and agriculture each declined requests for interviews.

“This is politically very difficult,” says U.S. Awasti, managing director of the Indian Farmers Fertilizer Cooperative Ltd. and an informal adviser to government officials on the issue.”

Here is what I said in my original response to the commenter:

I admit that markets fail. That is, they cannot always accomplish the ends which we as a society agree are desirable. However, governments fail as well, and government failures are much more difficult to remedy because experience shows that once a program begins, it is rarely terminated. Agricultural subsidies are relics of a previous era and now exist largely as a wealth transfer from consumers of food to relatively wealthy farmers (I can substantiate this with data). These subsidies, like the FDA, lead to unintended consequences such as the one I explore in the original post.

Here is another quote from the article:

Kamaljit Singh is a 55-year-old farmer in the town of Marauli Kalan in the state of Punjab, the breadbasket of India. He says farmers feel stuck. “The soil health is deteriorating, but we don’t know how to make it better,” he says. “As the fertility of the soil is declining, more fertilizer is required.”

Can anyone deny that government intervention intended to “optimize” the market often leads to tragic consequences? This is not an argument for no government, but it is evidence that ideas can be dangerous if they are implemented by governments which do not have a real profit/loss stake in the industry. I try to avoid arguments rooted in emotion, but I would like to break down the idea that “the left” helps the underdog while “right-wing” economists help entrenched capitalist industries.

H/T: Tyler Cowen