Marc F. Bellemare Posts

An interesting new article (gated) titled “Agricultural Economics and Economics: Influence and Counter-Influence, 1910–1960” by Marc Nerlove (yes, the same Marc Nerlove who won the Clark Medal and made seminal contributions to economics and econometrics) in the latest issue of Applied Economic Perspectives and Policy:

This paper examines the effects which agricultural economists had on developments in economics and on economic policies during the years 1910-1960. These developments are viewed against the backdrop of what was happening in the economy at large and particularly with respect to farmers, and of major books and articles in economics published in the period. Some ideas of agricultural economists and the influence they had are discussed. Agricultural issues and agricultural economists, in the broad sense, had a profound influence on the development of general economics and on economic policies during this period.

The article covers many of the contributions of agricultural economists to economics. Nerlove’s contribution is obviously mentioned, but he also discusses Theodore W. Schultz, who won the Nobel prize for economics in 1979 for his work on agricultural development, among others.

After reading Mastering ‘Metrics last month, however, I am surprised by Nerlove’s omission of the contribution of Philip G. Wright, an agricultural economist who, in collaboration with his son Sewall Wright, derived the instrumental variables estimator in an 1928 book titled The Tariff on Animal and Vegetable Oils.

Similarly, had Nerlove’s article not stopped in 1960, he would have had to mention Yair Mundlak who, for all intents and purposes, derived the fixed effects estimator in a 1961 article in the Journal of Farm Economics–which has since been renamed the American Journal of Agricultural Economics.

The father of Major Major, a character in Catch 22, a novel by Joseph Heller, makes a good living not growing alfalfa. “The more alfalfa he did not grow, the more money the government gave him, and he spent every penny he didn’t earn on new land to increase the amount of alfalfa he did not produce.” Each day, Mr Major “sprang out of bed at the crack of noon… just to make certain that the chores would not be done.”

To this day, to be treated as a farmer in America doesn’t necessarily require you to grow any crops. According to the Government Accountability Office, between 2007 and 2011 Uncle Sam paid some $3m in subsidies to 2,300 farms where no crop of any sort was grown. Between 2008 and 2012, $10.6m was paid to farmers who had been dead for over a year. Such payments explain why Tom Vilsack, the agriculture secretary, is promoting a rule to attempt to crack down on payments to non-farming folk. But with crop prices now falling, taxpayers are braced to be fleeced again.

From a great article in the most recent issue of The Economist. The article goes on to mention how people like the Walmart heirs, CNN founder Ted Turner, Senator Chuck Grassley, Jon Bon Jovi, and “working-class” hero Bruce Springsteen (whose net worth is estimated to stand at about $300 million) are among those hard-up rural folks who receive farm subsidies.

What is behind this state of affairs? It’s the political economy, stupid.

“Quebec does not have opinions, but only sentiments,” once said Canadian Prime Minster Sir Wilfrid Laurier, who himself hailed from Quebec. I was sadly reminded of Laurier’s quip when I read the following op-ed in La Presse (Montreal) on December 30 (what follows is a mixture of my own translation and Google Translate):

The media reports a recent spate of land purchases in Quebec by investment banks. Given the financial difficulties of farmers, those financial firms appear to have smelled a bargain. Some farmers are faced with a lack of succession within their families. Others are facing debts due to having chosen to get into a more industrialized form of agriculture.

But this multiplication of land purchases and the operation of agricultural land by large landowners likely heralds a return to sharecropping.

Without going into the details of the institution of sharecropping, a few centuries ago, large landowners leased their lands out to farmers with whom they agreed to share the harvest. In short, those landlords agreed that part of the tenants’ agricultural labor, of which they appropriated the benefits, could go to the tenants themselves. Those tenant farmers were more or less agricultural laborers.

The gradual emancipation of the peasantry favored a mode of production centered on the family farm. But in the last few decades, industrialization has come to pervade all areas of production, agricultural production included. This has led to the situation we see today, viz. the coexistence of family farms with other farms focused on intensive large-scale production.

With this purchase of large tracts of land in Quebec by investment banks, we return in some way to the sharecropping system of centuries past: Peasants again are becoming agricultural laborers whom landowners allow to use a plot of land for their subsistence. It is hard to imagine that such an approach represents any kind of progress.