Geography

For decades, US farmers have been required to provide the government with reams of reports, verifying everything from crop yields, conservation plans, and crop plans. The USDA tells them where, what, and when to plant. In some cases, the USDA tells them when they are allowed to harvest. All those fancy projections, crop surveys, etc, that The Economist and planners review come from those. Vi sack won't say it, but that is the real incentive for the small amount of subsidies that actually make it to farmers who farm, as opposed to the cash shoveled at Cargill, et al.

Honestly, sometimes I wonder if any of the commentators have a clue about what goes on in the real world. Go into any FSA office, and then the SCS office, and ask to read their manuals on the regulations applying to crop production in that area. It would take you days even to read it. Most honest employees will admit that nobody understands all of it. That level of control is what subsidies pay for, in a desperate attempt to maintain a cheap and unending food supply to urban residents.

Rural poverty is a real problem. Our economy has changed in ways that have made many small towns obsolete from an economic standpoint. Many rural communities place little value on education (which is essential for farmers these days, too), so the smart kids leave.
But farmers are rarely the poorest residents. Price supports just benefit absentee landlords and local banks. They reward stasis, and discourage innovation.

People talk about cities being “efficient”, but I’d be interested if Ryan Avent can answer a question that has been gnawing at me for months:

What is the evidence that cities are more efficient ways of organising economic activity? Specifically, how do we know that - in this day-and-age of telecommunications - the existence of cities arises from superior efficiency in organising economic activity, and not merely from superior efficiency in organising rent-seeking?

Clearly, cities are very good places to organise rent-seeking. The mutual exchange of favours - which lies at the heart of political rent-seeking - is something that requires intimate association and trust, and therefore physical proximity. One might arrange a bribe over lunch, but never over the phone.

Now, it is possible that certain industries (the finance industry perhaps) do benefit from having the practitioners located in one place, and therefore have a tendency towards a natural monopoly site for doing business. The city which initially acquires that natural monopoly will tend to keep it. And that city can then set prices to extract rents from the rest of the economy.

But this raises several questions of efficiency and the allocation of rights.

First, to whom do the economic rents belong? If one stumbles across a natural monopoly by chance, does that entitle one to keep the rents? There is no incentive mechanism at work: the monopoly was acquired by accident and that accident won’t be repeated no matter how much rent is given to the owner. If a city happens to acquire a natural monopoly in one industry, is it entitled to keep the rents?

Secondly, the existence of one rent-extracting industry may exert a centripetal force that drags in ever more people irrespective of efficiency. Each individual - faced with the choice between being a metropolitan “screwer” and a non-metropolitan “screwee” - will move to the city, until the marginal internal migrant assesses the prospect of accessing rents to be just offset by the perceived disadvantages of metropolitan life. But that equilibrium will not be at the optimal point for efficient production. It will be skewed by the existence the original rents.

If we add in the effect of government, the process may become self-sustaining. As RA has already told us (Government of the rich, by the rich, for the rich), political agents tend to do the bidding of those people with whom they have closest contact. If political agents come to be concentrated in cities, they will do the bidding of those who live in cities.

Thus more people will move to the city to access – directly or indirectly - the additional rents which politicians are empowered to disburse. And that in turn will increase the number of city people lobbying for rents.

This process may be seen most vividly in resource-rich countries with corrupt governments, where people flock to the cities despite those cities having no obvious comparative advantage.

But it may also be seen in supposedly advanced resource-rich countries like Australia where the population is squeezed into the eight state and territory capitals. (Almost a fifth of the population lives in Sydney alone.) To access rents in Australia it is essential to live within lunching distance of the Cabinet.

Now the situation in the US (which seems to be RA's world) may be different from that in developing countries and Australia, but the question remains:

If we could exclude the effects of metropolitan rent-seeking, what evidence do we have that cities are actually superior ways of organising the underlying economic activity that generates the rents?

Finally, on the question of “values”:

a) this is yet another article that appears to assume the be-all-and-end-all of human existence to be the production of tradable goods and services in the most “efficient” way possible. That is a value judgement. Some people may believe that there are other goals – for example, positional goods like status – that are important. (Harking back to the rent-extraction theme, this very article could be seen as an example of a metropolitan journalist using privileged access to a mass media soap-box to project a particular set of metropolitan values); and

b) how does a president’s “populist” rhetoric differ from a president’s “popular” rhetoric . . . . . . other than as a value judgement?

tfw,

I'd agree with that. I brought up the Amish to add a degree of complexity. They aren't subsidized with money, but they are granted exceptions on things like schools policy or insurance. The Amish add value to our community, but it's a value that requires we make exceptions for them. I see making these exceptions as something that's worth it, and that would be if some subsidies were required as well. However, the case for the Amish isn't the more general case, since the Amish are a fairly small distinct group that requires some special provisions they aren't the same as subsidizing rural industries more generally, since much rural industry would survive, if in diminished scale, with or without the exceptions and subsidies.

There are fewer people on all the farms than in NYC. The argument made by many - Palin in particular - is that these are the "authentic" Americans. As far as I can tell, a person living in Philadelphia, Chicago or Los Angeles is by sheer weight of numbers more authentic. As for history, I think Philadelphia was where the Declaration of Independence was signed.

Why should I pay to subsidize postal service for people who choose to live in rural areas? Why am I paying subsidies to wealthy cotton farmers in Texas? Why am I paying farmers to grow corn, especially when it piles up and sits or is turned into expensive fuel?

Some things make sense: we need dairy farms and it's better they are regional because dairy is perishable and we prefer that kind of dairy to the aseptic kind. But why exactly do we subsidize people who routinely vote against any form of subsidy for anyone else?

Tzimisces, do you have any idea how much the Amish are able to charge for a piece of hand-made furniture? If anything, I would use their community as an example of how rural residents can maintain their lifestyle and successfully participate, without subsidies, in the market economy.

I do seriously question the value of subsidizing rural areas. It's not a question of whether or not they're valuable, they certainly are, rather it's a question about whether there's value in putting money into these communities so that there are more people there than there would be without the subsidies. There will always be products we need from rural areas, and there will always be people with the wealth and flexibility to live where they want that will prefer to live in rural areas.

However, what we do need to question is whether there's a marginal value in subsidizing rural areas so that more people are able to live there than economic fundamentals support. I don't doubt that there are many people who prefer to live in rural areas, like the culture, and like the values. But, there's an awful lot of things I'd like that aren't subsidized. So why should we subsidize rural industries just so that more people can develop these rural values?

Of course, this shouldn't be taken too far. We also have stupid policies that create subsidies for current residents of cities at the expense of long term development of new housing (Manhattan rent control). I see these types of policies as just as damaging as many rural subsidies (though I support subsidies that maintain undeveloped land, population growth will mean we eventually need it, but it isn't necessary it's in production today). Still, two wrongs don't make a right. I see no reason that we should be subsidizing people to live a certain lifestyle that economic forces are acting against.

Lifestyle is something the individual should have to pay for, it's really not something that's socially valuable since its value doesn't accrue beyond the people actively living it. Social action is only necessary when there are otherwise unaccounted for benefits or costs that aren't internalized by the individuals involved. I don't see this as being the case with rural vs. urban divides. These are pretty clearly individual level concerns and not something that I see a social interest in.

Now maybe if there weren't natural resources, cheaper land costs, or a need for agricultural products I could see a need for government subsidies to support a way of life that would otherwise go extinct, just as I see a value in making exceptions for the Amish or supporting Jamestown re-enactors. These things woulld otherwise disappear. But rural areas aren't in danger, it's not a question of whether we have them, but how much. This is the kind of question the market is good at solving, no need for the state to be involved.

People are talking past each other here.

Klein (and R.A.) are saying that cities are more economically valuable. And they're right.

Vilsack is trying (perhaps badly) to say that the rural places are socially valuable. Arguably, he also has a valid point.

Rural settings breed at least somewhat a different type of character than urban settings do.

In a rural setting, things are tight economically, and people are rare. Relationships are valuable (even economically!) and help you survive, both physically and emotionally. But in the city, most people are an annoyance - just traffic that you wish would get out of your way. At gut level, rural people are connected to everyone, and everyone matters; urban people are connected to small subset of the city, and everyone else is neutral to negative.

This can be overstated, of course. And yet, there is a real difference in character and mind-set between urban and rural.

Is this difference socially valuable? Does this difference remind the city people of some things that are worthwhile for them to remember? Arguably, yes.

Should we economically subsidize things that are socially useful? Do we subsidize the arts?

Junius, Mike Konczal had an excellent take on the "uncertainty" trope:

"Last year we reached out and talked about the economy with 30 conservative economists (part 1, part 2) and I got the sense that they had a Ayn Rand Groundhog Day version of the recovery: every month, the productive leaders of the economy peek their head out from their hole checking the field for the shadow of the unproductive parasite class and politicians looking to leech off them; the proper role for government is to clear the field of parasites and leave tax and cash goodies to help bring them out of their hole and into the economy."

http://rortybomb.wordpress.com/2011/03/01/the-deep-south-conservative-ec...

Right, Bampbs. The blogger and Klein are both right but Vilsack is (hopefully) not being serious.

"This reminds me of the argument that business leaders aren't investing because they're put off by the president's populist rhetoric."

I don't think that's exactly the argument. I think it's more a matter of the uncertainty introduced by having a highly interventionist administration. It's much more difficult to anticipate and plan for what one person will do than to plan for what the multitudes (ie. the market) will do.

Yep, Cargill and ADM, they're just good folks.

Vilsack is merely changing the subject.