AFRE 300: Public Policy Issues in the Agri-Food System: Readings

The opensecrets.org website is a non-partisan effort to compile information on how money flows into politics. The data covers several angles, including campaign donations – from the Federal Election Commission data, and lobbying data. It lists the interest groups, individuals and corporations channeling money into federal politics.

1. See the trend of money in politics for yourself. Plot a graph of total campaign contributions to congressional races for the state of Michigan (or any other U.S. state you prefer) from 2000-2018. Hint: on the website, select “View state profile for Michigan” after choosing “Congressional Elections” from the main menu. Describe what you observe.
2. Identify major contributors to Michigan congressional races, (or any set of races or issues that you find interesting). What do you think the contributors are paying for? What do you think are the intended and unintended consequences of the level of political contributions that you observe?

2021 ebook; The Paradox of Special Interest Groups,” pp. 243-246. This content is also in the Digital course pack. Discussion questions are below.

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From: New ideas from dead economists : an introduction to modern economic thought / Todd G. Buchholz

Buchholz looks at how special interest groups — or lobbying groups — behave when they lobby for the policies they want. He asks the question: Why do people join interest groups to lobby the government and how much will they be willing to spend to lobby the government?
You should think about this as “the economics of lobbying.” As you read, think about these questions:
1. Interest groups could lobby for laws that make everyone — including their members — better off or they can lobby for laws that make their members better off while making other people worse off. Why does Buchholz say that interest groups will choose to lobby for laws that make their members better off while making other people worse off? Relate this to the morality question for J.K. Galbraith in last week’s readings.
2. If Buchholz is correct that interest groups will always lobby for laws that make their members better off and make other people worse off, then we would expect the people who are worse off to form their own interest group and lobby against the law that would make them worse off. Buchholz says this will not happen in some cases where the people being hurt by the policy have “rational ignorance.” What is “rational ignorance” and why do some voters decide to be “rationally ignorant?” Why don’t these people form an interest group to lobby against the policies that may be harmful to them?

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Print Source: Government's end : why Washington stopped working / Jonathan Rauch.
New York : PublicAffairs, 1999. http://catalog.lib.msu.edu/record=b3613141~S39a

1. Rauch discusses the creation of an interest group called the "Car Rental Coalition." This group was formed to represent rental car companies when they felt the need to lobby against a regulation they thought would harm their industry. Rauch calls this an example of the "parasite economy.” Why does he call it the parasite economy? Rauch concludes the story with three lessons. What are the lessons in this case and why does he say that everyone in the story is doing what is best for them but in the end everyone in the story is worse off?
2. Rauch discusses why interest groups are formed by looking at the profits that firms can make from “making and taking.” Why does he say that it is rational for firms to invest in the formation and support of a lobbying group rather than investing in equipment, research or other business investments that make them more productive?

3. THINK ABOUT:
How could Rauch’s two stories be used to explain why we have so many interest groups in the United States?
With the introduction of more low-cost communications technologies (faxes, texts, e-mail, etc.) Congress is now getting more messages from constituents than at any time in history. Will this make a difference?
Some observers believe that the availability of low-cost communications such as internet and e-mail will make politics “more democratic” and more open to citizens. Think about the public choice theory we have discussed in class: What happens to an interest group entrepreneur’s cost of organizing an interest group with this new technology? What would you predict would happen to the number of interest groups that lobby government? If Rauch's opinion on the causes of "demosclerosis” are correct, would you expect government to work better with the introduction of these new technologies?
Many people complain because Congress "doesn’t listen to the public." But Rauch is saying that the (a) "the public" is actually made up of lots of interest groups that have many conflicting opinions about policy issues and (b) Congress listens to these groups TOO MUCH and make bad policy decisions by trying to satisfy the public too much. What do you think of this viewpoint?

1. What are the major risks facing CEOs of companies – when social issues that concern their customers, employees or other stakeholders become headline news?

Grier talks about farmers viewing cities with political suspicion, and city-folk viewing farmers with disdain. In discussing the nation’s transition from rural to urban, he raised important points on who are considered ‘real voters’ and one-person-one-vote.
1. In your experience, how real is the rural-urban animus? How has the power of farming and rural Americans changed over time?
2. Is it true that the divide widened in 2016?
3. How have politicians from the major parties contributed to the worsening or bridging of the divide? Is polarization useful for anyone? Is it particularly helpful for farm policy? Is the new style of American politics producing policies that are good for the country?

1. Use this Farm Policy Facts resource to review the Titles (or components) of the 2018 Farm Bill. What do you learn from the history of the Bill, or from the CRS publications that could improve the summary you wrote for last week’s class?
2. Explore further by reading the reports from the Congressional Research Service. Describe your assessment of the budget allocations for each title. Did you have any surprises or insights?

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1. Johnson outlines 8 "basic facts" (economic factors) about agriculture that he believes cause farmers to “outproduce the demand for food” in the long-run. What are these basic facts and how do they cause farmers to sometimes produce more than the market is demanding? What are the implications of these basic facts for the behavior of food markets? For other participants in the agri-food system?
2. Why does Johnson disagree with Cochrane's view that technology is the main cause of low prices for agricultural commodities?
3. THINK ABOUT:
If Tomek/Robinson, Cochrane, and Johnson (from last week’s reading) are correct that (a) prices of agricultural products are unstable, and that (b) there may be instability, a cobweb, a treadmill or asset fixity at the farm level of the system, then what are the implications of these factors for farmers, food manufacturers/wholesalers/retailers, and consumers in the short run? In the long run?

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1. Robinson defines three major agricultural policies — price supports (“nonrecourse loans” or "loan rates”), target prices, and marketing quotas (we will discuss a fourth in class — the set-aside).
2. What is the definition of each of these policies?
3. What is the impact of each of these programs on farmers, food firms (manufacturers/retailers), input suppliers, consumers, taxpayers, and exports?
4. Given the target price, loan rate, and market price for an agricultural commodity, how would a producer:
a. Decide whether to sell on the market or take the loan rate?
b. Calculate the deficiency payment?
c. Calculate the total price received? (2a, b, and c discussed in class)
5. By the end of this section in class, be sure you can explain the four major commodity programs, including graphical analysis of each program.

1. What is the Michigan Farm Bureau's position on NAFTA? Why do you think they hold this position?
2. Why would the Michigan Farm Bureau, which touts its environmental credentials, be opposed to the decision to designate the western Lake Erie basin as “impaired”? First, be sure to explain what “impaired” means in this context, and what it implies for farmers.?
3. The Waters of the United States rule by the EPA, much like the Lake Erie decision at the state level, did not meet the Farm Bureau’s approval. Explain all sides of the argument. Which makes sense in the long-run for the state of Michigan.
4. Do you see anything interesting in the Michigan Farm Bureau's take on the 2018 Farm Bill?

(pp. 1-5)

(pp. 1-2)

1. How are farmers’ payments calculated under the 2018 farm bill? How do the calculations differ from the version in the primer by Becker?

1. How does this story relate to Rauch’s discussion of the farm policy process earlier in the semester? (Think about the parasite economy, special interest groups, the rural-urban divide and the fragmentation of interest groups.)

Hendrickson, M.K., James, H.S. The Ethics of Constrained Choice: How the Industrialization of Agriculture Impacts Farming and Farmer Behavior. J Agric Environ Ethics 18, 269–291 (2005).

1. What are the four IFOAM principles that provide an ethical framework for the organic food movement? Can you compare the mission statements of organic/non-organic food producers for consistency with these principles?

How do you interpret the arguments in the article by Hendrickson and James, that farmers are under pressure to be unethical? What role does policy play in this process?

Cushman, John H., Jr. "Pollution by Factory Farms Inspires Industrial Approach to Regulation." New York Times 6 Mar. 1998

Anderson, Donald M. 1997. “Turning Back the Harmful Red Tide.” Nature 388 (6642): 513.

January 8, 2019 | Press Releases
1. How does “point pollution” differ from “non-point” pollution? What policy alternatives might be used to reduce non-point pollution? Why might some of the policy alternatives used for point pollution not work as well for non-point pollution?
2. How has the growth of large scale, concentrated livestock operations changed the nature of the point pollution problem? What policy alternatives may be used for concentrated livestock operations?
3. Should we think about environmental quality the same way we think about other goods?
4. What do you notice as the main motivation for the bipartisan bill championed by Senator Portman on algal blooms? As a hint, think about when the first algal blooms law was signed.
5. How is the challenge of the red tide in Florida, as described in the article by Anderson, related to the algal blooms problem? Can you describe common solutions?

Porter, Eduardo. "British Columbia's take on effects of carbon tax." International New York Times, 2 Mar. 2016.

Robert W. Hahn. The Journal of Economic Perspectives. Vol. 3, No. 2 (Spring, 1989), pp. 95-114
1. Try to find a useful definition of the term externality. Can you think of personal example? Can you think of an example in the agri-food sector?
2. What are the policy alternatives for achieving environmental standards, according to the article by Robert Hahn? What are the consequences of each of these alternatives?
3. What does the author of the carbon tax article think about environmental regulation? The party that introduced the carbon tax in B.C. Canada, was it a left-leaning or right-leaning party?
4. If a tax on an environmental externality can help Canada, as the author argues, can the same argument be made for agriculture practices in the U.S.?
5. Why might taxes be a lower cost alternative for reducing pollution than regulations? What might be the consequences of using taxes to control pollution?
6. Why might pollution permits be a lower cost means of controlling pollution than regulations? What are the consequences of using this alternative to controlling pollution?

1. Did the videos change your answers to the questions following the article by Robert Hahn?
2. What are the advantages (and disadvantage) of the cap-and-trade approach?

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1. What is the "GATT" and what are its major principles?

Bradsher, Keith. "The World Trade Agreement: The overview; U.S. and Europe clear the way for a world accord on trade, setting aside major disputes." New York Times, 15 Dec. 1993

"World Trade Talks: The Uruguay Round's Key Results." Wall Street Journal, Dec 15, 1993, pp. PAGE A6..
1. What are the major provisions of the GATT agreement completed in 1993?
2. What industries, including food industries are likely to gain, and lose from GATT?

Washington Post, December 17, 2005, p. 1.

Kurtenbach, Elaine, “WTO Negotiators Agree on Farm Subsidies,” "WTO Negotiators Agree on Farm Subsidies". Associated Press Financial Wire. December 19, 2005. pp. 1-3

The Economist, vol. 409, no. 8866, 14 Dec. 2013, p. 78(US).
1. What issues were central to the negotiation of the Doha Round of WTO negotiations? Why was the agreement it reached in December 2013 an “unaccustomed” result? Why was the result criticized as being “too small”?
2. Were the results good for US consumers? US farmers? The environment? Developing economies?

by Steven Zahniser, Sahar Angadjivand, Thomas Hertz, Lindsay Kuberka, and Alexandra Santos. International Agriculture and Trade Outlook No. (WRS-15-01) 91 pp

Sreenivasan, Hari and McGregor, Sarah.

Waldron, Amanda.
1. What was the impact of NAFTA on food and agriculture trade between the United States, Mexico and Canada after 20 years, according to the USDA report by Zahniser et al?
2. What are the facts behind the NPR interview about the future of NAFTA? Are the negotiations reducing or introducing uncertainty into business’s expectations for trade policy? Is this good for business?
3. From the Brookings article, can you guesstimate the impact of NAFTA withdrawal for the US?

Ellie Vorhaben.

Andrew Chatzky, James McBride, and Mohammed Aly Sergie.
1. What is the USMCA, and what are its main accomplishments? How does it differ from NAFTA
2. What were the negotiating positions of the affected nations going into the USMCA negotiations?
3. Which countries had the highest trade barriers on food products prior to the NAFTA agreement? Prior to the USMCA agreement?
4. How will it affect the agri-food sector in the US? In Canada and Mexico?

Bhagwati, Jagdish. "The Case for Free Trade." Scientific American. November 1993, pp. 42-49.

Daly, Herman E. "The Perils of Free Trade." Scientific American. November 1993, pp. 50-57.
1. Bhagwati and Daly debate the question of whether increases in world trade will harm the environment. What are the reasons why Bhagwati believes an increase in trade will improve environmental quality? How can trade barriers lead to a lower level of environmental quality?
2. Daly believes that increased trade will lead to lower environmental quality. What are the reasons why Daly believes an increase in trade will harm environmental quality? Why does he believe that the externalities associated with energy consumption require the use of tariffs to internalize externalities? Why does he believe that tariffs should be used to offset any differences cost that are created by differences in environmental regulations?
3. Do their disagreements consistent with the reasons offered by Heller in the first section of this course?

Brasher, Philip. “Agri-Pulse poll: Climate change concerns many farmers, but carbon payments far too low.”

Harvey, Fiona.

Pearce, Fred.
1. How do US farmers want to address the climate change challenge? How should others help?
2. How much of man-made greenhouse gas emissions come from maritime shipping and airlines? From shipping alone? Are the firms responsible for these emissions open to corrective action?
3. What steps have been proposed or taken by airlines to address emissions? Do you think those steps are (will be) effective?
4. What steps to corrective action have been proposed or taken by shipping companies? Do you expect these steps to have an effect of farmers, processors and other businesses in food supply chains?

Michael Collins, "Farmers hurt by tariffs to receive $4.7 billion." USA Today, 28 Aug. 2018, p. 03B.

Website defaults to the newest.

Farm Income Team (USDA), “2019 Farm Sector Income Forecast”.
By Ryan McCrimmon

Jake Spring and Tom Polansek,
1. Why was a package of relief payments needed for farmers in the USA TODAY article? How did trade policy lead to a decline in farm income?
2. The USDA Farm Income Team expected that US farm profits would fall in 2018 to levels not seen since the Great Recession but t foresees growth in 2019. Was the 2018 decline avoidable? What changed from 2018 to 2019?
3. The article by Spring and Polansek projects that the current trade war has winners and losers. Describe and explain, and if you disagree with the authors, provide evidence from authoritative sources that enhance the discussion.

American Journal of Agricultural Economics. Jul2016, Vol. 98 Issue 4, p1146-1157. 12p. 7 Charts, 2 Graphs.

Hertz, Thomas,

Hertz, Thomas, Kusmin, Lorin, Marre Alexander and Parker Timothy.

Good, Keith.

Matthew Shane et al.,
How did the economic crisis of 2007-09 affect agricultural output? Did the demand for farm labor increase? Did farm wage rates increase or decrease?
1. What structural features of the agri-food sector explains the patterns described in the Perloff and Hertz papers? The USDA report cited in the article by Keith Good forecasted a 38% drop in profits for farmers? What was the reason behind the forecast? (Hint: you may have to dig around beyond the article to find out).
2. From the article on rural employment, can you say whether rural employment has recovered from the economic crisis after a decade? What explains the fact that unemployment rates fell in rural areas, even when the job index showed little if any positive change?
3. Would you expect all firms or subsectors of the agri-food system to be equally affected by a recession? Explain your answer.
4. Compare the projections of the slump in farm income from the articles by Keith Good, and (only the summary section) of the USDA report by Shane and co-authors. How do you reconcile the differences?

1. Describe the intended and unintended consequences, for this specific public policy issue.
2. Explain the ethanol mandate in no less than 150 words. Please describe the sources for your write-up.
3. Note the arguments made, and the stakeholders named by the newspaper article.
4. Summarize another news article or policy brief that describes the same policy question: How important is the fact that some of the ethanol mandate’s consequences are not very obvious? Try to explain the consequences of the policy in terms whether they are [1] intended and obvious, [2] unintended and obvious, [3] intended and not obvious, and [4] unintended and not obvious.

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1. In this class, we will use economics to analyze the consequences of policy alternatives. Heller gives 4 reasons why economists often disagree about the consequences of public policy. What are these reasons? How do those reasons relate to the discussion of the motives behind policy decisions as discussed above in the Detroit News editorial?

Detroit Free Press, September 17, 1996. (Be sure to scroll down as the article is at the bottom of the page.)

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Print Source: http://catalog.lib.msu.edu/record=b3676818~S39a

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1. McDiarmid’s article and the Legislative Service Bureau backgrounder both examine the history of the Michigan Beverage Container Law. In this class, we will focus on four key elements of all policy analysis: Issues, Stakeholders, Alternatives, and Consequences. Consider the following for the Michigan Beverage Container Law:
2. What was the issue the Michigan Legislature addressed with the Beverage Container Law?
3. Who were the stakeholders that were potentially affected by this issue?
4. What policy alternatives were available for addressing this issue?
5. What were the economic consequences of each alternative for the stakeholders?
6. Why would an industry interest group such as the Food Marketing Institute (FMI) oppose a national bottle law? How does this relate to our “alternatives and consequences” approach to policy analysis? Are there unintended consequences?

1. What is the definition of the price elasticity of demand?
2. How is the price elasticity of demand calculated?
3. What does the price elasticity of demand measure?
4. What are the ranges of the price elasticity of demand and how are they related to the shape of the demand curve?
5. What is the definition of the price elasticity of supply?
6. How is the price elasticity of supply calculated?
7. What does the price elasticity of supply measure?
8. What are the ranges of the price elasticity of supply and how are they related to the shape of the supply curve?
9. What is the “incidence” of a tax and how is the incidence of a tax related to who will ultimately pay a tax?
10. How do the price elasticity of demand and the price elasticity of supply determine who must bear the incidence of a tax?

Chapter 1 - The uniqueness of food markets. Hansen, Henning Otte. Food Economics: Industry and Markets, 2013, pp. 1- 22.
1. NOTE (page 2) the long list of “special conditions (economic and non-economic) that cause agriculture and the agri-food system to be “unique.” We will focus on three major theories of the behavior of agricultural and food markets.
2. Be sure to note the several graphs in this reading and pay particular attention to the long-term trends in these graphs (trends over several years).

IN: Part II: Chapter 9: Price Variation through Time. pp. 181-185.
Tomek, William G/ and Kenneth L. Robinson. Cobweb Models. Agricultural Product Prices, 2014
1. What are the three economic factors that lead to the operation of the “cobweb model”?
2. How does the price and quantity of a food product change over time in the cobweb model?

1. What are the underlying economic factors that determine the operation of Cochrane’s “agricultural treadmill”?
2. What are the steps in the "treadmill” that lead to long-term decreases in the prices of agricultural commodities?
3. NOTE: You should be able to graph the treadmill using cost curves and supply/demand curves by the time this reading and lecture is complete.
4. Cochrane argues that the supply of food products grows faster than the demand for food products. How is the income elasticity of the demand for food related to this phenomenon?

2018-10-16. Paul Hicks.
Economists often assume that markets are “self-correcting.” That is, if the price of a good increases, then producers will respond quickly with increased production (or consumers will decrease consumption). On the other hand, if the price decreases, producers will decrease production (or consumers will increase consumption.
What characteristics of agri-food markets would prevent them from being “self-correcting?

pp. 1-5
1. How much do subsidies for com affect the price of com sweetener (High Fructose Corn Syrup, or HFCS)? The price of soft drinks? Caloric consumption? Obesity?
2. Do the authors provide a clear link between health policy and farm policy?

Adam Briggs . Nature volume 531, page551 (2016

1. How much tax revenue could a national sugar tax provide in the US? The authors cite other places that have enacted a sugar tax. What has been the impact of these taxes on public health and government revenue? How could the revenue from a sugar tax be used?
2. What is the position of the World Health Organization on soda-taxes?
3. How costly does Briggs think soft drinks are? Are the costs public/social or private? How did the author propose to fix the unaddressed costs of cheap sugary drinks?
4. How do you interpret the evidence in the Guardian newspaper article about Berkeley CA? In your opinion, are residents of Berkeley drinking less sugary drinks? How do more recent papers differ from the early results from places like Berkeley?

Read Chapter: Climate Change: How It Is Fundamentally Altering the Menu (pp. 25-46)
1. Does climate change present an ethical problem to anyone who eats? Is such an ethical challenge for all people, or for some people in some countries?
2. Is it even possible to conceive of a meaningful policy response to address the climate impacts of people eating food?
3. What advice, if any, would you offer to industry or to policymakers?

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1. In Figure 8-1 and Figure 8-2, Krugman and Obstfeld develop the basic concepts of an import demand curve and an export supply curve. READ THIS SECTION CAREFULLY —IT IS THE KEY TO UNDERSTANDING THE ENTIRE TRADE SECTION OF THIS COURSE! Given the supply and demand curves of an importing country, how would you find the “import demand curve" for that country? What does the import demand curve represent? (Figure 8-1)
2. Given the supply and demand curves of an exporting country, how would you find the "export supply curve” for that country? What does the export supply curve represent? (Figure 8-2).

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1. Why does the theory of comparative advantage conclude that free trade makes the world better off? Does free trade make everyone better off?
2. Use the export supply and import demand graphs to answer the following questions:
What is the impact of a move from "autarky" (no trade) to free trade on producers and consumers in each country? (Figure 6.6)
What is the impact of an import tariff on producers and consumers in each country? (6.7)
What is the impact of an import quota on producers and consumers in each country? (6.9)
What is the impact of a variable levy on producers and consumers in each country? (6-8)
What is the impact of an export subsidy on producers and consumers in each country? (6.10)

Doering Christopher.

Hanrahan, Charles E. 2008
Was the ban fair? How would you have wanted other countries to respond to the U.S. mad cow problem?
1. From your readings, judging the questions in the news article and the report to Congress, how did policy makers see the issue? Do you think consumers in Korea and other markets would agree or object to the arguments in the report?
2. Can you try to name the firms hardest hit by the ban? How do you think the firms responded?

Gardner, Timothy, Mano, Ana and Polansek, Tom.

Polansek, Tom.

Tatiana Freitas and Dominic Carey.
1. Was the US ban on Brazilian beef fair? Who appears to be most affected by the ban? Could the meat-packer named in the Polansek article benefit from the ban?
2. Is China’s ban on Brazilian beef fair? How does it affect US producers? US beef consumers?

Orden, David. Journal of Agricultural and Applied Economics; Baton Rouge Vol. 34, Iss. 2, (Aug 2002): 303.

Pearson, Charlie

Koo, Won W. And P. Lynn Kennedy. International Trade and Agriculture, 186-188 and 192-196.

1. What is an exchange rate?
2. How is an exchange rate determined? What factors affect the demand for a currency? What factors affect the supply of a currency? What factors cause a currency to appreciate or depreciate?
3. What is the impact of appreciation or depreciation of a country’s currency on that country’s exports and imports?
4. According to the article by David Orden, would Canadian hog producers want a decrease or increase in the relative value of the U.S. dollar? Why? Did the author suggest that exchange rates may have long-run effects?
5. What tools are available to farmers and other agri-food businesses for managing exchange rate risk?
6. How would you explain the trade war’s effects on China’s currency, as explained in the article by Phillips?

Melvin, Michael. International Money and Finance. pp 34-39.

Click to download the pdf of Chapter 2 at the top of the page and navigate to page 10 in the pdf. Stop reading at “Post Bretton Woods: 1973 to the Present” on page 39, which has a bar graph (Figure 2.3).
1. What is an international reserve currency? Why do we have an international reserve currency? What are the advantages of being the world’s reserve currency? How does a nation’s currency become the international reserve currency?

Schweikhardt, David B. and William P. Browne. Review of Agricultural Economics: Vol 23(2), pp 302-316.

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Paarlberg, Don. Chapter 7: The myth of heroes and villains. Great Myths of Economics. pp 95-100.
Print source: [New York] : New American Library, [1968] . http://catalog.lib.msu.edu/record=b1422947~S39a