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Intervention bias in agricultural policy

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  • Robert J. Myers

Abstract

This paper re‐examines the motivation for government intervention in agriculture to support farm prices and incomes. A model is outlined in which the government has a preference for higher farm incomes but fails to provide farmers with the socially optimal level of price support, even when one accepts the government's income redistribution goals as a valid reflection of social preference. It is shown that agricultural policy has an intervention bias: government price supports generally are higher than would be socially optimal. The source of the intervention bias is a time inconsistency in optimal agricultural policy formation, caused by the government's inability to precommit to a rule for setting future price support levels. Simulation results indicate that in some circumstances the intervention bias in agricultural policy can be substantial.

Suggested Citation

  • Robert J. Myers, 1992. "Intervention bias in agricultural policy," Agricultural Economics, International Association of Agricultural Economists, vol. 7(3-4), pages 209-224, October.
    • Handle: RePEc:bla:agecon:v:7:y:1992:i:3-4:p:209-224
    DOI: 10.1111/j.1574-0862.1992.tb00214.x
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    Cited by:

    1. Jayne, Thomas S. & Mason, Nicole M. & Myers, Robert J. & Ferris, John N. & Mather, David & Sitko, Nicholas & Beaver, Margaret & Lenski, Natalie & Chapoto, Antony & Boughton, Duncan, 2010. "Patterns and Trends in Food Staples Markets in Eastern and Southern Africa: Toward the Identification of Priority Investments and Strategies for Developing Markets and Promoting Smallholder Productivi," Food Security International Development Working Papers 62148, Michigan State University, Department of Agricultural, Food, and Resource Economics.

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