Lecture 3.
Agricultural policy objectives and the farm problem

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What we want to learn about this topic

Short introduction to the issues

Agricultural policy objectives

Treaty of Rome Article 33 (ex 39) objectives; all highly desirable, but is government intervention justified?

Agenda 2000 revised statement of EU agricultural policy objectives

The farm problem model

A common structural characteristic of developing and industrial country economies is the declining share of economic activity contributed by the agricultural sector, whether measured in terms of GDP or employment. This declining share implies that resources must be re-allocated from the farm to nonfarm sectors and, in a market economy, this implies that labour returns to agriculture will lag behind labour returns in the nonfarm economy to provide an incentive for this to happen. From a farm perspective, it is not surprising that the problem of low (and unstable) incomes is defined as a problem (the 'farm problem') but how justified is public intervention to raise farm returns? In this lecture we cover:

Reasons why farm incomes may lag behind nonfarm incomes

The pattern of adjustment

Reading suggestions

Winters, A., (1990), The so-called non-economic objectives of agricultural support, OECD Economic Studies 13, pp. 237-266.
(surveys the usual arguments advanced to justify government support for agriculture in industrialised countries)

For a discussion of the farm problem model, see
Gardner, B., 1992, Changing economic perspectives on the farm problem, Jnl. Econ. Literature 30, March, pp. 62-101
(read first part of this article, pp. 62-85, ignore last section on US farm policy).

Supplementary readings

D. Blandford and B. Hill (eds.): Policy Reform and Adjustment in Agricultural Sectors of Developed Countries. Wallingford, Oxon.: CABI Publishing, 2006.
(concentrate on the early chapters describing the forces for change. Much of book is a set of national case studies, while concluding chapters examine policies to assist adjustment).

For discussion of the pattern of agricultural adjustment in Ireland over the past decade, see
Crowley, C., Meredith, D. and Walsh, J., 2004. Population And Agricultural Change In Rural Ireland, 1991 To 2002, Teagasc.