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Abstract
Agriculture is the main source of food for the world, and food is the basic input
in the daily sustenance of humans. Yet, in many parts of the world there is
insufficient food, which in turn implies inadequate agricultural output. The
reasons for inadequate agricultural production are many and varied, ranging from
poor distribution and poor production techniques to political intervention at
various levels in the global agricultural complex. The most important reason for
deficie.nt agricultural output is difficult to ascertain, but Schultz (1977) left no
doubt as to his ranking of the causes. He suggested that the level of agricultural
production depends not so much on technical considerations, but in large measure
"on what governments do to agriculture." Schultz has long been the most ardent
and eloquent spokesman of this position. See, for example, Schultz, 1964, 1977,
and 1978. Export taxes on agricultural products provide government revenue and
keep domesitc prices low, product price supports in developed countries maintain
farm incomes and provide surpluses which in turn find their way to developing
country markets to further depress domestic farm prices, and agricultural inputs
are frequently either taxed or subsidized. Yet, the magnitude of these effects
on agricultural output, income distribution between producers and consumers,
efficiency, and on rural-urban migration is often not fully appreciated.
This paper discusses government intervention in agricultural price determination,
drawing on welfare theory to quantify the economic impacts on the
previously mentioned variables. In this study, we examine France, Federal
Republic of Germany, United Kingdom, Japan, Yugoslavia, Argentina, Egypt,
Pakistan, and Thailand. The general theme of the paper is that the agricultural
policies pursued by developing countries produce effects which are diametrically
opposite to those produced by the policies of many developed countries, and that
the policies of both are costly in terms of global welfare. Peterson addresses
the developing country side of this question in a somewhat different manner.