Wednesday, December 19, 2018

A crucial turning point for agricultural policy

Dieter Helm from Oxford University in a video presentation of policy options for agricultural policy after Brexit: Dieter Helm

He argues that we are at a critical historical turning point for agricultural policy, as important as the post-war settlement embodied in the 1947 Act and joining the then common market in 1973. We need to be clear about what the problem is you are trying to answer in agricultural policy. Why do we have to intervene at all? Post-war policy across Europe was influenced by a 'dig for victory' narrative which is no longer relevant.

He argues that we no longer need policies to deal with volatile prices given the availability of futures markets and financial instruments. I am not convinced that these address all the challenges, particularly for smaller farmers.

What earlier policies failed to address were negative externalities and public goods. Economists have a tight definition of public goods, but public perception equates public goods with the public interest. The Treasury may be tempted to transfer non-agricultural policies to the agricultural budget, e.g., rural broadband access.

There is an asymmetric information problem between farmers and those implementing public policies. Helm suggests the use of auctions and discusses this in the context of river catchment areas.

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