(July 18, 2011 at 8:34 am)Rhythm Wrote: The idea of subsidizing business is in at least one sense the means by which production is properly planned and distributed. This was important once as a way to prevent gluts of tomatoes, and shortages of grain, for example. The early programs to subsidize agriculture were intended to keep people from starving. Subsidies aren't always black or white. In the case of ag, it would be nice if the producers would level production themselves, but they wont, because they honestly can't. Subsidies are a less heavy handed way to overcome this, the alternative is absolute control and planning of food production by the Fed. (That is until such time as local mixed crop producers can compete with multinational mono crop producers....a situation we're not likely to ever see realized.)
No way, subsidies are the absolute worst way to deal with a scarcity issue! When a resource becomes scarce the prices rise as the demand pursuing the goods becomes larger relative to the goods available, this is seen as a "problem" because now those who desire the goods but are less willing to pay will miss out to the people who are willing to pay more, it's not a problem at all, if there is a product that is scarce there has likely already been investment in increasing the productive capacity of the industry and likely little more that can be done, with the increased demand for other staple food due to the grain prices capital will be allocated towards increasing the productive capacity of these industries, such as to extract the maximum amount of productive gains from the least amount of capital, creating a solution to the food shortage problem by providing alternatives at lower prices and in turn creating a more efficient economy, all based on the price signals generated by people's willingness to pay - All subsidies do is artificially push down the price of the grain by hiding the value being subsidised from the purview of the consumer masking the true cost, people who wouldn't be willing to pay for grain at the retail price + the subsidised value are essentially being tricked into purchasing a good at a price higher than they would otherwise pay had they known the full-price they were paying via taxes.
You also now have a situation where the people who most want the goods and who would have otherwise been willing to pay more for them are now pursuing the same scarce resources as those who do not have the same demand which creates more tainted market signals about the demand for grain relative to the supply, the demand so essential to price signals that informs the allocation of capital has been tainted. There is also the downside that people who may have no interest in grain or any real demand for it are now paying for the subsidies so that grain consumers can maintain their cheap prices.
Subsidies also hurt trade between states/provinces or nations, it may be the case that the Grain is actually cheaper imported from another producing region but given the subsidies that are tainting the price signals it would be much more difficult to tell - Your own nation could possibly be allocating capital towards other goods and services that are in demand and for which the most efficient increases in productive capacity can be achieved so that you can trade these goods with grain producing regions but the capital has been tied up in marginal increases in productive capacity and suppressing prices in Grain instead, now you're whole economy is less efficient.
If you want to keep people from starving you don't fuck with the market and throw the price signals out of whack, you give them money so that they can participate in the market and if Grain is out of their price range they will demand some other staple food.
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