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October 1987, 
Vol. 69, No. 8
Posted 1987-10-01

Farm Policy: Justifications, Failures and the Need for Reform

by Thomas Gale Moore

Thomas Gale Moore, a member of the Council of Economic Advisers, addresses the conceptual basis for a farm program. Although market failure—for example, excessive price or quantity risk that cannot be hedged through conventional market channels—often is cited as a basis for government intervention in farming, Moore notes that the government could also fail, and its costs must be evaluated against any potential benefits from intervention. He also notes that erratic or poorly designed aggregate policies can affect the farm sector through the close linkages between financial and commodity markets. Finally, after observing that the rent-seeking behavior of farmers is a major reason for the current scope and cost of farm programs, Moore acknowledges that any attempt to reform farm programs will require compensation sufficient to ease the costs of transition to a more market-oriented farm sector and overcome the political opposition of vested farm interests.