Who decides what to grow?

The federal government had its economic summit a week ago. Lots of tidbits from that meeting. I’m not going to go over everything that came out of that meeting. Just some things I find interesting. As with every policy position there are good ideas and there are bad ideas.

One of the bad ideas that stood out was the bit about state governments identifying crops. According to the released statement, “Each state government is encouraged to identify at least two agricultural crops in which they have comparative advantage…”.

Why is this a bad idea? Well it keeps with the theme of this regime. That the government decides what will be grown and not the farmers. The government knows. The farmers do not. What happens if the government decides that tomatoes are the thing they have a comparative advantage in? But the farmers want to grow soybeans instead because it is more valuable. Who decides?

Of course the best thing for the farmers to do is to grow the most valuable thing they can. If they are forced to grow something else, because a government committee decides, then technically they have been made worse off.

Of course the government will claim that there is a reason they chose that crop. Maybe they want tomatoes because they want to supply their “nascent” tomato industry. But even in that scenario the best thing is still for the farmers to grow the most valuable thing they can and then the industries buy tomatoes. If tomatoes are the most valuable thing then sure. But if they are not, then forcing the farmers to grow tomatoes makes them worse off.

Morale of the story: if your central planner forces farmers to pick a less valuable crop for “national objectives” then the farmers are worse off. At best the central planner would choose exactly what the farmers would have chosen. But then why do you need a central planner. Who decides what to grow? The farmer or the government?

 

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