This question may be naive, but why is the agricultural industry so subsidized? I understand the moral argument, but why, economically, does subsidizing farms result in a more efficient allocation of resources? I've heard that it's because farming as a business is full of unpredictability, but if that were the case, wouldn't there be a significant market for private insurance, and wouldn't the cost of that insurance be priced into the cost of food?

1. Farmers vote. And, Farmers live in states where the value-per-vote is high under both state-vote balancing, and gerrymander. Farming is politically useful.

2. Food is part of national security. It's sensible to keep the sector working.

3. Consumers hate variability in food pricing. So, general sentiment at the shop is not in favour of a strong linkage of cost of production to price, and under imports, there's almost always a source of cheaper product, at the socialised cost of losing domestic food security: Buy the cheese from Brazil, along with the beef, and let them buy soy beans from China and Australia to make the beef fatter. -And then, you can sell food for peanuts (sorry) but you won't like the longer term political consequences, if you do this. See 1) and 2).

You have to realize the vast majority of farmland is in states suceptable to floods, droughts, hurricanes, pests, frosts, etc. You can read stories of an off year where locusts were so bad they darkened the skies, for example.

Compounding this, farm equipment is freaking expensive. It's not abnormal for a large farm to have hundreds of thousands in payments on machinery. In a good year they make hundreds of thousands. In a bad year they're on the hook for hundreds of thousands. It can take only one bad year to wreck a farm, which is why their suicide rate is so high.

It's hard to imagine as a dev. But imagine you make 200k. Then next year, because of ransomware your boss installed, they tell you you owe 200k through no fault of your own. What would that do to your finances?

Insurance is a parasite. I'm usually against subsidies, but for as something as important as food, it seems reasonable.

Not everything is about economics. As the romans said - you need bread and circuses to stay in power. Keeping food cheap serves an important political function. It also serves an important security function to keep food domestic because if you are at war with where your food is grown, you are not going to win that war.

You can't eat private insurance.

The consequences of not being able to produce enough calories is severe. It is much better to overproduce and everyone gets fed than producing just enough and a climate event erases out 20% of our calorie production.

Some of them date back to 'westward expansion', where they were incentives to encourage settler immigration (e.g. Texas tax exemption from 1839). They've stayed on the books because nobody wants the trouble of suggesting their removal.

More generally, however, it's a cost that is paid to support massive efficiency gains in other sectors. Like roads, aviation or the military. The freight system particularly would be unreliable if food prices floated according to only supply and demand, due to freights vulnerability to political upheavals, militias, etc.

It's out of political fear. The irony is that it doesn't actually work all that well.

Apparently, New Zealand abandoned all farm subsidies at some point and while the transition was abrupt and rough for farmers the farming sector recovered and is now performing much better. They abandoned it because they could no longer support it economically. They were producing lots of sheep that couldn't be sold. Now they produce much more meat with much less sheep.

Farming subsidies aren't unique to the US. Here in the EU, farmers are giving away subsidized potatoes in Berlin currently. You can literally go to a collection point and pick up some free potatoes. They have so much over production that farmers literally don't know what to do with it. Nobody wants them. In the same way there's a history of subsidized beetroot farming for sugar production, too much wine in France, butter and milk surpluses, etc. This happens over and over again.

In the US, the two main crops that are being subsidized are corn and soy beans. Corn syrup isn't exactly a thing that the rest of the world needs in their diets. It's a very uncommon ingredient outside the US. And commonly associated with obesity issues inside it. Soy beans are useful for export and for feeding animals. Exports are problematic (tariffs) currently and animals can also be fed with corn.

And of course much corn is also used for ethanol production, which in turn is used to greenwash fuel usage in the ICE vehicles that burn it. Bear in mind that intensive corn farming is very CO2 intensive. The extensive mono cultures in the US are destroying the landscape and contributing to desertification. It's not great the environment or global warming. It doesn't make any economic sense to be subsidizing corn production at this scale.

The problem here is that these are relatively low value crops that would not be produced in anywhere near the current volumes without subsidies. They aren't actually needed in these volumes either. Farmers mainly grow it because they get money to grow it. They would be growing more valuable things without subsidies. Or at least be diversifying what they do. The irony of this is that many farmers don't even like being that dependent on subsidies.

The whole system perpetuates but there's no solid argument for it. Everyone could arguably do better without that. But it's easier/more convenient to not change the system. So politicians keep on "protecting" the farmers (i.e. their own seats).

The ability for a nation to feed itself is national security, period. Anyone who says otherwise is wishfully thinking or naive.

The quickest way for a government to collapse is famine.

IMO it is the role of the federal government to ensure that the US is not dependent on another country to feed its people. This is probably not popular here, but its a fact.

> so subsidized

Emphasis on "so", i.e. past obvious strategic rationale like food "security", there's reason to believe US ag has excessive subsidies. IMO answer is like every other "strategic" sector, farmland political economy has been captured by wealth (i.e. Bill Gates largest farmland owner). There's a fuckload of tax haven / loop holes tied to farmland that defers capital gains tax, estate/inheritance tax, property tax. Farmland is stable investment (because land) used to park wealth - it's an asset class, hence if held as asset, wealthy will double down / double dip to make sure it doesn't go idle, so they lobby all the "easy" crops to get massive subsidies and now something like 80% of subsidies goes to top 10% of recipients. US doesn't need to produce that much surplus corn/soy, but it's relatively easy to grow so big agri with capital sunk on those crops will lobby for continued subsidy of said crops, build up even more wasteful sectors like agri to energy (30-50% of corn goes to ethanol), and next thing you know a very inefficient ground water to subsidized agri commodity to gdp generator takes on it's own logic. TLDR, people good at at spread sheets rigged US agri like they rigged everything else.

Pricing anything into the cost of food would be political poison. Paying farmers to grow nothing is considered preferable to that

Because agriculture is hard industry. The producer prices that is what the farmer gets are often laughable cut from final product. And this is due to farmers having little or no power in the system. Their products are made at certain time. And then they start declining in quality and finally rotting away. Most of the value ends up in other parts of the chain.

You could increase prices relatively little and farmers would earn lot more. But no one else is willing to allow that to happen. As such directly subsidizing them is more efficient.

most of the subsidies are insurance not direct payments.

At least in Europe they have inproportionally big lobby and food is considered a security issue. If it would not be subsidized it would probably be beaten by much more cheaper imports. You can see they ignored security issue with energy and it backfired pretty bad.

… but why, economically, does subsidizing farms result in a more efficient allocation of resources?

It’s doesn’t.

Agricultural subsidies in the US, and I presume most states but I’m not as well read on their policies, are a mixture of realpolitik, war preparedness, and graft.

If you are trying to square the circle, you can’t, because economic efficiency was not an input for the decisions on these subsidies.

because the energy states of inputs are so massively beyond ordinary bounds that distortions of unexpected kinds develop and persist in markets that otherwise appear to be straightforward? And, this is not new, but more energetic and more far-reaching than ever before. (more comments would have to chose a lens through which to postulate e.g. economic, legal, energy exchange, human nature ... etc.. ?)