Unintended harm of government economic programs

The government pays farmers not to grow crops. What could go wrong?

When farmers take a conservation payment rather than plant a crop, they don’t buy fuel and fertilizer, they don’t buy machinery and seed, and they don’t hire help for the harvest. In short, Partch said, the payments stifle the local economies by suppressing high-production agriculture in an area that boasts some of the best wheat-growing conditions in the world.

via Census: Dwindling small towns determined to fight extinction – Spokesman.com – March 6, 2011.

The landowner does well, and as noted in the story, many landowner farmers no longer live on the farm but live in cities. This provides a low risk income stream to the land owner but harms the local businesses that depend on the economic activity generated by actual farming.

The program has had quite an impact on the outlying counties around Spokane, with likely indirect impacts on Spokane County businesses that service the needs of agriculture.

Comment

I am interested in how this favors real estate interests but hurts small businesses and wage earners in these communities. As I alluded in another post, I wonder if our focus on real estate property development, particularly with regards to the $3.7 Billion in public and private investment in downtown Spokane over the past decade, has distorted our local economy and might explain, in part, some of the difficulties in creating an innovation-based economy? I am still thinking about this topic and seeking more data. For example, buyers of upscale homes in the Kendall Yards property development do not have to pay property taxes for 12 years. That means the costs of their services are paid for by others in Spokane. Big benefits go to a small number of property owners, and related infrastructure improvements increase the values for downtown property owners with little benefit to everyone else.

Well intentioned government programs some times have unintended side effects that may explain why things are not the way we expect them to be. In this case, a bias in favor of downtown property development means less is available to provide government improvements elsewhere and in other programs (e.g. not real estate focused). Downtown is quite nice today – perhaps attention needs to be given to other areas and functions.

Again, I am only thinking about this topic – this process may or may not lead to useful insights.

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2 Responses to Unintended harm of government economic programs

  1. Just a quick comment to say that this economic analysis almost always leaves out the economic value of “ecosystem services” which are, admittedly, difficult to quantify. “Not farming” may very well be quite a bit cheaper than, for an extreme example, “finding alternative sources of drinking water.” Or, in a more typical scenario, stricter regulation.

  2. inlandnw says:

    I understand what you are saying.

    Per the linked article, the lack of economic activity (seed, fertilizer, equipment, fuel, wages for farm labor) is negatively impacting the local farm communities. Alternative uses of the land do not seem to making up for those direct losses, again per the article.

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