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November 2010 Archive for Economic Sense

RSS By: Matt Bogard, AgWeb.com

Matt's primary interest is in the biotech industry and ag policy.

A Tea Party Thanksgiving - Was Rush Right?

Nov 23, 2010

By Matt Bogard

Last year I wrote about the first Thanksgiving, as a lesson in Agricultural Economics:

"The first Thanksgiving story provides an interesting lesson in agricultural economics.  Foremost, the celebration was about thanking God for abundance. However, an important aspect is what resulted from a move away from a socialist or common property model of organizing and allocating resources (imposed on them by the Colony’s Sponsors) to a system of private property rights."

According to a recent article in the New York Times, this view is questionable because it has been adopted by the 'Tea Party.' Suddenly, it has become popular to attack, or paint stupid, anything associated with the Tea Party movement.  The Times is referring to my interpretation (which I got from other sources) as the 'Tea Party' Interpretation. (See The Pilgrims Were ... Socialists? Nov 20,2010 New York Times)

I could care less about the tit for tat back and forth arguments between Tea Party lovers and haters, but I do get concerned when one side or the other gets the economics wrong. In terms of the history of economic thought, the 'Tea Party' interpretation has long been an accepted interpretation of Thanksgiving by many economists.  In 2005, way before the 'Tea Party' movement, Thanksgiving was discussed in relation to economic freedom at the Foundation for Economic Education. (Link) The Times article admits this, but quickly moves on.

The article makes some good points, but they are correct only in degree, not in principle. The basic economic principle that incentives matter still holds. This principle is largely rejected by socialist thought, or in general by most instances of government intervention. With the Pilgrims, the 'Tea Party' or economic interpretation goes like this: At first the Pilgrims tried to share everything in common, but because this created perverse incentives, they adopted a system of private property, which provides superior incentives for productive behavior.

Here is the first straw-man argument set up by the Times Article:

"Bradford did get rid of the common course — but it was in 1623, after the first Thanksgiving, and not because the system wasn’t working. The Pilgrims just didn’t like it. In the accounts of colonists, Mr. Pickering said, "there was griping and groaning."

They are arguing, in degree, if we tried to quantify the amount of production under the 'common'  or wealth redistribution system, it didn't utterly fail. The Pilgrims didn't all starve. (sounds like the arguments made by many of the long time defenders of communism and socialism). They just adopted capitalism because they preferred it, not because it was superior.

The basic concept from economics referred to as revealed preference holds that if someone chooses A over B, A is superior to B as revealed by their preferences. IF the 'socialist' system were so superior, then why did they give it up? Quantify that. The Times article also failed to address the actual historical record of what actually happened. As I shared last year:

Governor William Bradford's comments in 1622 describe the perverse incentives that resulted in the absence of property rights and redistribution of work and wealth:

"The experience that was had … that the taking away of property and bringing in community into a commonwealth would make them happy and flourishing; as if they were wiser than God. For this community was found to breed much confusion and discontent and retard much employment that would have been to their benefit and comfort. For the young men, that were most able and fit for labor and service, did repine that they should spend their time and strength to work for other men's wives and children without any recompense. The strong… had no more in division of victuals and clothes than he that was weak and not able to do a quarter the other could; this was thought injustice."

It sounds to me like the Pilgrims learned very quick, the bane of socialism, that INCENTIVES MATTER.

After trying to tie the real story of Thanksgiving to the Tea Party, the article goes on to imply that most Tea Partiers don't really understand what Socialism is:

"To call it socialism is wildly inaccurate," said Karen Ordahl Kupperman, a historian at New York University and the author of "The Jamestown Project." "It was a contracted company, and everybody worked for the company. I mean, is Halliburton a socialist scheme?"

Well, actually given the amount of government favoritism and subsidies, you could argue that Halliburton is the result of fascist policies, and yes fascism is one of the two patterns of socialism according to economist Ludwg Von Mises, but that is another discussion.

Again, we are talking about differences in degree, not principle. It may be true that, technically the Pilgrims were voluntarily part of a company, or similar to shareholders of a corporation. And it is true that many corporations allocate resources internally by command and control vs. on the market. And it is true, that this is NOT socialism. This is true unless the company was actually government sponsored, protected or heavily regulated. Such a cozy relationship between the company and government could be characterized as fascist, and yes that would be socialism - according to economist Ludwig von Mises, Fascism is one of the two patterns of socialism. But that is another story.

But, again, Socialism operates on the principle that incentives don't matter, or they don't matter significantly to outweigh the state's superior knowledge and abilities to allocate resources. The State's ability to do this has been disproven time and time again, and it is a lesson that the Pilgrims learned well. Even corporations that appear to allocate resources internally vs. contracting on the free market are subject to the pressures of the market to do so efficiently. Those that fail to do so go out of business, get taken over, or get subsidized or bailed out by government (and abandon the capitalist model).  Whether the Pilgrims technically operated as 'socialists' is beside the point and largely a matter of semantics. The idea that private property and incentives 'don't matter' was tested and failed. Whether or not the Pilgrims were technically socialists, the premises of socialism were tested and failed. 

The Times article also claims that the first Thanksgiving was actually in 1621, and it is true that there was a historical account of a Thanksgiving feast at that time. But historical accounts also show an even greater feast was held in 1623.

"The first actual mention of the word thanksgiving in early colonial history was not associated with the first feast described above. The first time this term was associated with a a feast or celebration was in 1623" -source

In 1623, they embraced the incentives of private property and capitalism:

"They had very good success, for it made all hands very industrious, so as much more corn was planted than otherwise would have been. The women now went willingly into the field, and took their little ones with them to set corn; which before would allege weakness and inability; whom to have compelled would have been thought great tyranny and oppression…By this time harvest was come, and instead of famine, now God gave them plenty, and the faces of things were changed, to the rejoicing of the hearts of many, for which they blessed God?"

The first Thanksgiving was a great example of agricultural productivity, given the proper incentives. The article also worked in a jab at Rush Limbaugh, and I have to say, Rush was Right.


A Guide to Sustainable Agriculture

Nov 13, 2010

By Matt Bogard

This presentation/video takes on myths about modern agriculture perpetuated by films like Food Inc & popular media, presents facts about 'factory farming', corn, organic food & pesticides, biotechnology, livestock production & climate change, meat consumption and climate change .



A Video Discussing Sustainability

Nov 01, 2010

By Matt Bogard


The term factory farm has gotten a lot of use lately, and I have always contended that the term has often been used by activists to appear to be pro family farm, while supporting an agenda that would undermine the technologies and practices that most family farms depend upon. Recently Feedstuffs Foodlink posted a story about a board studying the term (link) :

"In recent years, the reference has been used with increasing frequency in both conventional and online/social media to signify anything and everything that activists see as bad in livestock and poultry production, including animal suffering, excessive use of antibiotics and hormones and environmental and food safety problems, according to an analysis by the Cattlemen's Beef Board."

The concept of sustainabiity is another contentious term, with different meanings according to different people- This issue was discussed in a recent article in Farm World Online- Rosene Not One Definition Fits Sustainable Agriculure (link)

"GMO crops can increase sustainability by reducing pesticide use, they can potentially reduce the use of nitrogen fertilizers, improve water use efficiency, and minimize yield-limiting factors. Such capabilities are a positive step in ag but those who are emotionally tied to sustainable ag don’t want to hear that."

Another great discussion regarding family farms vs. factory farms can be found at the American Farm Bureau's blog post " A Tale of Two Farmers (link)

Unfortuanately, some of these discussions can degenerate into different producers filling different market niches attacking one another. It is true that popular media ( see Media May Be Overhyping Benetits or Organic Food from KState) and celebrity athors like Michael Pollan and movies like Food, Inc have given mixed signals about the sustainability of modern agriculture.

It seems as a result, that in many social settings if you don't hold to a certain core set of beliefs, you don't care about the environment. How many earth day celebrations in your home town or local college involve actual farmers? How many corporate or organizational 'sustainability committees' involve people with backgrounds in agriculture? How many emphasize only certain paths to sustainability, such as natural, local or organic food? How many would be willing to concede that both organic and biotech foods could complement one another? 

I've tried to tie these themes together in the above animated video that depicts a conversation between two coworkers interested starting an office sustainability committee. (this was made possible by utilizing tools availabel at http://www.xtranormal.com/

  It is important that we deal with these misperceptions in a way that is respectful to all types of producers. 




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