Perspective: Average Is Over For Ag, Too

08:06AM Oct 29, 2014
John Phipps close
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Tyler Cowen, a libertarian economist from George Mason University, published a short but notable e-book, “Average is Over: Powering America Beyond the Great Stagnation,” to wide acclaim last year. As one reviewer put it, “I still can’t figure out if it is utopian or dystopian.”

Me neither. He envisions an economy and culture separated into two groups: an educated, collaborative and wealthy aristocracy; and the vast majority who will earn little but survive on low-priced goods made by highly automated systems. Even critics find it difficult to refute his logic.

Already, America has made “average” statistics meaningless. The fabled hollowing out of the middle class means instead of normal distribution—the familiar bell curve with a few on each end and the bulk crowded around the mean (average)—we have bulges at the end and fewer in the middle. 

Compare the mean to the median, which is the midpoint separating the 50% above it from the 50% below it. In 2013, the average household income was $72,641. The median income, though, was much lower at $51,939. This means nearly 65% earn less than average. That isn’t just counterintuitive; it also triggers a sense of unfairness.

What Cowen is trying to illustrate is how pre-wired we are to assumptions of normal distribution. The height of people in a room, life expectancy of your town population, even local yields would likely fall on a bell curve. So much is the result of chance, so there might be an instinctive bias to see, and anticipate, the world this way. 

Research bears this out. People not only badly underestimate how top-heavy U.S. incomes are, they fall short guessing how skewed it could be. We are not only farther from normal distribution than we imagine, we are 
farther than we can imagine. We want our world in an understandable bell shape.

There is little alarm about this, but for good reason. As Cowen somewhat callously points out, being in the bottom group isn’t absolutely dire. Millions get by somehow. Moreover, psychologists say the vast majority believe they can enter the lofty elite, despite growing evidence to the contrary.

An Uncertain Future. Census of Agriculture numbers demonstrate the same hollowing out. The minimum farm size for adequate household income rises relentlessly. There are some peculiar brakes on this trend in our sector, such as the role of landowners in the growth of income share at the top. Most producers know to ignore overall statistics, but what Cowen points out as coming next is the real value of his speculation.

Those who rise to (or stay in) the top tier will probably do so because they can work with both technology and groups. Although these two characteristics appear almost conflicting, I find this convincing. The vision of agriculture as a blend of production and service tasks seems right to me.

Perhaps we can see Cowen’s predictions coming true in the emergence of various types of collaborative farming among peers. 

It is remarkable that much of crop farming is not more highly concentrated. My guess is this is the legacy of much higher fertility rates than there are currently. Farms are constantly being split up. Yet enough of us have seen the only-child advantage at work to encourage us to have smaller farm families of our own. Our consolidation delay might simply be generational.

The end of average affects the structure of our industry. It also impacts our markets. Any business plan that factors in growing middle-class income (e.g. restaurants) might struggle in the way casual dining has in the past few years. The lucrative middle-class market will increasingly be somewhere else. The bigger question is whether middle-sized farms will be there as well.