There has been an overall agreement that past policies have been inefficient and that income-support policies “overshot” in assuring and providing food supply and have become too costly and barely affordable. This suggests the need for “decoupling”-setting entitlements criteria that do not affect production while attaining other objectives. Government policies have resulted in substantial excesses of the productive capacities of agriculture in the United States, Western Europe, and other developed countries. A policy refornl should consist of two elements. First, it will induce gradual down scaling of agricultural sectors of these countries so that, within a transitional period of, say, 10 years, agricultural markets will attain a sustainable set of equilibria which improves welfare and the performance of the agricultural and food production sectors. Once agricultural markets approach these equilibria,plastic flower bucket government policies will operate to attain sustainable growth in the future and make the agricultural sector more flexible and progressive. The design of a policy reform requires the identification of effective policy instruments and the development of procedures for setting their levels as well as for their enforcement, monitoring, and adjustment over time.
The assessment and selection of policies should be done within a decision-making framework that operates to increase economic efficiency while recognizing and incorporating political economic constraints. The next section introduces such a framework and spells out its implications regarding information and assessment criteria for the policy instruments’ selection. The paper, “Building Sustainable Coali tions for Welfare Improving Policies,” argues that efficiency and equity considerations have to be balanced when designing a policy reform that is both welfare improving and politically feasible. Thus, a framework for the determination and analysis of pol icy reform should include functional relationships measuring the economic welfare effects and political feasibility of policy instruments. Welfare economics provides justification for the use of appropriate summation of economic surpluses as a measure of economic welfare and efficiency. The recent literature on political economy provides alternative frameworks for modeling the politically feasible set of agricultural policies. The model here applies assumptions and fonnulations that are similar to the ones used in recent empirical political economic models of agricultural policy choices . Specifically, it assumes that a policymaker presents a propos:ll for a vote by a legislative body or even a referendum by the general population. The choices of the voters are assumed to be affected by the impacts of the policy on the welfare of different groups they represent, belong to, or support. It is also assumed that the policymakers cannot predict voters’ responses to policy proposals and that proposals are shaped so that the voting uncertainty is controlled.
Surplus measures can be utilized to obtain the distributional effects of policies within markets. For example, analysis of the market effects of a pesticide control policy can apply surplus measures to estimate the impacts of the policy on consumers, producers in different regions , pesticides, other input manufacturers, etc. . While applications of this type of analysis seem straightforward, note that appropriate incorporation of international trade considerations, monopolistic and oligopolistic behavior, and imperfect information and uncertainty consideration within this framework requires much ingenuity and effort. Still, these distribution effects can be presented in clearly defined monetary terms. Quantification of nonmonetary effects of policies might be very difficult, and expression of these effects in monetary terms is sometimes impossible. For example, a pesticide control policy may affect the health and well-being of growers, pesticide applicators, farm workers, and consumers; and the estimates of such effects are Subject to very high degrees of uncertainty . There is much controversy regarding the appropriate procedure for monetary assessment of days lost due to diseases and lives lost due to accidents . Therefore, for analysis, it may be useful to present estimates of the real impacts of policies on health and lives with a given degree of statistical significance and not mone tary estimates. The distributional effects of policies are represented by the function Win the model.
The model suggests that assessment of political support for policies also requires knowledge of H, the weight that different impacts have in shaping voting be havior. Several studies have applied econometric techniques such as logit and Tobit to congressional voting data to estimate impacts of certain factors on voting behavior. These studies clearly show that voting pallerns of individual representatives are consistent with the economic interest of the regions represented by these representatives. Further applications of these kinds of models, using appropriate measures of distributional effects as explanatory variables, are needed to allow better prediction of voting patterns in response to policy changes. etermination of a policy that values the decision problem in requires knowledge of the efficiency and distributional impacts of alternative policy instruments. The assessment of these policy impacts should not be restricted to analyses of impacts of individual policy instruments but should include assessments of the impacts of policy instl’uments’ mixtures. Policy instruments may have complementarity of substitution relationships. They operate jointly and in correlated manners to affect distributions of key variables such as farmers’ earnings and food prices and quantities. These correlations and dependency relationships suggest that prices of a policy mix are likely to be different sums of outcomes and impacts of the individual components. Just, Lichtenberg, and Zilberman have demonstrated that independent management of grains and water inventories by uncoordinated activities of government agencies may lead to substantial welfare losses. Lichtenberg and Zilberman have shown that the market efficiency impacts of environmental regulations in agriculture are likely to be substantially overestimated when the existence and effects of commodity programs are ignored.
Therefore, policy analyses and policy design should develop mechanisms for coordinated management of policy instruments and also assess impacts of policy mi xtures. he construction of a policy reform is an intensive and iterative process involving several rounds of negotiations at different levels. There are many participants in this process including government officials whomay initiate the process, representatives of interest groups , and the voters. These voters are not passive participants in the process but, rather, active participants in negotiations and modifications of proposals. There are many who view these process as a game with many participants and who analyze its outcome accordingly . The model presented above may provide the agencies which initiated the policy reform with a good .initial proposal and help to guide them in negotiations and when updating reform parameters. Figure 2 illustrates how the approach presented here can be incorporated in the iterative process of shaping the policy reform. First, a data collection and modeling effort will be taken to estimate parameters needed to predict impacts of alternative policies and the political importance of different power groups. Parallel to these data collection and estimation efforts, different interest groups and their political representative organizations should be identified. These available information will be used in the establishment of an initial proposal that will be negotiated with representatives of interest groups and other political power brokers. The negotiation process may lead to either passing of a proposal or to a reassessment of political realities,flower buckets wholesale redesign of policy, and a new round of negotiations. These negotiations will continue until an acceptable formula is reached. As both political and physical realities are changing over time, key elements of the policy reform will have to be modified and updated. Thus, the legislative process described in Figure 2 wi 11 have to be conducted once every 5 or 10 years. The modeling approach presented here will provide a consistent and systematic framework for assessment of realities and introduction of policy changes. Some of the classic works on the economics of public policy view policy design as the choice of instruments to allain social objectives. One of the implications of the model presented here is that policies are evaluated by their contribution to efficiency and the weighted welfare of different groups in the economy, where the weights reflect the political power of the different groups. Since surplus measures are used to evaluate the groups’ welfare, interest groups are designated in correspondence to goods analyzed in the model. Thus, producers of corn in different states, consumers of milk, and users of water which was contaminated by wheat production are examples of the types of interest groups treated by the model. Measures of welfare of these types of groups are likely to be related and even expressed in terms of objectives such as producers’ income, affordable food, and water quality. Hence, the model implies that policy instruments are selected in a way that maximizes social welfare as a multidimensional function of policy objectives. Thus, the outcome of the “political economic” framework presented here C:1Il be expressed in terms of the Tinbergen framework.
In the next section, the impacts of some of the instruments proposed as part of the policy reforms are analyzed qualitatively. Impacts of policy instruments will be analyzed in terms of policy objectives and in terms of welfare of certain groups. This is a “safety net” program that assures farmers a certain income floor. Entitlement for the program will depend on income, wealth, and a socioeconomic factors . This program may have two goals. One is to assist the very poor and raise their income and living standards constantly. The other is to assure rural citizens adequate income at low points of the business cycles. The two goals may require separate mechanisms and are likely to be relevant for separate populations. The first goal is a standard antipoverty goal and is appropriate for the very poor and disadvantaged in the rural sector. It has very little to do with agriculture since the very poor gain very little income at all limes. The second goal is to protect farmers and other members of the rural community from “hard time” periods when prices are low, yields are low, etc. Farmers may not be in the greatest need for such a program since they are protected by crop insurance, may use futures markets, etc. Individuals who provide services to farmers-small dealers, farm workers, etc.-are at least as vulnerable economically at the downside of agricultural business cycles as farmers; and such programs may protect them. One way to prevent misuse of this anticyciical income assurance program is to make it a subsidized insurance program. Eligible individuals-farmers, farm workers, and agro-businessmen-may need to buy the rights for this income-support program by paying a fee or a premium. The goal of assuring minimum income to all members of most sectors may be obtained best within the framework of general assistance programs that exist in many countries. Such programs may have stipulations that may discriminate against the rural sector . As agricultural support programs are being down scaled and eliminated, the range of entitlements of farmers and rural people for the benefits of general welfare programs should increase. The minimum income assurance program mentioned above is, in essence, a welfare program applicable only to part of the farm sector’s population. However, low farm product prices affect all members of the farming community and reduce farm incomes across the board; revenue assurance programs address this issue. In the program considered here, each entitled farmer is assigned a target revenue and an output base and receives the difference between the target revenue and output base times actual price when this difference is positive . This program is essentially a deficiency payment program where each farmer is assigned a revenue base instead of a yield and acreage base. The key element of this program is that it will be set for a long time, and the revenue basis will not be modified according to past behavior. Disallowing modification of the base according to performance will serve to reduce the impact of the program on supply . It is difficult not to modify entitlement bases as time passes since there are dynamic changes in land allocation, and base assignments need to resemble reality. Therefore, one cannot maintain a decoupled revenue support program forever. Such a program will be used for a transition period when agriculture is down scaled and the range of support provided by the program will gradually decline.