Rationale for Public Intervention in Food and Agricultural Markets

For a century, economists have recognized that free and functional markets do not always exist for farm products. Con sistent with this recognition, several contingencies were developed for use by farmers, and others, to protect and enhance their interests in relation to product buyers and input suppliers. Probably the most visible and significant of these contingencies were antitrust policy, cooperatives and marketing orders. Each of these policy instruments enables changing the structure and/or behavior of the market. Changing the basic power balance between buyer and seller is intended in each case. In this sense, these policies are considerably more ambitious than the group of policies (such as market news and grades and standards) that are intended to facilitate orderly marketing. Marketing orders and cooperatives are seen as a special privilege for the agriculture and food sector. Advantages farmers receive from all of these policies can lead to over production unless entry is restricted. Many people feel it is inappropriate for the federal government to facilitate marketing programs that restrict output and increase price. For these and other reasons, these policies have been more controversial than policies intended to enhance natural market forces. This paper presents an historic evolution of the central ideas used in justifying government interventions to reshape agricultural market structure and organization. These justifications are then placed into a more modern context. A tentative assessment is drawn concerning how the historic rationale stands up to changing times. An effort is made to determine if there are aspects of modern and emerging food markets representing hazards not found in history. Finally, suggestions are made concerning what types of policies might better fit the modem context.