Thursday, June 17, 2010

Subsidized Agriculture Is Inefficient?

Kevin Drum has a post on healthcare costs and productivity, citing some studies.  As usual, he's good.  But what interested me was a chart comparing the annual increases in productivity for different industries in the  10 years. 1995-2005  There were surprises: I would have thought IT would have been the best. It's good, increasing productivity roughly 6 percent a year, but it's only second to durable goods, which is roughly 7 percent.  That may be one reason for the rust belt--we're just getting more productive.

What was the third ranking industry: agriculture, at a bit over 5 percent increase per year. Presumably a lot of that is attributable to the use of GMO seeds and increased yields.  If I remember correctly, I read a history of US agriculture in the 20th century which cited the argument that government programs essentially provided the capital to invest in improved productivity.  Don't remember if the history confirmed the idea, but it would work in recently--farmers who have to cut corners would choose less expensive seed, those with the cash from subsidy payments could pay the more higher seed bill.

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