How Many Variables Make a Good Program?

Had a comment on my post about the Durbin-Brown proposal for a state revenue counter-cyclical protection program. Essentially he said that insurance proposals on a group level, as opposed to the individual farm level, hadn't been popular.

That spurred me to thinking (always dangerous). In the old deficiency payment program, we had two variables--the national price received by farmers and the acreage for payment, the other "variables" were known to the farmer when he or she signed up. (Notably the acreage for payment was under the farmer's control.) In the proposed program, it sounds as if we have four (state harvested yield, state price received, farm acres for payment, farm harvested production). Of course, each variable interacts with others, so you have like 16 possible outcomes for a farmer looking ahead before planting. Assume the full planted acreage, the farm production could be low or high, the state price low or high, and the state yield low or high.

That makes the proposal complex, and more unlikely to pass. The advantage of a program that is tailored to the farm is that more of the variables are under the farmer's control. And, as Tyler Cowen says in his new book on the Inner Economist, people like to be in control. Certainly I do.

(Side note--I think the wheat growers are opposing the program, in part because it might count as "amber" in the WTO scoring. Don't ask me the definition, but "amber" is bad.)

Rural Development?

My RSS reader gave me these two links almost side by side: one is 550 rural organizations hoping for money in the new farm bill; the other is a map showing rural counties losing population by death and out-migration (a commenter observes if the younger people of child-bearing age migrate, then later the county will start losing population by the excess of deaths over births).

Their hearts are in the right place but TR had the "Country Life Commission" back in 1908 looking at the same problem. And my grandfather was a roving minister for the Presbyterian church in the 1920's covering the Dakotas and Nebraska, trying to revive country churches. I don't think reviving a generic rural area is doable. A free-market economy and a society that values individual freedom can't do it. We, the government, can slow the process and perhaps make it less painful, but we don't have the power.

USDA and Effective Programs

I'm leary of program ratings like this at OMB. Skimming the ratings for programs with which I used to be familiar doesn't give me a warm and fuzzy feeling; nor is the wording concrete enough to convey a clear message to the layman. In general, there's too much bureaucracy, too little involvement of the hands on people, too little significance to the ratings (i.e., does Congress increase or decrease appropriations based on the rating?). The Government Performance and Results Act (GPRA--I may have the title wrong) was enacted around 1990 and we've all seen the benefits from it.

Still, Rome wasn't built in a day.

The Tobacco Program

Freakonomics points to an interesting Wall Street Journal article on tobacco growing. It's on the rebound, in new areas (southern Illinois) and with new growers. I sent this comment:

The writer didn't make much of the point, but it sounds as if much of the new tobacco acreage is being grown under contract. In the old days tobacco was sold at auction in an auction barn (I'm getting too senile to remember the company, Phillip Morris maybe?, that used that in its commercial. The old system was effectively a cartel, operating under delegated power from the government based on farmer referenda. Under the new system, risk may be handled by the contracts between grower and company. That's a system similar to that used for eggs and poultry for decades, that recently moved into hogs as well.

Another Pigford Piece

This time the claim is that Sen. Obama will be helped in southern primaries by his stance:

Presidential hopeful Sen. Barack Obama (D-Ill.) has taken a leading role on a major civil rights issue affecting black farmers that could give him a boost in Democratic primaries in South Carolina and other states in the South.

The issue is the landmark Pigford settlement between historically disenfranchised black farmers and the U.S. Department of Agriculture (USDA). Signed in 1999, the settlement was intended to make up for decades of discrimination in which black farmers were denied USDA loans and credit while white farmers were granted help.

Prudery, as in Mine

Given my upbringing, it's not a surprise to me that I turned out to be a prude. (My wife wants to see the new Vito Mortenson movie, the one with an 8 minute fight scene where he's nude. I'm not enthused.) Although I loosened up on language, the Internet still feels a bit formal to me (that's a combination of words not often seen). And I understand that using profanity can cause the spam filters to trip. So I normally don't.

But here's a chance to recommend a site with two long posts strictly on obscenity, of the excretory kind. I've pushed Dirk Beauregard's site before, and do so again.

New "Safety Net" Program Analysis

The extension people are doing explanations of how the program proposed by Sens. Durbin and Brown to replace loan deficiency and counter-cyclical payments might work. University of Illinois here and Ohio State here.

Without getting into the overall program, the idea of going to state-level prices and yields is interesting. The price support people at FSA have experience with the variation within a state because they set county-level loan rates. But this would create new learning opportunities for my old friends, what few are left, in FSA. The definition of a "farm" will be challenging. (I remember the early 80's when we suddenly switched from worrying about disasters, where the farmer wanted the smallest possible "farm" to maximize the likelihood of a loss to worrying about production adjustment, where the farmer wanted the largest possible "farm" so he had the most leeway on the diverted acreage.

Here Congress would be putting the bulk of payments in a "disaster" context, so small farms will be desired. But the location of a "farm" may become more critical along state lines (unless maybe FSA already has a rule prohibiting combination of land across state lines--to get the farm into a state with more favorable price/yield combination).

And I'm sure the prospect of working more closely with RMA thrills everyone in both agencies. Well, it's early days and we'll see what happens.

We Don't Know What We're Doing

That's my interpretation of the testimony of Gen. Petraeus and Ambassador Crocker. My logic:

• The surge originally was intended to reverse the momentum which the violence had attained. And to provide space for political process to work.
• The surge succeeded in stopping the violent momentum but the overwhelming impression I got from sporadic viewing of the hearings and reading the paper was the idea that bottom up progress, symbolized by Anbar, was the new hope, something completely unexpected from 6 months ago.
• So, because something good happened for once in Iraq, we're going to probably "go long". (Remember when the discussion before the Baker group's report was: "go big", "go long", "get out". Well, we tried the "go big" (as big as we could without going to a draft, etc.), now Bush is going long.)

The bottom line is we didn't understand Iraq before we invaded, and we still don't understand it. That's not surprising; most of us don't understand our own society. That doesn't mean that I'm necessarily for withdrawing all troops by Dec 2008. George Packer in the New Yorker had a sobering piece last week (yes, I'm running slow in blogging) about which he's now blogging.

Gee I Wish I Had Known This Back at USDA

The "Overcoming Bias" blog has lots of good stuff, rather academic though. Today they have two posts on "planning". Or rather, the planning fallacy, because "The planning fallacy is that people think they can plan, ha ha."

Or: "When people are asked for a "realistic" scenario, they envision everything going exactly as planned, with no unexpected delays or unforeseen catastrophes - the same vision as their "best case".

Reality, it turns out, usually delivers results somewhat worse than the "worst case".

The advice is: when in the midst of a project, ask your experts for how long it took other similar projects to complete. If I'd done that, I would have skipped involvement in several failed projects, mostly attempting to cross bureaucratic lines (or merge "stovepipes").

EU Set-Aside

In a blast from the past, this agweb article referred to a proposal to reduce the EU set-aside from 10 percent to 0. This was new to me--I thought the EU and the US had done away with production adjustment. On doing a very little research it looks as if it was a cross between the US "Conservation reserve Program" and the annual set-aside programs we had at times in the 1970's-1990's. Like CRP in that the 10 percent level was "permanent" (as of 1999) and not changeable from year to year. Except now it's proposed to be changed. $8 wheat futures will do that to you.