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12 J. Consumer Pol'y 1 (1989)

handle is hein.journals/jrncpy12 and id is 1 raw text is: Noel D. Uri
Target Prices, Market Prices, and Economic
Efficiency in Agriculture in the United
ABSTRACT. This paper looks at one aspect of current United States agricultural
policy. This concerns the attempt by the federal government to support commodity
prices and income of farmers. This is accomplished through the deficiency payments
program. Unfortunately, the program is inherently economically inefficient. More-
over, alternatives (short of eliminating the program altogether and not replacing it)
also are not economically efficient.
The United States has a long and sometimes tempestuous history of
struggling to find an acceptable compromise of farm, consumer, and
taxpayer interests in formulating agricultural policy (Gardner, 1981,
1987; Tweeten, 1977). The most recent incarnation of agricultural
policy is in the Food Security Act of 1985. Under the aegis of this
act, the U.S. Secretary of Agriculture administers the various agricul-
tural programs of the United States. These programs (some of which
date back to 1933 and beyond) relate to agricultural commodities
(e.g., dairy products, wheat and feed grains, cotton, and rice), food
stamps, conservation, research programs, agricultural trade, and so
forth (Glasser, 1986).
A key program in the 1985 Act is the provision of price and
income support for farmers through deficiency payments. The objec-
tive in supporting income is ostensibly to reduce the uncertainty
associated with farming (both in terms of commodity prices and
income) and hence maintain a stable agricultural base for the U.S.
economy. Specifically, by reducing the fluctuations in net farm
income it has been suggested that it will be possible to reach the
objective of helping farmers to maintain themselves as free, inde-
pendent business people, control their means of production, make
their own decisions and benefit from their own labor and manage-
ment abilities while at the same time maintaining an adequate
supply of high quality food at reasonable prices (Rasmussen, 1985,
p. 3). This is necessary, it is argued, because farmers are an economi-
cally hard-pressed group which is the result of their relatively

Journal of Consumer Policy 12: 1-17, 1989.
© 1989 Kluwer Academic Publishers. Printed in the Netherlands.

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