Monday, June 27, 2011

Sheldon Kimmel: Everything You Think You Know About US Agriculture Policy is Wrong

My buddy, Dr. Sheldon Kimmel, has just published an economic analysis of US Agriculture policy on SSRN. He says it is based on a false premise. The article is titled "The Illusion of Anticompetitive Behavior Created by 100 Years of Misleading Farm Statistics".
The share of U.S. consumer food-spending that farmers received (the “farm-share”) fell steadily from 48% in 1913 to only 20% by 2000, prompting repeated investigations into who might be to blame for that decline. Similar alarms come from the other standard measure of how markets treat farmers, the farm-retail, “price spread.” However, this paper explains the biases built into these measures: Both of these measures are distorted by purely nominal changes. This paper introduces a better measure of how markets have treated farmers, and shows that, if measured properly, the farm-share of total consumer food costs has been stable.