Transcript Agriculture and Health Care

AGRICULTURE AND
HEALTH CARE
Chapter 30
Food Production
• For most of history, the majority of societal
resources were devoted to the production of
food. In less developed nations, this is still the
priority.
• In more developed countries, food production
has become more efficient and productive
requiring less and less overall resources.
• This increased efficiency has freed up
resources for other uses like housing, clothing,
transportation, medical care, education,
recreation, and energy.
In developed countries, resources
devoted to food production is shrinking
Nation
Canada
Australia
France
India
Nigeria
Tajikstan
per capita GDP
43,100
43,000
35,700
4,000
2,800
2,300
% labor for food
2%
4%
4%
49%
70%
47%
Good News about Agriculture
• They are very competitive among
US markets. Many sellers, many
buyers.
• Productivity costs are dropping
and crop yields are climbing.
• Is There Little
Government Intervention
Today? No! The government
plays a large role in the stabilizing
of agricultural markets and helping
farmers deal with long-run
problems
Farming Yields Continue to Climb
Commodity
Corn
Cotton
Peanuts
Wheat
1954 yields
39.4 bush
341 LBS
727 LBS
18.1 bush
2013 yields
158.8 bush
826 LBS
4006 LBS
47.2 bush
Why:
1. Better Seed (Genetically Engineered)
2. Better Fertilizer, Herbicide, Pesticide
3. Better Equipment (capacity and efficiency)
4. GPS planting technology (less waste)
%
303
142
451
161
What are the Long-Run
Problems of US Farmers
• Increasing Productivity in Agriculture – Increased
efficiency leads to an over supply of a crop. Decreasing
its market value.
• Demand for farm products is income inelastic – A rise
in general incomes does not increase the rise in spending
for agricultural goods. (inferior good?)
• Demand for farm products is price inelastic – The
price can drop by 50%, but our demand for that product
will not increase by 50%
The Bad News
Fewer farms are
needed to meet
demand
2. Less efficient
farmers are driven
out of market
1.
Short-Run Problems for Farmers
1. Prices and total revenues are unstable
2. Drought, pests, heat, all make yields
unpredictable
Traditional Government Farm Policies
1. Price Supports
• Government sets a price floor above equilibrium price
• At the higher price, farmers produce more
• The excess supply is purchased by the government
• The Government cannot sell the surplus to anyone that
may purchase the commodity
• Gov’t usually stores the surplus at an additional cost
• This strategy is costly for taxpayers (pay for storage),
and consumers (pay higher price due to the price floor
above equilibrium)
2. Supply Restricting Policies
• Farmers are paid to produce less
• As supply decreases, market equilibrium price rises
• In this policy, consumers pay an inflated cost for product
due to this market manipulation
3. Target Prices
• A solid price is set in advance
• If the market equilibrium does not hit that price, the
deficiency is paid by the government
• This policy is bad for tax payers who must make up the
difference
Important Government
Agriculture Legislation
The FAIR Act of 1996
Federal Agriculture Improvements
and Reform Act (Clinton)
 Goal was to reduce government subsidies to farmers
 Eliminated supply restrictions and target prices
 Subsidies were to be phased down…but ended up being
augmented in years 1998-2001.
 All government support was supposed to end in 2002.
Important Government
Agriculture Legislation
The Farm Acts of 2002 and 2008
Added back many benefits and incentives for US farmers.
Benefits like:
 Direct Payments – fixed payments to farmers each
month (farm welfare checks)
 Counter-cyclical payments – similar to target price
payments. Make up the deficiency in lower market costs
 Nonrecourse commodity loans – Forgives loans and
scales down interest rates if world commodity price do not
hit desired price
 https://www.youtube.com/watch?v=FWLuow2z0mQ
Economists Criticisms of Farm Policies
• They are not as bad as farm policies in
other countries – Japan subsidizes 48% of
the value of food crops
• They don’t work – The less efficient still go
broke…you can’t fight supply and demand
• They are economically expensive and
inefficient!
But right now, agriculture has been
tagged as an industry that is
“too big to fail”
Health Care
Two primary US concerns:
1.
Overall health care expenses has been rising steadily
• Health care as a percentage of GDP went from 5.7% to 17% since 1965
• This GDP percentage devoted to health care is much higher than other
developed countries
• Reason: “expanded capabilities of medicine brought about by
technological advances”
2.
Overall distribution of health care is unequal
• 49.9 million people in 2010 did not have health care or 16.3% of nations
population
• Most uninsured are low income but not Medicaid qualified
So, rising costs have made existing insurance even more
expensive for the low income who already cannot afford it
Videos on The Affordable Health Care Act
AKA: Obamacare
• https://www.youtube.com/watch?v=JZkk6ueZt-U
The YouToons put a positive light on the issue
https://www.youtube.com/watch?v=XQtxcKT-u_Y
A more negative view
What we need is not just good health
care, but good health
Risk Factor
Smoking
High blood Pressure
Overweight-obesity
Lack of Activity
High blood sugar
Annual Premature Deaths
467,000
395,000
216,000
191,000
190,000