Monday, May 26, 2014

Increasing Opportunity Costs and the Farm Bill. Come visit my "Farm" to see what it is about.

Here is a very basic presentation to illustrate the concept of "Increasing Opportunity Costs".  This can be a difficult concept for the average high school student to intuitively understand (at least from my experience it is).

What prompted me to create this was an article I read recently (and cannot find now) about an "unintended consequence" of a Farm Bill provision regarding the subsidies paid to corn growers.

The subsidy was paid on a "per acre planted" basis with no regard as to HOW MUCH corn was harvested on that acre.

The article quoted a farmer as saying this policy encouraged the planting of corn on land "not necessarily suitable" for the growing of corn.  It took multiple acres planted to yield the same amount of corn from land that was more suitable for growing corn.

So, land that might have been more suitable (and efficient) for growing something else (potatoes? rice? grazing?) was put into use for growing corn instead.

Economists would say this policy leads to a less than optimal and inefficient allocation of societal resources.

Politicians would say this policy leads to an optimal allocation of special interest satisfaction.

Guess which of the two is in charge of things.

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