ARE120%20LN01~2008

ARE120%20LN01~2008 - ARE 120 Julian Alston Spring 2008...

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ARE 120 Spring 2008 Julian Alston April 3, 2008 Lecture 1 INTRODUCTION: THE POLICY SETTING Outline: 1. Introduction: The Policy Setting 1.1 Overview 1.2 Rationales for government intervention 1.3 Forms of intervention 1.4 Consequences of alternative policies 1.5 Illustrative example Handouts: Syllabus Homework 1 Figures for Lecture 1 Reading: Read chapters 1 and 2 carefully over the next week (skim chapters 3 and 4). Review 100A: supply, demand, competitive market equilibrium, welfare economics.
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INTRODUCTION: THE POLICY SETTING 1. 1 Overview of Government Intervention in Agriculture Governments around the world intervene in almost every aspect of agricultural production and marketing. In 2007 USDA outlays in the federal budget totaled about $125.6 billion (about 5 percent of total federal government spending). USDA Program Expenditure in 2005 Expenditure in 2006 Expenditure in 2007 Percent of Total (2007) billions of dollars percent Food, Nutrition, and Consumer Services 51.0 53.9 54.4 43.3 Farm Service Agency (mainly farm commodity programs) 36.5 36.8 33.9 27 Rural Development 14.3 18.1 14.4 11.5 Natural Resources and Environment 8.7 8.3 7.7 6.1 Foreign Agricultural Service 5.4 5.4 5.2 4.1 Risk Management (mainly crop insurance) 3.0 4.0 4.2 3.3 Research, Education and Economics (mainly agricultural R&D) 2.7 2.7 2.3 1.8 Marketing and Regulatory Programs 1.8 2.2 1.7 1.4 Other 1.5 1.6 1.8 1.4 TOTAL 124.9 133.0 125.6 100.0 Source: http://www.usda.gov/agency/obpa/Budget-Summary/2007/FY07budsum.pdf But taxpayer costs are only part of the story with agricultural policies, since some policies (such as the dairy and sugar policies) involve support through transfers from consumers to farmers, from higher prices, rather than from taxpayers. 1
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ARE120%20LN01~2008 - ARE 120 Julian Alston Spring 2008...

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