Tim Harford on Subsidies

Here’s part of a fascinating interview with Tim Harford about his book, “The Undercover Economist.”

Nick Schulz: I was interested to read in your book that you suggested that agricultural subsidies are harmful to the environment. And that might be news to some people. How is that the case and why is that so?
Tim Harford: And actually let me broaden that. I mean we are talking about all kinds of agricultural protectionism. Agricultural subsidies get the most airtime. But actually more direct trade barriers like taxes and tariffs I think are more serious. They all push the same kind of way. They will push towards having crops grown on land which is not as suitable as it could be if their crops were grown in another country.
So you have got acres of fertile land in Guatemala that you could grow sugar there. But because of protectionism, the sugar is grown in Florida and the Everglades are destroyed. And meanwhile the Guatemalans are either growing coffee for basically nothing, or like the Columbians, they think, well, maybe we should grow cocaine instead.
Now this is not a good idea. And I have a little graph — I don’t have a lot of graphs in my book. I prefer the written word. But sometimes the picture is worth 1,000 words — and it’s just a graph of trade barriers for different countries and how much fertilizer they use on their agricultural land. The countries that have the highest trade barriers, Japan and Korea use so much fertilizer. Then it is the EU. They use a lot. American less, but you know they still have quite a lot of protectionism and they still use quite a lot of fertilizer.
And then countries like Brazil that don’t have a lot of agricultural protectionism don’t use much fertilizer either. And when you think about it, it makes perfect sense. The protectionism is necessary because the land is not good. And the fertilizer is necessary because the land is not good. So free trade in agricultural products is — well it’s good for a lot of reasons. But one of the reasons is it is good for the environment.

Posted by on January 1st, 2006 at 2:23 pm


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