Some Theoretical Aspects of Agricultural Policies

n virtually every country, developed and developing alike, governments intervene in agricultural markets. They subsidize farmers (mostly in developed countries); they tax farmers (mostly in developing countries);1 they try to stabilize prices; they impose import tariffs and quotas; they restrict production; they provide food subsidies for urban areas; they support the use of fertilizer; they build irrigation systems; they offer extension services; they try to control marketing; and they provide credit, often below market rates. These programs have been at the center of growing controversy. They often impose huge financial burdens on the government and generate allocative inefficiencies in countries that are poor enough already. Yet governments in developing countries often seem to doubt the advice offered from the developed countries to abandon these policies, when the developed countries engage in not dissimilar practices themselves.