ZfAA /,jq? SOME THEORETICAL ASPECTS OF AGRICULTURAL POLICIES

In virtually every country, developed and developing alike, gov-ernments intervene in agricultural markets. They subsidize farm-ers (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 subsi-dies 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 alloca-tive inefficiencies in countries that are poor enough already. Yet gov-ernments 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. This article aims to provide a systematic framework within which to assess these various programs.2 The circumstances of individual countries differ so much that no single prescription would be appro-priate for all. But the framework in this article should be useful for considering a wide range of cases. A useful starting point is to ask, What are the legitimate reasons for The Market government intervention in agricultural markets? In particular, what and makes the market's own allocation either inefficient or otherwise "un- Government acceptable"? There is a standard litany of such reasons; five are Failures relevant to agriculture.3 1. Incomplete markets in insurance futures and credit. Farmers Approach cannot get complete insurance against the big (output and price) risks they face. Rural credit markets, like agricultural insurance markets