1. AGRICULTURE AND HEALTH CARE Chapter 30

2. Paul Harvey – “So God Made a Farmer” https://www.youtube.com/watch?v=ZRDaPEaDJ7E

3. Food Production For most of history, the majority of societal resources were devoted to the production of food. In less developed nations, this is still the priority. In more developed countries, food production has become more efficient and productive requiring less and less overall resources. This increased efficiency has freed up resources for other uses like housing, clothing, transportation, medical care, education, recreation, and energy.

4. In developed countries, resources devoted to food production is shrinking Nationper capita GDP % labor for food Canada 43,1002% Australia 43,0004% France 35,7004% India 4,00049% Nigeria 2,80070% Tajikstan 2,300 47%

5. Good News about Agriculture They are very competitive among US markets. Many sellers, many buyers. Productivity costs are dropping and crop yields are climbing. Is There Little Government Intervention Today? No! The government plays a large role in the stabilizing of agricultural markets and helping farmers deal with long-run problems

6. Farming Yields Continue to Climb Commodity1954 yields2013 yields % Corn39.4 bush158.8 bush 303 Cotton341 LBS826 LBS 142 Peanuts727 LBS4006 LBS 451 Wheat18.1 bush47.2 bush 161 Why: 1. Better Seed (Genetically Engineered) 2. Better Fertilizer, Herbicide, Pesticide 3. Better Equipment (capacity and efficiency) 4. GPS planting technology (less waste)

7. What are the Long-Run Problems of US Farmers Increasing Productivity in Agriculture – Increased efficiency leads to an over supply of a crop. Decreasing its market value. Demand for farm products is income inelastic – A rise in general incomes does not increase the rise in spending for agricultural goods. (inferior good?) Demand for farm products is price inelastic – The price can drop by 50%, but our demand for that product will not increase by 50%

8. The Bad News 1. Fewer farms are needed to meet demand 2. Less efficient farmers are driven out of market

9. Short-Run Problems for Farmers 1. Prices and total revenues are unstable 2. Drought, pests, heat, all make yields unpredictable

10. Traditional Government Farm Policies 1. Price Supports Government sets a price floor above equilibrium price At the higher price, farmers produce more The excess supply is purchased by the government The Government cannot sell the surplus to anyone that may purchase the commodity Gov’t usually stores the surplus at an additional cost This strategy is costly for taxpayers (pay for storage), and consumers (pay higher price due to the price floor above equilibrium)

11. 2. Supply Restricting Policies Farmers are paid to produce less As supply decreases, market equilibrium price rises In this policy, consumers pay an inflated cost for product due to this market manipulation 3. Target Prices A solid price is set in advance If the market equilibrium does not hit that price, the deficiency is paid by the government This policy is bad for tax payers who must make up the difference

12. Important Government Agriculture Legislation The FAIR Act of 1996 Federal Agriculture Improvements and Reform Act (Clinton)  Goal was to reduce government subsidies to farmers  Eliminated supply restrictions and target prices  Subsidies were to be phased down…but ended up being augmented in years 1998-2001.  All government support was supposed to end in 2002.

13. Important Government Agriculture Legislation The Farm Acts of 2002 and 2008 Added back many benefits and incentives for US farmers. Benefits like:  Direct Payments – fixed payments to farmers each month (farm welfare checks)  Counter-cyclical payments – similar to target price payments. Make up the deficiency in lower market costs  Nonrecourse commodity loans – Forgives loans and scales down interest rates if world commodity price do not hit desired price  https://www.youtube.com/watch?v=FWLuow2z0mQ https://www.youtube.com/watch?v=FWLuow2z0mQ

14. Economists Criticisms of Farm Policies They are not as bad as farm policies in other countries – Japan subsidizes 48% of the value of food crops They don’t work – The less efficient still go broke…you can’t fight supply and demand They are economically expensive and inefficient! But right now, agriculture has been tagged as an industry that is “too big to fail”

15. Health Care Two primary US concerns: 1. Overall health care expenses has been rising steadily Health care as a percentage of GDP went from 5.7% to 17% since 1965 This GDP percentage devoted to health care is much higher than other developed countries Reason: “expanded capabilities of medicine brought about by technological advances” 2. Overall distribution of health care is unequal 49.9 million people in 2010 did not have health care or 16.3% of nations population Most uninsured are low income but not Medicaid qualified So, rising costs have made existing insurance even more expensive for the low income who already cannot afford it

16. Videos on The Affordable Health Care Act AKA: Obamacare https://www.youtube.com/watch?v=JZkk6ueZt-U The YouToons put a positive light on the issue https://www.youtube.com/watch?v=XQtxcKT-u_Y A more negative view

17. What we need is not just good health care, but good health Risk Factor Annual Premature Deaths Smoking467,000 High blood Pressure395,000 Overweight-obesity216,000 Lack of Activity191,000 High blood sugar190,000