Question

2. There are far more consumers of agricultural commodities than there are producers; but agricultural producers have consistently been able to get Congress to vote them subsidies at taxpayer expense and supply restrictions at the consumer's expense. How can the success of the agricultural lobby be explained by “the general rule of political economy”?

Answer 1

Solution:-
This part is not related to only agricultural commodities but to many other commodities because most of the buyers of a particular product are well organised and represent a smaller group where as the consumers represent a very large group which is poorly organized. The organisational structure is important because then, the government cannot be pressurized to take action in their favor. Subsidies are generally provided by the government to ensure that the production of a particular good is not reduced because of increased cost of production. But there are also cases where subsidies are provided to the products which are already earning profits. The the producers of these goods are able to lobby the government because they are well organised. The political economy favours a small group because the advantage to a smaller group is higher than the disadvantage to a larger group when subsidies are provided. Consumers as a group cannot contribute enough to lobby the government in their favor because they are not organised and they have no incentive to pay on their own because they believe that those who are not buying the product should not be paying for others. Producers unite on the other side, and are able to represent a strong yet smaller group. This is the reason why the political economy favors subsidizing the producers than the consumers.
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