Question

Choose only one of the following public policy related questions to respond to. But do not respond to a question if 5 other students have already responded to it. Be sure to read my and student posts regarding all 5  questions.

1. Should governments subsidize education? Should governmentsoperate our schools or should schools be run by private businesses?
   
2. Should governments support farmers through farm subsidies and/or other economic programs designed to increase farmer incomes?
   
3. To reduce drug use and crime, should governments: A) Try to destroy as much of the supply of drugs as possible, B) Try to reduce the demand for drugs, C) Legalize drugs, or D) Some combination of the above strategies?
   
4. Should governments enact policies to: A) Reduce pollution, B) Eliminate pollution? Which pollution reduction strategy would you recommend: A) A command regulation that required all firms to reduce pollution by a certain percentage, B) A pollution tax, or C) A tradable permits system?
   
5. What does the term 'price gouging' mean? Do you think it should be legal? What are the pros and cons of making price gouging illegal? Is making price gouging illegal an example of a 'laissez-faire' economic policy?Can you think of a better way to help low-income people who may be hurt by rising prices for things like bottled water or gasoline?

Use economic terminology and concepts in your response. Your response should not exceed 8 sentences.

Answer 1

Should governments support farmers through farm subsidies and/or other economic programs designed to increase farmer incomes?

The governments all over the world enacts policies such as subsidies, loan waiver to protect the farmers. However, such policies are strategic blunders because it does not allow the farmers to be competitive in the long run. The weak players in the agriculture sector should leave the market in the natural process but they remain in the market due to the government support. The cost of this support is borne out by the taxpayers and that create a dead-weight loss in the society. The inefficient allocation of resources further creates a stress on the resources and raises the inflation.

If the government support is in the form of minimum support price then it creates a surplus in the market because of a higher price. Another angle is that farmers in the poor countries can not match with their competitors in the rich countries because of the government support and they suffer losses which does not allow them to invest in increasing productivity of the farm output.

Only one subject has been chosen to answer as per asked by the student.