A few responses to Prince Charles

I just read the transcript of Prince Charles' speech on sustainable agriculture in DC last week. There are a lot of good ideas, and a few areas in which I think more can be said.

Ag subsidies: I believe there’s a strong consensus across many individual issues and disciplines that American and European agricultural subsidies are wasteful and counter-productive. The challenge is a political one – there are about 20 farm states, and it’s very difficult to get things done legislatively in other areas (health care, immigration, climate change, you pick) without the support of at least some of that bipartisan group of 40 farm senators. It’s not a rich-world-only issue, too – here’s a year-old WSJ article (subscription required) on how difficult it has been to repeal fertilizer subsidies in India despite 40 years of trying, and recent fertilizer subsidies in Malawi have become a darling case study of country-led agricultural development proponents, despite criticism by the World Bank and others.

Scale: I think Prince Charles is too blasé about dismissing the benefits of scale for cost and efficiency of agricultural production. Cost is important not as much to you and me, but definitely to the urban slum-dweller in Cairo or Mumbai who spends 2/3 of his or her income on food. And efficiency is important for the environment – less yield per hectare of land means more land under cultivation, and since there’s not much unused cropland around the world, this results in degradation and cultivation of ecologically sensitive areas like the Amazon, the Sahel, Indonesia’s peat swamps, etc. If we can replicate current yields at scale using organic methods, that would be great, but the burden of proof is still on those who claim this can be done.

Local production: Another attractive idea that I think is easier to apply to ourselves (living in not only the richest but also one of the most agriculturally productive countries), but runs into difficulty when generalized across the world. There is a lot of upside in smallholder productivity in Sub-Saharan Africa, but in other regions that import food today – I’m thinking of mainly the Middle East and China – it would be very difficult for them to produce more food domestically without exactly the kind of unsustainable drawing down of natural capital that Prince Charles rightly warns against. If we want the most holistic and least naturally destructive agricultural system at a global level, it has to include a significant component of trade between the most fertile parts of the world and the less fertile but more populated parts (unfortunately the two don’t match).
To close, a photo I took from an airplane of pivot-irrigated wheat in the middle of the Egyptian desert, with water drawn unsustainably from the underlying aquifer (we do this in the American West, too). We Americans are very fortunate for the fertility as well as the economic prosperity of our country, and not all countries have the agro-ecological potential to feed themselves in a sustainable way.

Behavioral challenges in ag development

Robin Hanson passes along this illuminating and frustrating anecdote:

There are higher-yielding varieties of groundnut than those that farmers in Malawi tend to plant, but getting them to switch is tough. Better seed is pricey, increasing their risk. So researchers from the World Bank ran an experiment. With local NGOs, they offered the farmers loans. Some loans even came with a crop-insurance policy: if the season was dry and the yield a dud, the debt would be forgiven. The farmers’ risk was lowered. Of farmers offered conventional loans, 33% signed up. With the added incentive of insurance, 18% did. The researchers were puzzled.

It’s been more than 30 years since microfinance began its fantastic rise, spreading billions of dollars in credit to hundreds of millions of overlooked borrowers around the world. Insurance is the next big promise of financial services for the poor. But there aren’t many takers. That’s not from lack of interest on the part of suppliers. The Gates Foundation has plowed millions of dollars into microinsurance initiatives...

Hanson speculates that people (obviously not rational actors) buy insurance more for signaling purposes than to improve their actual risk profile:

My best guess is that most insurance is bought not to reduce risk but instead to signal prudence and caring. The first life insurance companies had a terrible time selling “bets on their death,” and only succeded when they framed insurance as what a caring and prudent husband and father did to take care of his family. While simple adverse-selection theories predict that high risk folks buy the most insurance, in fact low risk folks buy more insurance. And we don’t want to insure our big life risks because such a desire would signal a lack of confidence in our prospects.

Poor folks want loans because they want the money, but to want insurance they’ll have to want to signal prudence and caring, above and beyond the signals they now use. Seems a hard sell to me.

Sounds like a tough nut to crack, and illustrative of the huge challenge of improving pitiful agricultural yields in poor countries, compared to their agroecological potential.