* farsightedness of capitalist farmers
Topics: Resources
16 Sep 1993
From: ervan
> [ Auto manufacturers only think about the balance sheet
> whereas voters think globally about the next 10 to 20
> years so the former's superior knowledge of autos won't
> necessarily lead to their doing the right thing. ]
Why? I hear this all of the time and I just don't think it is
true. For instance, I have money in an IRA, which I cannot get
to for years (actually, I can get to it before retirement, but
not for at least 10 years and then only with a hefty penalty).
If I were to pay enough attention (and have sufficient money) to
buy a particular stock, I would be concerned about its long run
pay back. Why else do people invest in income stock (as opposed
to growth stock) for their retirement savings? Why does the
board (who usually own substantial stock) care any less than the
average stock holder? They don't. They care more. Even if they
didn't, retirement funds are one of the largest stock investors.
Don't you think they would use their proxy power to fight for
long term gain? There are numerous companies over a century old
and still making handsome profits. That sounds like the long run
to me. If I'm a greedy capitalist and I can make $100K this year
or $20K/year for the next 10 years, which am I going to choose
(usually, and assuming an 8% interest rate so the NPV is greater
for the 10 year plan)?
Even if Detroit is for some reason oblivious, why don't
clever private investors invest in companies that are doing
research into fuel efficient cars? When your supposed crunch
comes, those investors will profit, even though the "Big 3"
might be hurt.
The answer: it does happen. It happens exactly to the extent
to which it is the rational thing to do. If you think people
are investing too little in research for fuel efficient cars,
why don't you invest in it? When you are rich you can come back
and tell me I'm wrong.
Having said all of that, there are some reasons why big
industry is somewhat myopic and they are all the fault of the
government. The tax and regulatory environment changes every
year, usually for the worse (from a business's point of view).
If I, as an investor, cannot count on keeping my investment in
the long term, I'd rather extract the profit now than in the
future. Even, if on average, regulations don't get worse, a
changing environment creates an uncertainty which I'd rather
avoid. Second, corporate income is taxed twice, once as
corporate profits and again as personal income to the share-
holders. In light of this, it is better to go into debt
and pay interest (which is an expense and therefore requires
no taxes) than to pay stock holders. The effect is the same,
borrowing money, except that bond holders want to be paid
the principal instead of dividends forever. This also
shortens perspective somewhat.
> [ Farmers know how to get high productivity next year, but
> sacrifice the future. ]
Again, why? Farmers have even more long run interest than
board members. They intend to stay on their land for the rest
of their lives (since they realize they cannot do anything
else). Furthermore, they want to give their land to their
children. Or, at least, let their children sell their land.
But if it is unproductive, it won't be worth as much. Do you
think your Green friends have a better idea about soil
productivity than farmers do? The same solution presents
itself. Buy that land, farm it a sustainable way, and when
the rest of the land is eroded away, what you have preserved
will be very valuable. Even if you don't live long enough for
that, all you need to do is convince the next purchaser of the
increased value of the land because of your good stewardship
and you can still realize the profit.
Let me now turn to the practical details of the situation.
> [100 years of monoculture has depleted 1/3 of the topsoil
> and must stop.]
False. See chap. 3 in [1] or pages 190-200 in [2]. In
the 30's things were bad because mechanization was running
ahead of understanding. Farmers were making mistakes
but the government did know any better either. As soon
as people learned better, farmers adjusted at once.
Meanwhile, government lands are still the most depleted
of any because the political horizon truly is short
range.
Depleted soils can be quickly replenished. So, it's not a big
issue in any case. Wind does not destroy soil either, it
merely moves it somewhere else. While rain does take some
soil to the Gulf, most of what is lost from one plot ends up
on another (even with levees).
> [ bugs are becoming resistant to pesticides ]
Yes, and syphillis is increasingly resistant to anti-biotics.
This does not mean that we should stop treating it where we
can.
> [ Flooding worked for 1000's of years ]
So did the feudal system and then we found a better way.
Using floods to preserve the soil ignores the economics
of the situation. First, a very small percentage of the
soil in the U.S. is subject to the kind of flooding
that levees protect. Second, it is more economical to
grow a year's worth of some crop that is plowed under than
to allow flooding. It's cheaper. It doesn't require
reaching an agreement with your neighbor who may be on
a different schedule. It allows you to get just the nutrients
you need instead of all of the junk in the river water.
> [ modern agriculture is not "balanced", why not let
> nature take its course with floods then use it as
> pasture when crops cannot be grown? ]
This is another strangely anti-Green sentiment. You would
take land that could produce thousands of bushels of corn
(usually) to feed hundreds of people and instead graze cattle
to feed a few? Fortunately, the market prevents people
from engaging in such waste. As a matter of fact, most cattle
these days are raised in special lots and fed harvested corn.
That's actually more efficient than letting them roam.
Even if your data were correct, it would not be sufficient to
prove your point. Should we shut down mines? Should we stop
drilling oil? If your standard is to avoid depletion of
precious resources, then that would have to be your
conclusion. The nature of the world is that everything is
finite. The question is how much do we save and how much do
we use? Soil as a resource is no different than any other.
The mere fact that it is renewable does not change this
analysis without some discussion of the cost. For instance,
is it worth 1000 barrels of oil to renew an acre of land?
For that matter, is it worth a gallon of gas to recycle 100
pounds of newsprint when we have more forests than we did
50 years ago and deinking dumps toxins in the water supply?
Summary:
1) Greedy capitalists are very interested in the future. That your
analysis of economic circumstance is different does not prove
that only short run interests exists.
2) Even if capitalists are shortsighted, capitalism allows you
to invest in such a way that you can help society and enrich
yourself. In contrast, socialism assumes the government is the
most farsighted (ha! ha!) and makes it illegal for anyone to
prove otherwise.
3) The mere depletion of finite resources does not demonstrate
shortsighted thinking.
4) The topsoil is not being depleted. Using flooding to replinish
it is a grossly uneconomical.
[1]-----------------
Author: Bailey, Ronald.
Title: Ecoscam : the false prophets of ecological apocalypse / Ronald
Bailey.
LOCATION: CALL NUMBER STATUS:
MAIN STACKS GE140 .B35 1993 Not checked out
[2]-----------------
Title: America's renewable resources : historical trends and current
challenges / Kenneth D. Frederick and Roger A. Sedjo,
editors.
LOCATION: CALL NUMBER STATUS:
MAIN STACKS HC103.7 .A77 1991 Not checked out
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