A Terrible Beauty is Corn

Imagine an argument between me, on the one hand, and Alan and Sarang, on the other. I argue that corn subsidies, whatever their merits, have contributed to obesity by making empty calories cheaper than they would otherwise have been. I argue that this has increased people's incentives to consume empty calories. (For the sake of this discussion, let's ignore those instances in which the government pays farmers not to grow corn.)

Alan responds that in fact people's incentives to consume empty calories have not increased, because empty calories have actually become more expensive as the result of government policy. Alan notes that sugar quotas increase the price of sucrose, which is a sweetener that competes with high fructose corn syrup. Assuming fructose and sucrose are substitutes, an increase in the price of sucrose should lead to an increase in demand for fructose, which could actually overwhelm any increase in supply brought about by the corn subsidies (that is, corn syrup could end up more expensive than it would be in a free market).

I might reply that I was just talking about corn subsidies. Holding other things constant, corn subsidies have led to cheaper empty calories. Maybe sugar quotas have caused empty calories to become more expensive, and maybe this has overwhelmed the effect of the corn subsidies, but I am holding sugar prices constant in my analysis.

Sarang and Alan note that corn subsidies and sugar quotas are closely linked: both involve the use of government policy to promote the interests of farmers. The two policies may have even been enacted in the same legislation. It might be very difficult to imagine a world in which corn farmers benefit from subsidies but sugar-cane and sugar-beet farmers don't benefit from quotas.

So then, what is our answer to the question, "Ceteris paribus, do corn subsidies make empty calories cheaper?" If, with Alan and Sarang, we answer, "No," then we are taking the view that there basically is no such thing as a "corn subsidy," as traditionally understood (that is, money that is paid to farmers based on how much corn they grow). Rather, there is something called "agricultural policy," and it is the only relevant unit of analysis. Indeed, it is what we mean when we use the term "corn subsidy."

So anyway, James has written a series of blog posts about how corn subsidies have led to increased incentives to consume empty calories. Sarang responds that James's response about holding sugar prices constant is point-missing because the point is just that James's model of corn subsidies is at odds with reality because it's missing the dynamics of the price of sugar.

I want to make two observations:

1. It may be valuable to consider the effect of corn subsidies (defined narrowly) separately from the effect of other policies, even policies that are almost certain to accompany corn subsidies (such as sugar quotas). This is standard in economics, and frankly I am not accustomed to thinking of it as a disreputable practice.

2. Even if it is not "valuable" in some deep sense to model corn subsidies separately from sugar quotas, it is still perfectly possible to do it for the sake of discussion, or for the sake of sorting out one's ideas. I might concede that any such discussion is entirely academic, since farm policy is in the hands of our mal-apportioned Senate, which will under no circumstances adjust corn subsidies while leaving everything else constant. And even if the Senate did such a thing, surely something would happen in the world that would shift sugar prices one way or another, or shift gasoline prices, or any number of things, ensuring that it will never be the case that only corn subsidies change and that everything else is truly equal. Nevertheless, it may be fun or engaging to ask the question, even if the circumstances underlying the answer (everything else being equal) will never obtain in the real world.