The "Farm Problem"

Today, farmers are no more than three or four percent of the population -- it depends a bit on just what you count. At the beginning of the twentieth century, though, more than a third of the people who worked were farmers. The proportion of the labor force in agriculture during the first half of the century is shown in the following figure:

Figure 3: The Proportion of Working Americans who Worked on Farms

Thus, a "farm problem" was more than just a problem for farmers -- it was considered a problem for the entire economy. The proportion of the population who earn a living through farming has dwindled throughout the century, but we still have, in 1996, government policies in place that are the products of the "farm problem" as it was perceived sixty and seventy years ago.

The "Farm Problem" was seen as having two major aspects.

Farm incomes tended to lag behind incomes in other sectors of the society, and even to fall.

As we saw in an earlier chapter, this is a result of the long-term trend of increasing productivity in agriculture, coupled with inelastic demand.

Farm incomes were highly uncertain and fluctuated widely from one year to the next.

Of course, farm incomes fluctuated with farm prices. As we have just seen, there were a number of reasons why farm incomes fluctuated -- weather changes, changes in demand, changes in technology, and, perhaps, cobweb cycles.

Because of the inelasticity of farm demand, there was a certain irony about how farm incomes fluctuated when productivity changed, either because of technological progress or because of the weather.

An Irony