The bad harvest

HEADNOTE

Crop insurance reform has become a good idea gone awry.

IN THE PAST FEW DECADES, MANY AGRICULture policy analysts have argued that partially subsidized crop insurance would be a more efficient and equitable

way to protect farmers from disaster than ad hoc disaster aid. These arguments produced major crop insurance legislation in 1980 and 1994, as well as significant reforms in several farm bills over the past twenty years. Despite the high expectations and grand promises of these crop insurance reform efforts, it is unlikely that the benefits to the nation have exceeded the taxpayer cost. What is more, last year's latest round of crop insurance reform, which is intended to increase farmer participation, will likely not prevent more ad hoc disaster payments in the future.

Policy advocates who prefer the efficiency of markets over government aid are philosophically attracted to the idea of crop insurance. This is because a properly designed crop insurance program spreads out risk while requiring farmers who are exposed to risk to pay for the coverage.