I wrote this early 2019 while at UC Berkeley as an assignment for my upper division Environmental Economics course, taught by David Roland Holst.

Obvious Answers 

Factory farming subsidies are a market failure

In almost every economics course I have taken, we discuss animal agriculture/factory farming and its policies and regulation (or lack thereof), thereby causing market distortion and market failure. I think it is particularly important to criticize factory farming within the context of this class due to its environmentally unfriendly nature. The subsidization of animal agriculture is relevant to topics we discuss such as market failures, optimization of social welfare, taxation of “Bads,” and environmentally friendly policies. 

Animal agriculture is subsidized in America. This does not make sense for so many reasons: environmentally, ethically, and economically. Animal agriculture creates many negative externalities, such as water pollution, deforestation, and greenhouse gas emissions. In a logical world, any single one of these externalities would call for a tax. Yet, that has not proven to be the choice of policy makers and writers of every Farm Bill. Astoundingly, there are often times price floors on eggs, dairy or meat for consumers. Policies like this veer us further away from a social optimum, where deadweight loss is created and government revenues from taxpayers’ dollars are irresponsibly wasted.

Subsidies to producers encourage greater output and consumption, which is very detrimental in this case. We already have a market failure with the presence of unaccounted externalities in the price of animal products in the free market. The presence of subsidies further distorts the market and results in even more deadweight loss.

The vast majority of taxpayer dollars that make up this subsidization are given to massive food conglomerates, a regressive policy to say the least. The food conglomerates that operate factory farms have notoriously bad animal and human rights records. Animal agriculture is a human rights issue just as it is an ethical and environmental issue. Subsidies, be them explicit or implicit, take from the poor and give to the wealthy by condoning production that has a high risk of injuring workers, who are predominately lower income, and benefit top executives or investors.

An initial solution to the multifaceted issue of animal agriculture is obvious: remove all subsidies related to factory farming, including but not limited to grain subsidies, price floors, farm income stabilization, and surplus buy-back programs.

I think that we should encourage policy makers to take further steps that bring us closer to a social optimum. The social optimum acknowledges worker injuries, water pollution, deforestation, local air pollution and related health complications as well as the overall contribution of greenhouse gasses. As it stands, these costs are not accounted for which means social welfare is far below the optimum. Most economists would agree that a tax on animal agriculture and related production is appropriate and relatively feasible. A tax could mitigate the effects of the externalities and raise social welfare. The best policy would force factory farming to include all the previously stated social costs into their total cost curve, thereby shifting the  supply curve inward, raising prices and decreasing output. Consumers will seek out some of the myriad substitutes that provide them with the same utility. Recently, it has become evident that consumers are shifting their preferences away from animal products, thereby pushing its demand curve inward. This bottom-up phenomenon, while great, puts too much pressure on consumers to fix issues that policy makers should be fixing for the better welfare of society.