ECONOMIC

Second, the economic costs generated by price ceilings could be reducedby the elimination of many price restrictions. Decontrol of natural gasprices is the most urgent need. This would increase economic efficiency and,by increasing supply, move us toward greater energy self-sufficiency.Third, regulations related to health, safety, and the environment needto be carefully evaluated. These regulations are aimed at some importantthough elusive social goals. But some generate hidden economic costs thatare being ignored, and some may not be effective in achieving the goals oftheir enabling legislation. A sound comparison of the realized benefits againstthe total costs generated by each of these regulations is necessary to ensurethat the regulatory goals chosen by society are desirable and are achievedat the least possible cost.AGRICULTURAL POLICYFarm programs over the years have reduced real GNP by imposing avariety of restrictions on pricing, production, land use, and trade in farmcommodities. Some of the most important of these restrictions have beeneliminated in recent years, but others remain. In 1977 major pieces offarm legislation will expire, and there will be pressures to return to pastapproaches which have caused an inefficient allocation of the Nation'sagricultural resources. This section reviews the progress made in farm policy,the threat to that progress, and the direction we believe that future farmpolicy should take.THE MOVEMENT TO MARKET-ORIENTED FARM PROGRAMSBeginning in the 1930s the pursuit of income protection for farmers ledto programs which have raised average farm prices above competitivemarket-clearing levels. These programs have produced the general consequencesof price-increasing regulation discussed in the preceding section:the regulated price induces more output and less consumption than wouldotherwise have occurred, and the excess production and capacity generatepressures to restrict output.For grains and some other commodities the regulated price has beensupported by Government acquisition of commodities. The existence of excesscapacity is then revealed in the accumulation of stocks of commoditiesheld by the Government. To prevent stock accumulation, schemes have beentried under which a relatively high price was paid for commodities useddomestically, while exports were made at a lower world price. If sufficientquantities could not be exported at world market prices, export subsidieshave been paid—notoriously in the case of wheat, when subsidies were paidduring the period of the Soviet purchases of 1972. In addition, subsidizedexports have been made through the Food for Peace program and throughsubsidized credit to foreign purchasers. Domestic food consumption has beensubsidized through the school lunch, food stamp, and other special programs.Because no demand-increasing approach has been able for long to equate158