A government subsidy of the production of a good is defensible if the good generates external benefits, i.e., benefits not captured by the producer, in which event the good will be underproduced if left entirely to the market. This is not usually true of agricultural production. But Switzerland may be an exception because of its heavy dependence on tourism and the undoubted contribution that Swiss farms make to the beauty of the Swiss countryside. However, before determining how much of a subsidy to provide or indeed whether to provide any subsidy, one would have to determine how much and what kind of agriculture would be produced with no subsidy. Perhaps the reduction in agricultural acreage would be too slight to make significant inroads into tourist revenues. Assuming the effect could be measured, the proper method of financing the subsidy would be by a tax on the tourism industry. As for the form of the subsidy, this should depend on the effect on touristic values. The aim presumably would be to increase the amount of agricultural acreage, and perhaps dairy production because the cows with their bells are, to the tourist, particularly attractive adornments of Swiss farms.
Quite apart from tourism, Swiss people themselves may derive pleasure from their agricultural countryside. That would constitute an additional external benefit that might justify subsidy, but it would be very hard to measure. "Contingent valuation" surveys ask people what they would pay for various environmental amenities if such amenities were priced. But the responses are not reliable. People are being asked to put a price on goods that are not sold in markets, and they have no relevant experience with pricing such goods. The surveys tend also to focus on a single amenity (as in my Swiss example), which produces exaggerated responses because the respondents are not being asked to allocate a limited budget among a range of possible subsidies.
Switzerland may be a special case; it is inconceivable that agricultural subsidies in general are justifiable in terms of positive externalities. A country like France, for example, which receives a quarter of the European Union's generous allocation for such subsidies, has highly productive agriculture and its huge tourist industry is far less dependent on bucolic vistas than Swiss tourism is. Agricultural subsidies generally reflect, as Becker points out, the operation of interest-group politics. A related feature in the European context is job protection--it may be especially difficult for many farmers to find alternative employment outside the agriculture sector.
Our ethanol subsidy is a particulary disgraceful example of the genre, especially given the availability of much cheaper sugar-based Brazilian ethanol blocked by a high tariff from competing with the ethanol produced from our corn. It is possible though unproven that ethanol as a fuel involves a net reduction in carbon dioxide emissions compared to gasoline and so may help to limit global warming. I qualify with "unproven" because while ethanol is not a fossil fuel and so burning it does not emit carbon dioxide, its production requires fossil fuel. Even if ethanol as a fuel has definite advantages from the standpoint of controlling global warming, this is a poor argument for a subsidy of it, as the subsidy can distort the efficient choice of inputs into the manufacture of fuel. Better would be a tax on carbon dioxide emissions; this would give producers and consumers of fuels and of products utilizing fuels, such as cars and electricity, an incentive to search out the cheapest substitutes for fossil fuels, which might or not include ethanol.
Although the percentage of farm revenues generated by subsidy is less than half in the United States what it is in the EU countries (16 percent versus 34 percent, according to the OECD study discussed by Becker), the efficient rate is probably zero. The fact that it is positive may reflect not just the operation of interest-group politics but the skewed representation of states in the U.S. Senate. Because each state has two Senators regardless of population, thinly populated agricultural states have disproportionate influence which they can use by means of logrolling to attract support for generous subsidies having no public-interest justification whatsoever.