The European Community needs a policy for agriculture to standardize the method of establishing an equilibrium price for agricultural commodities. Countries choose not to allow free-market pricing of agricultural commodities in order to ensure what the country perceives is a greater public good in the form of farm employment which remains stabilized, to increases in production, preservation of the country's agricultural heritage. The problem is that attempts to regulate the price of any commodity, arrives at a price schedule which is not efficient. This is the case with the prices set by the European Community on farm produce.
Inequalities exist in any market where the price paid by the consumer does not equal the cost of the producer to produce the item. Inequalities may also exist if their is substantial public benefit or public cost associated with the production of the item. Currently, the Common Agricultural Policy (CAP) has contained within it both public goods and public costs. The public goods and public costs, which are included implicitly and explicitly manipulated through the CAP, can be shown clearly by the situation found in France.
In France, the farmers comprise only about 5 percent of the labor force. This small percentage of the labor force represents for the country their heritage. The French people are strongly tied to the notion that they are an agrarian people. The French agricultural community gives an identity to the French people. This identity is a public good. It has intrinsic value for France. As a public good its price is not included in the direct cost of French agricultural products.
The French government wants to support the labor force. Since the 1930's, the percentage of french people living and farming the land for a living has decreased from 50 percent to about 6 percent. This translates into a job loss. Since 1970, there have been 1 million farm jobs lost. The number ...