Rent-seeking in agricultural policy revisited: a new look at the Common Agricultural Policy consensus

Abstract

It is generally believed that agricultural interventionism represents the payment of political rents to farmers. We attempt to show that the concept of political rent known as the rent-seeking theory is not valid for agricultural policy. It is not justified to identify the entire subsidies paid to agriculture as a ‘political rent’, since political rents cannot be taken to include payments for the supply of public goods or those transfers which compensate for market imperfections. Our work aims firstly to review the concepts of rents and rent-seeking, and to develop a methodology for quantifying political rents in agricultural policy. We perform comparative analyses with the aim of calculating the ‘pure political rent’, based on the input-output approach for representative farms according to the EU FADN typology and on a decomposition of the Hicks–Moorsteen TFP index for the period 2004-2012 and 27 European Union Member States. The calculations of political rents show that historical payments are neither a rational nor a just solution. No attempts have yet been made in the literature to quantify political rents, even though this might lead to an improvement in the effectiveness of public expenditure. The original methodology is proposed for valuing these items.