Puzzling Results at the USDA

New research raises questions about federal conservation spending

By Jane Shaw Stroup of The Independent Institute. 

"The Department of Agriculture (USDA) is a giant agency with a $481 billion budget, 65 percent of which goes to the food stamp program. As the 2026 farm bill nears passage this autumn, the public is watching a bitter partisan debate over food stamps. But few people—other than insiders—are scrutinizing the rest of the bill. Yet other agriculture programs, although minuscule compared to food stamp benefits, deserve attention, too. The USDA pays $5.3 billion a year for its conservation programs. Two recent studies raise questions about their effectiveness and appropriateness. 

Woody Encroachment

Let’s start with woody encroachment. This is the unplanned intrusion of trees and shrubs into croplands and grasslands. Such vegetation reduces the amount of land that can be used for raising crops or grazing cattle, thus reducing production. 

In 2019, the Natural Resources Conservation Service (NRCS, an agency of the USDA) started the Kansas Great Plains Grassland Initiative (KGPGI). Its goal was to end, or at least slow, woody encroachment in Kansas. Two researchers from Kansas State University studied this problem carefully. 

Between 2017 and 2024, the USDA spent only $24 million addressing woody encroachment in Kansas, while the problem was causing landowners $30 million in forage losses each year (and even more in Oklahoma and Texas). Surveying landowners of Kansas cropland, the researchers found that between 41 and 61 percent of the landowners saw this encroachment as a major problem. Yet relatively few were participating in the government’s Environmental Quality Incentives Program, which provides payments for addressing environmental issues such as this. 

So why the low participation? The researchers, Jackson Lindamood and Gabriel S. Sampson, found “high [tree and shrub] control costs, labor constraints, and difficulties prioritizing treatment areas,” as well as landowners’ “limited awareness, uncertainty about eligibility, and program complexity.”

The authors then began an economic study to calculate the impact of woody encroachment on land values, knowing there might be benefits as well as losses. They selected more than 12,000 parcels for which they had land sale prices and environmental data from 1990 to 2024.

Very simply, they found that woody encroachment increased land values. “The value of a one percentage point increase in woody cover on the parcel is associated with increased per-acre value ranging from $9 to $27 depending on model specification,” they wrote. This new vegetation was providing habitat for wildlife, which encouraged recreation, especially hunting—a service that was more valuable at the margin than raising crops or grass alone.

They called their findings “somewhat of a management and policy paradox: landowners face high costs to control woody encroachment on grassland, yet the land market places a land value premium on woody cover.”

So perhaps woody encroachment is a good thing and should be left alone? It’s not clear whether the researchers saw it that way. “This suggests a clear role for policy interventions that substantially lower the costs of control, have clear eligibility guidelines, and are easy to navigate for producers or landowners,” they wrote.

CRP and Land Values

There is something amusing about the upside-down effect of woody encroachment, but to me, there is something disturbing about a recent study of the Conservation Reserve Program (CRP). Unlike the woody encroachment program, the CRP—the USDA’s largest conservation program—pays farmers to reduce their usable acreage by setting aside marginal or erodible land. Started formally in 1985, it has two goals: increasing natural habitat and, by reducing farmland, keeping up crop prices.

This year, the environmental research organization Resources for the Future (RFF) produced a comprehensive working paper by Matthew Wibbenmeyer et al. on the effect of the CRP on nearby property values. 

The paper begins: “Conservation is often perceived to be at odds with economic activity.” Specifically, the government’s “payments for eco-system-services” under the CRP has caused anxiety that its “spillover effects” may be harming rural communities. This could happen “by reducing outputs, employment, and demand for support services from agriculture, forestry, or other land-based industries.” 

On the other hand, they continue, there are also benefits, such as “improved environmental quality, recreational amenities, and landscape resilience to erosion, extreme weather, and ecological disturbances.”

The RFF used CRP data and residential property values to find out if CRP land affects the value of nearby homes. And it does. They write: “a 10-hectare [2.47-acre] increase in CRP enrollment [by landowners] results in an approximately 4 and 1.6 percent increase in the value of homes within 500 and 1,000 m[eters], respectively.” Nationally, this adds up to an increase in residential property values by $775 to $900 million per year.

So a government payment program to keep up prices and protect the environment raises the value of nearby land. That’s nice, but should taxpayers pay money to raise the land values of what may be well-heeled homeowners who aren’t, as far as we know, doing anything special to protect the environment? Whatever the answer, the question is largely irrelevant. The paper seems to be a strategic effort to boost the CRP.

Over the years, the CRP has not shown environmental benefits that are dramatically greater than costs. In fact, in 2007, Leroy Hansen, an economist at the USDA’s Economic Research Service, wrote that: “Nationally, the CRP is estimated to provide $1.3 billion in annual benefits, which represents 75 to 80 percent of the program’s cost.” In other words, by cost-benefit standards, it is a net loss. This study by RFF gives support to the benefit side. 

These two cases suggest that members of the public should take a closer look at the USDA’s conservation programs."

Share of incomes and income taxes by brackets

From Mark Perry.

 

 

America’s Misplaced Income Priorities

You won’t hear it from politicians, but economic inequality is on the decline

By Ryan Young of CEI.

"The national inequality debate is asking the wrong questions. Pundits are cheering a recent Congressional Budget Office (CBO) report showing a decline in income inequality in the United States, but focusing on the mathematical ratio between high and low incomes distracts from more important questions: How are low-income people actually doing? Are they becoming better off in absolute terms? Effective poverty-fighters focus on real people, not ratios.

The headline finding of the CBO report is a decline in the country’s Gini coefficient, which measures how evenly income is distributed on a scale from zero to one. A value of zero represents identical incomes for everyone, while a value of 1 represents one person earning all the income and everyone else earning nothing. In 2023 — the most recent year with available data, discussed in the CBO report — the Gini coefficient in America after transfers and taxes was 0.418. This is down from 0.442 in 2021. That puts the U.S. in the highest quarter or so among OECD countries.

Contrary to its reputation, the U.S. has a highly progressive tax code and a large welfare state. According to a different dataset from Our World in Data, taxes and transfers moved the U.S. Gini coefficient from 0.51 to 0.39 in 2024.

Medieval France and Italy were very unequal, with Gini coefficients estimated to have been around 0.70. Modern dictatorships with entrenched elites, such as Russia and North Korea, also have high inequality, though they do not publish reliable data.

The rich and powerful in these societies got that way through force and through political connections, which are a zero-sum game. In liberal democracies with relatively free markets, by contrast, most people must earn their money honestly through positive-sum trade. Entrepreneurs have to offer people things they value. In these societies, measures of inequality ought to count for very little.

According to a well-known 2004 study by Nobel-winning economist William Nordhaus, entrepreneurs capture only about 2 percent of the value they create. By that estimate, for someone like Jeff Bezos to capture $1 billion in value, roughly $49 billion would accrue to customers, employees, shareholders, and suppliers. Unlike feudalism or socialism, market-based wealth is positive-sum. That’s a pretty good deal ethically and materially. In market-based societies, Gini coefficients are a question of aesthetics, not of well-being. For example, Michigan Senate candidate Abdul El-Sayed recently said, “I’d rather have an economy that makes 1,000 millionaires than 1 billionaire.”

This statement is fine as an aesthetic preference. But that is different from making as many people as possible as well-off as possible. Each productive billionaire creates numerous millionaires through the wealth their ventures create. SpaceX’s IPO created about 4,400 new millionaires, for example. That’s part of the reason why, in the United States, there are currently about 28,000 millionaires for every billionaire.

Ethically, what is important is not relative poverty, but absolute poverty. Do people at the economic bottom have enough to live in comfort and dignity? Are they becoming wealthier over time?

Data from the St. Louis Federal Reserve’s FRED database find that people at the economic bottom are indeed becoming wealthier. This shows another problem with obsessing over inequality.

Many people have low annual incomes but plenty of saved wealth, such as retirees. Many younger people with children, mortgages, and student debt have higher incomes but little wealth, or even negative wealth. The important thing is that they all have a decent standard of living that improves over time, regardless of how their situation affects the Gini coefficient.

In inflation-adjusted dollars, the bottom 50 percent of households had about $700 billion of wealth in 1989. Since then, it has more than doubled to $1.7 trillion."

Great tweet from Phil Magness on the tariffs

Click here to see it.

 

 

Media Bias and the L.A. Times

By David Henderson. 

"This a repost of an EconLog post I did in 2010. What motivated me to repost is something I read in the Wall Street Journal a few minutes ago. It’s James Freeman, “Kudos to the New York Times,” WSJ, October 26, 2026. Freeman writes about an interaction between constitutional law scholar Josh Blackman and Patrick Healy, the NYT’s assistant managing editor for standards and trust. [DRH aside: That title is already revealing. The NYT thinks it needs a special editor for standards and trust? Wow!] 

Here’s a quote from Blackman that Healy uses in his piece:

Back in February of this year, I was quoted twice in The New York Times back to back in the span of 24 hours, which is, you know, pretty cool. But I sort of noticed that both of the references were to Josh Blackman as a “conservative” law professor. And I just thought that was strange. So I went through the Westlaw archives and just sort of searched for “liberal” law professors and “conservative” law professors in the New York Times database, and it was far more likely that you’re identifying a conservative than a liberal. And those numbers are stacked because liberals are quoted even more often. So the numbers even have a greater disparity.

The whole NYT piece is worth reading. Healy was fairly accountable, which doesn’t mean that his colleagues will be.

It reminded me of a not so nice interaction I had in 2008 with Ralph Vartabedian of the Los Angeles Times. I wrote about it in 2010. Here it is.

Bryan Caplan’s and David Boaz’s comments on media bias remind me of an incident that happened almost two years ago. Ralph Vartabedian called me to get my take on the members of President-elect Obama’s economic team, particularly Christina Romer and Larry Summers. I answered his questions. At no time did he ask my ideology. Here’s his article. [DRH note: Surprisingly, you can still access it.]

In case you’re in a hurry, I’m posting here the relevant 2 paragraphs:

He also will have to work with some outsized egos and giant intellects on Obama’s economic team: Lawrence H. Summers, chairman-designate of the National Economic Council; Timothy F. Geithner, nominated to be Treasury secretary; and Christina Romer, chosen to lead the Council of Economic Advisors.

The group is generally not of one mind. Major differences exist in how they view regulation, monetary control and fiscal policy. Summers, for example, was among the Clinton administration officials who helped relax federal regulation on Wall Street, recalled David R. Henderson, a conservative economist at the Hoover Institution. Romer has questioned how well fiscal policy works at all, a central tenant of Democratic economic thinking.

So I wrote him the following:

Dear Ralph, 

I saw your piece. I’m not a conservative. I notice also that not only did you get my ideology wrong but also that I’m the only economist to whom you ascribed an ideology. What gives, Ralph?  

David

He replied:

Dear David,  

I thought your comment about Summers and Romer came from a viewpoint of significant concern about what the Obama Administration was going to do, so I used the reference only as an indicator that you are critical of at least Summers. As for the conservative label, I based that on a couple of points…clearly Hoover is known as a conservative organization and I have honestly never known anybody in it who was a liberal. I believe you were on the council of economic advisors under President Reagan, no? You seemed pretty critical of the liberal members of Obama’s team and our data base at the Times indicates you are a registered Republican there in the Monterrey [sic] area. I can give you a call later today. 

Ralph

I replied:

Dear Ralph, 

Those are all relevant techniques for figuring out my ideology–if I’m dead. Given that I’m alive, another way is to ask me.  

Also, couldn’t you use those same techniques to discern the ideology of Blinder and others you cited? And yet you didn’t.  

Best,  

David

Later that day, he did call me. He said he felt apologetic. I persisted and asked him why he didn’t ascribe an ideology to the other economists quoted, who clearly had ideologies. He explained that I was the only one quoted who was critical of the Obama team.

 
“Did you hear what you just said?” I asked. “Only those who are critical are given ideologies.”  

“Yes, I get it,” he said.   

That’s why I didn’t blog on it. I thought maybe he really did get it and I didn’t want to reduce my probability of being interviewed again. Twenty months later he still has not called for another interview. My guess is that by simply confronting him about it, I reduced my probability to close to zero."

The Washington Post‘s Editorial Board makes the case for letting “private capital determine how many data centers America needs.”

From Cafe Hayek. 

"But the political movement to slow down or block the growth of data centers could have adverse consequences for the entire economy. By some estimates, AI-related goods accounted for as much as three-quarters of all global trade growth in the first quarter of 2026 and upward of a third of U.S. economic growth.

Financial risk does not diminish the structural utility of technological advances. Many railroads failed, but the track remained. Ditto for companies in the 1990s that laid fiber-optic cable, which continues to generate value.

If CoreWeave has borrowed too much, creditors and shareholders will bear the consequences. If Microsoft or Meta wants another gigawatt of electricity, they should pay the cost of producing and transmitting it. But neither investors nor consumers benefit when zoning boards, permitting regimes and utility bottlenecks prevent otherwise economically viable projects from being built."

Between 1900 and 1990, real consumption of house furnishings and apparel grew by a factor of 114

See Cataloging Growth: A Re-Evaluation of 1900–1990 by Veonica Backer-Peral & Benjamin Wittenbrink. 

"Measuring real GDP growth requires distinguishing changes in prices from changes in product quality and composition, yet systematic quality adjustment of price indexes is unavailable for much of the twentieth century. We construct a new quality-adjusted price index for U.S. house furnishings and apparel goods using 5.1 million product listings from Sears catalogs, 1900–1990. We use large language models to extract product information and estimate hedonic price schedules with detailed product characteristics, allowing us to infer annual changes in the cost of living. The resulting cost-of-living index implies substantially lower goods inflation than conventional deflators, and consequently implies much faster real economic growth: between 1900 and 1990, real consumption of house furnishings and apparel grew by a factor of 114 using our index, compared with a factor of 24 using standard goods deflators. The gap between our index and canonical ones is largest before World War II and suggests that productivity growth peaked earlier in the twentieth century than conventional estimates indicate."