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And the economic calculus you describe for a farmer is influenced by government interventions that make conventional agribusiness artificially profitable, and force the small soil-intensive producer to play on an uneven field (i.e. competing with big agribusiness plantations with subsidized irrigation). Even so, despite the skewed incentives, we've seen an explosion of local market gardening over the past generation–Earl Butz's “get big or get out” reached its apex in the 1970s.

What's more, I expect the economic calculus of both the home grower and the farmer to be heavily influenced in the next few years by Peak Oil: by increased long-distance shipping costs, fuel costs for mechanized equipment, and the natural gas inputs for chemical fertiliser.

John Thacker: It's odd that you lionize the productivity advantages of specialization, because it seems to me that industrial development over the past thirty years has been in the opposite direction: toward networked local production integrating power machinery into craft production, i.e., using general purpose machinery to produce in small batches and switch frequently from one product to another on a demand-pull basis. That's the industrial model of Emilia-Romagna and other similar industrial districts around the world, and it's the model of the networked suppliers to which old-style American mass production industry increasingly outsources more and more of its operations. One of the central critiques of traditional mass production industry by lean manufacturing advocates (e.g. James Womack's *The Machine That Changed the World*, William Waddell and Norman Bodek's *The Rebirth of American Industry*) involves the false economies of specialization. Capital-intensive production with product-specific machinery requires large-batch production and push distribution to spread out the unit costs of the heavy machinery over the largest possible production runs. The result is mountains of goods-in-process inventory in the factories, mountains of finished goods in the warehouses for which there is no order, and mountains of inventory in “warehouses on wheels” being shipped around the country. By using less specialized machinery, scaling machinery within the factory to production flow governed by actual orders, and by scaling the factory itself to demand and siting it as closely as possible to the local market, lean production achieves lower unit costs than mass production; the reduced cost from bloated inventories outweighs the increased unit costs for each machine taken in isolation. Interestingly, industry tends to expand its craft periphery in economic downturns because corporations don't want to invest in costly product-specific machinery unless they can guarantee demand suffient to keep it running at capacity. But there has been a permanent structural shift toward an increasingly networked craft periphery, with corporations “outsourcing everything” and becoming increasingly redundant nodes on distributed networks of craft producers; in some cases, like Nike, they really do outsource everything, and the only thing that keeps the supplier networks from undertaking independent production is the old corporate HQ's control of IP and branding, marketing, and finance.

On the same general theme, for a major segment of the economy–software and entertainment–the old corporate IP-centered dinosaurs are being eaten alive by production on the greatest general-purpose artisan tool of all: the desktop computer.

To your other points…

1. I meant the median real wage. It's gone up, even using the standard deflators that undercount the worth of innovation and qualitative change. Measured in the standard way, there's been some decline for some groups toward the bottom of the distribution. But the typical bundle of consumption goods at the median isn't typical toward the bottom. And so the effective rate of inflation isn't the same at all points of the distribution. Because food is such a large part of poor household budgets, the dramatic decline in the price of food actually buoyed real wages and consumption at the bottom relative to the middle. This strikes me as a terrible place to make a stand, especially when you take into account that lower-income individuals tend to be less skilled, and have a less than average (which is not high) capacity to put innovations in home production to use.

2. I think the antecedent is abundantly well established. The decline in food prices is due to, among other things, technology, increasing specialization, increasing economies of scale in both production and transportation, all of which imply an increasing opportunity cost to amateur, lower-tech, less specialized and much much much much smaller-scale home production.

It just seems amazing to me that you guys think there's an issue here.

I sense you get pretty frustrated about the fact that you tend not to be persuasive to people with a background in relatively orthodox economics (or mildly heterodox economics).

Maybe. But if you use your sense of sight to read what Kevin wrote, it seems like part of what's frustrating for him in the current exchange is that his views on benefits of specialization and economies of scale were misrepresented so that the crude cartoon version of his analysis could be waved off as “totally incompetent.” I don't know about you, but I don't find that a very auspicious beginning for a conversation.

There are lots of ways to discuss a view that you don't find persuasive, and lots of people have criticized smaller or larger parts of Kevin's writing on agriculture and local production. (I have, for one. William Gillis has, from a position arguably to the left of Kevin's. Etc.) But there's responsive criticism which attempts to clarify and hone in on the issue, and thee's non-responsive attacks. What you're doing in this most recent comment is something like the former. What you led off with is more like the latter.

And so I'm incredibly skeptical of the idea that more than a few people would find it worthwhile to support a restructuring of institutions to shift to a radically different structure of food production.

Well, the suggestion is not necessarily that lots of people would direct their economic activity towards restructuring etc. Some food faddists like that kind of thing, but the main suggestion here is that that would be an unintended consequence of the final prices for the produce of capital-intensive centralized agriculture with long-distance shipping rising relative to the final prices for the produce of more localized, informal, and labor-intensive county-scale, neighborhood-scale, or home-scale alternatives. (Note that you would see this effect even if absolute prices for all kinds of produce were to fall.)

The real price of food is declining. True or false? Real average wages are increasing. True or false? I think the evidence is very, very clear that both are true. And I think this largely explains the dramatic decline in the household production of food. But you apparently don't. Why not? Would you agree that if the cost of food continues to decline as a percentage of the average wage, then the average-wage worker WILL hit a point where she is better off buying than growing?

1. What's happening to real wages over time is a lot more complex than that, because, as I'm sure you know, modal workers don't make mean incomes. When you separate it out by socioeconomic class, you get very different pictures for different kinds of families. Particularly over the last 35 years or so.

2. As specified, you haven't yet given enough information to determine whether or not a wage-worker will or will not reach an equilibrium point where the trade-off of cash for saved labor is worth making. If tomato prices decline relative to wages for non-food-related wage-labor, then that would tend to favor doing the wage-labor, buying the tomato, and pocketing the difference — if there's no comparable decline in the marginal time that it takes to grow the tomato yourself. But I don't think that the antecedent of that conditional has been established.

And if your alleged facts are facts, why are they not exploited to create huge fortunes? If I'm a farmer with x acres, and I would get more output per acre by switching production techniques and substituting labor for capital, why wouldn't I sell a bunch of my machines, buy a bunch of labor at the average wage or below, and make higher profits?

Well, if we're just looking at the input side, and not the effects of (say) government action on competition, then Kevin's alleged fact was that if you hold the acreage fixed, large-scale mechanized agribusiness will produce less total output than soil-intensive horticulture, but it will produce more output per marginal hour of labor expended on the acreage. The question then is whether it's more profitable for the farmer to economize on the costs of labor or to economize on the costs of land and capital. For people with relatively little access to large, concentrated tranches of land and capital, the trade-off may go one way; for people with better access, perhaps even access that's facilitated or directly provided by the actions of state or federal government, the trade-off may go the other way.

Just keeping you on your toes.

Re the effect of innovation, there have also been eighty years of innovations that enhance the productivity of home production (rototillers; refinements of composting, green manuring, companion planting, etc., based on findings of soil science and biology).

Sure. There's also been many innovations enhancing the productivity of ham radio operators, people like me who build their own computers, people who tinker on their own cars, people who sew their own clothes, people cooking their own food, repairing their own home, and so on. But in every single case, while it's easier to be a hobbyist or DIYer than it used to be, outsourcing and contracting and taking advantage of specialization has become more common, because the productivity advantages of specialization have increased even faster.

It's quite obviously much easier to cook your own food than it was 80 years ago. And yet the long term trend is in favor of people even more using prepackaged ingredients and eating out. And so on.

Plenty of people are going to enjoy doing any one (or more) of these things as avocations. But I think it's ridiculous to pretend that for any of these things hobbyists are going to dominate the market. Some people will garden; it will be their hobby. But other people will choose other hobbies, and there will be so many possible hobbies demanding your time that people will pick only a few.

Overall, this is a good thing, as people can choose what sort of hobbies and status competitions to participate in, and which ones to outsource.

Re the effect of innovation, there have also been eighty years of innovations that enhance the productivity of home production (rototillers; refinements of composting, green manuring, companion planting, etc., based on findings of soil science and biology). The organic farming techniques developed by Rodale, Bromfield, and Jeavons, compared to what Borsodi was doing, are like a Ferrari compared to a Stanley Steamer.

I'm not denying that families can grow sufficient food on small plots of land. I'm denying that it makes sense for most people, given their preferences and opportunities. And so I'm incredibly skeptical of the idea that more than a few people would find it worthwhile to support a restructuring of institutions to shift to a radically different structure of food production. I don't know why you think this is an attractive alternative. You may counter that in a very different world people would have very different preferences and opportunities, and I will agree. But I tend to be skeptical of specific claims about what kinds of things are likely ever to be different. For example, I don't believe it is true that most people can be persuaded to prefer the sense of independence from self-employment and home production vs. hyperspecialization, wage labor, and radical interdependence, unless they can be made to believe they would be much better off.

I sense you get pretty frustrated about the fact that you tend not to be persuasive to people with a background in relatively orthodox economics (or mildly heterodox economics). But I don't know how you expect us to respond. I've spent a great deal of time with and have learned a lot from new institutional “transactions cost” economists, and feel like I have a very good sense of the arguments of some of the world's best economic thinkers on the limits to scale. And my sense is that your views diverge radically from the consensus view of even those mildly heterodox economists who are very, very sensitive to the whole variety of transactions costs in real institutional structures. I'm not sure why you think I should believe you rather than them, especially when your views on where diseconomies of scale kick in seem to play such a crucial role in your normative political theory.

Anyway, I think I also have a pretty fair sense of actual agricultural practice. And it just seems to be a FACT that there are large economies of scale in agriculture, and that they have increased with technological innovation. So I don't know what to do with your alleged facts.

You obviously agree that if working for a wage and buying food at a store leaves people better off than growing their own, then it doesn't make sense for people to grow their own. Right? So here's what I wonder… The real price of food is declining. True or false? Real average wages are increasing. True or false? I think the evidence is very, very clear that both are true. And I think this largely explains the dramatic decline in the household production of food. But you apparently don't. Why not? Would you agree that if the cost of food continues to decline as a percentage of the average wage, then the average-wage worker WILL hit a point where she is better off buying than growing? Do you think that would be a bad thing?

And if your alleged facts are facts, why are they not exploited to create huge fortunes? If I'm a farmer with x acres, and I would get more output per acre by switching production techniques and substituting labor for capital, why wouldn't I sell a bunch of my machines, buy a bunch of labor at the average wage or below, and make higher profits?

No doubt. Tradeoffs abound. Our current arrangements are a result of labor being relatively expensive.

John Jeavons' raised bed techniques have been demonstrated to produce enough calories to feed one person on a tenth of an acre. That's another fact.

Fair enough; at what cost in other inputs (especially labor)? This is a cool demonstration of what you can do at one limit (maximizing calories per unit of land), just as robotic wheat harvesting is a cool demonstration of another limit (maximizing calories per unit of direct labor, or something). There's no particular reason to believe that either one represents an optimal solution to food production.

Ralph Borsodi demonstrated

In the 1920s. Revisit the (admittedly crappy) graph on farm productivity and ask yourself what this implies about the relationship today.

Re subsidies to centralized production of fruits and vegetables, the position of California as the nation's leading producer might just have something to do with:

1) Heavily subsidized irrigation water, serving rain-poor areas, from government-built dams;

2) Artificially cheap freight shipping on the Interstate, by trucks that cause virtually all roadbed damage and pay maybe half the actual costs of maintenance;

3) The piggybacking of California agribusiness on essentially free, state provided land (the former Spanish and Mexican haciendas).

If shipping and irrigation costs were fully internalized, I expect people in rain-rich areas like (say) western Massachusetts would be buying a lot more vegetables grown by truck farmers close to where they lived.

Point taken re Borsodi. He did, however, run a homestead that was largely self-sufficient in most fruits and vegetables and dairy products, and even produced some meat and cereal grains. And he was under the impression based on his own experience–although I don't know if he did the same detailed calculations he did for tomatoes–that it was cheaper in labor terms than working at a job to buy the food. I do know that he did such calculations for a fairly wide range of home production including spinning and weaving, furniture making, etc., and argued that some two-thirds of what we consume could be produced most economically on the homestead or in the small shop. What's more, he conceded that in most cases factory production was “more efficient” in terms of internal unit costs of production, taken alone; but he argued that the invention of stand-alone, electrically powered machinery captured most of the efficiencies of machine production, and that the additional internal economies of scale of factory production were offset by the fact that home production took place at the point of consumption and had no distribution cost.

Borsodi, being a natural polymath who would have put Odysseus to shame, also probably underestimated the transaction costs of learning to produce so many different things at the household level. But one of his chief failings was his neglect of the possibility of intermediate scales of production between the autarkic household and the large mass-production factory. A neighborhood-level division of labor, by enabling the most skilled seamstress, baker, woodworker, etc., use a particular set of home appliances to full capacity, would probably maximize economies of scale and comparative advantage with no appreciable increase in distribution costs.

Ralph Borsodi demonstrated–with careful accounting–that the total labor involved in growing and canning tomatoes, including amortization on the land and kitchen range, electricity, and all the rest of it, was about a third less than the labor required to earn the money to buy grocery store canned tomatoes for a person making an average wage.

To be fair, Borsodi's results here are partly a reflection of the sample he chose, and probably not nearly as easily applicable to other foods as they are to tomatoes. Homegrown tomatoes are one of the easiest fruits to grow tolerably well in most U.S. climates, and typically offer the largest cash savings from home production and preservation. Getting similar cash savings from homegrown corn or rice or melons would be a lot harder. (At which point, of course, the issue gets tangled up in a lot of other, knottier trade-offs, like the extent to which people might be willing to trade out food based on cereals and other things not easily grown at home in favor of different foods that are more easily grown at home. Which is a live concern, but one that's hard to do much in the way of monetary accounting to answer, since a lot of the trade-offs involved are generally qualitative rather than quantitative.)

1. It's not my case. It's Kevin's case. He gives the argument for it in his book and a series of articles which I'm certainly not prepared to reproduce in full here in the comments thread. My point so far has simply been that specific criticisms Will has offered as a reply to the case are in fact crude misrepresentations of the case he's allegedly replying to.

My own view is that Kevin probably overreaches on the extent to which centrifugal effects on agriculture will result specifically in sustenance kitchen-gardening. But I'm not prepared to wave that off as “bullshit” in the absence of a reply to the evidence he gives, and I'm not about to try and make the case that he overreaches based on the (clearly false) claim that he just denies the existence of benefits from specialization or economies of scale.

2. That said, it's also simply not true that centralized growing of fruits and vegetables “aren't subsidized” in the U.S. They receive far less in the way of direct federal subsidies (in the form of domestic price supports and export subsidies), compared to (say) cereal grains, soybeans, sugar, etc. But many vegetables (e.g. potatoes, onions) are bought up heavily through government purchase and donation programs (school lunch program, military procurement, etc.), many are included in government agricultural export financing and promotion programs (e.g. the Market Access Program), the market is just as heavily regulated as the cereal markets in favor of large incumbents by means of USDA and state and local regulations, they are covered by federal crop insurance bail-outs, and — this happens to be awfully important in the agricultural markets near where I live — benefit very heavily (especially with crops like melons, which are now mostly grown in the Southwestern desert) from government irrigation subsidies and engineering projects.

Moreover, Kevin's point is not simply concerned with the effects of direct government subsidy to producers. It's part of a larger case which significantly has to do with (among other things) the suppression of potential competitors and substitute goods, either by government-enforced cartelization, direct legal suppression of the product, by direct legal suppression of necessary inputs, or by the ripple-effects of economic distortions that make the inputs artificially expensive compared to how they'd be in a free market, or that make the inputs for centralized business models artificially cheap.

Is all of that enough to demonstrate that there'd probably be a large scale shift towards home food production in a free society? I dunno. In any case, we're still talking about a really heterogeneous set of products (the economics of tomato growing are quite different from those of cantaloupe farms, and both are awfully different from banana plantations), and all this is no doubt beyond the scope of this comment thread. But it's certainly a reason for believing that the market we have to look at now is pretty damn skewed, and so that pointing to revealed preferences under those market conditions is not a very reliable guide to what would be economically efficient in a genuinely free market, which was my point in mentioning all this stuff in the first place.

Then Rad Geek makes some actual arguments, and supports them. And in particular, he points out that economies of scale actually mean something.

And you think HE has backed himself into a corner?

Large-scale mechanized agribusiness produces a larger output per man-hour, but soil-intensive horticulture produces more output per acre. That's a fact.

John Jeavons' raised bed techniques have been demonstrated to produce enough calories to feed one person on a tenth of an acre. That's another fact.

Ralph Borsodi demonstrated–with careful accounting–that the total labor involved in growing and canning tomatoes, including amortization on the land and kitchen range, electricity, and all the rest of it, was about a third less than the labor required to earn the money to buy grocery store canned tomatoes for a person making an average wage. That's still another fact that can't be wished away by yelling “Economies of Scale! Booga Booga!”

“Economies of scale” result from the fact that some production inputs are lumpy, and are maximized when a set of production inputs is fully utilized. They vary with the material conditions of production, and–rather than being unlimited–are maximized at some discrete point beyond which diseconomies set in. Economies of scale are also entail packages of costs that in some cases offset each other, as when production reaches a scale at which economies of unit production cost are offset by increased distribution cost from a larger market area. And economies of scale depend on which production input you're trying to economize on. These are all things to be answered with fact, but you write as though they weren't even issues at all. “Economies of Scale! Booga Booga!” is apparently sufficient.