Price Parity: Back in the day

Almost nobody talks about "price parity" any more. A few decades back the term was the common coin of politcal debate, central to arguments about agricultural price subsidies.

During the depression, Rooseveltian economists decided that a period about 20 years before that, 1910-1914, had been a golden age for farmers. The price of goods farmers had to buy (made by urban folk) were in a "parity" with the price of the goods they were selling, their crops and slaughtered critters. So (the Brain Trust decided) the goal of federal policy ought to be to get back to that parity.

Ag subsidies, direct and indirect, were justified for over the next 30 years or so on the basis of helping farmers return to or maintain parity, defined by pre-WWI price relationships.

These subsidies were by the the 1960s receiving heavy critical fire all along the political spectrum, and although the critics didn't manage to stop the subsidies (which are still very much with us in the 21st century), they did manage to force the retirement of the expression "price parity" in this context.

The subject comes to mind because I was recently leafing through Hazlitt's wonderful book, Economics in One Lesson, a book that came out in the mid 1940s and has been continuously in print ever since, explaining how markets work to one generation after another in a little over 200 pages. Alas! not much in it is outdated. The chief anti-market fallacies remain what they were back then.

One of the exceptions is this notion of parity, in chapter XIII, where Hazlitt takes the notion quite seriously as a target, and eviscerates it wonderfully. So wonderfully, that nowadays it seems like the proverbial sledgehammer crushing the fly. Ah, but back in the day that fly was a dragon.

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