An article by the Harvard Medical School surgeon Atul Gawande in the December 14 New Yorker about how the U.S. Department of Agriculture's extension service may be a model for health care cost reduction has gotten a lot of attention, including from the director of the White House Office of Management and Budget, Peter Orszag, who praised it as "trenchant" and declared, "All together, I agree with Gawande." A lot of the Gawande article is about not health care but farming. Here is how Dr. Gawande tells the story, in a nutshell: In 1900, "farming was hugely labor-intensive, tying up almost half the American workforce." He writes, "You might think that the invisible hand of market competition would have solved these problems, that the prospect of higher income from improved practices would have encouraged change. But laissez-faire had not worked." Instead, in 1914, "Congress passed the Smith-Lever Act, establishing the U.S.D.A. Cooperative Extension Service. By 1920, there were seven thousand federal extension agents, working in almost every county in the nation, and by 1930 they had set up more than seven hundred and fifty thousand demonstration farms." This government intervention was a big success, in Dr. Gawande's telling: "By 1930, food absorbed just ..twenty per cent of the workforce."
The Wall Street Journal mocked this view in an editorial this week: "Mr. Gawande points to the case study of U.S. farm policy, and if politically sacrosanct agriculture subsidies and rural price-supports are the best to hope for, then what's the worst?" But the Journal didn't question Dr. Gawande's account of the core history. That account is subject to question, though. Consider this account from an article in the new Winter issue of National Affairs: "In 1800, America was a nation of farmers: About three-quarters of the labor force worked in agriculture. Since then, this share has been in almost continuous decline. By the eve of the Civil War, it was a little over half; by 1900 it was about one-third." Got that? From 1800 to 1900, the share of the work force that worked in agriculture declined to 33% from 75%. This is the period during which Dr. Gawande would tell you that "laissez-faire had not worked." Actually, the share of the work force devoted to farming dropped by 42 percentage points before any of the USDA extension agents that Dr. Gawande is so enthusiastic about went to work. Once they did, the share of the workforce devoted to farming dropped to 20% in 1930 from 33% in 1900. But that was a decline already well underway.
If there is a difference between the two statistics for share of workforce devoted to farming in 1900 -- the National Affairs article uses "about one third," the New Yorker uses "almost half" -- it may relate to confusion between "farming" and "food." Farming includes crops such as cotton, tobacco, indigo, and corn for ethanol that aren't food. I will email Dr. Gawande and the author of the National Affairs article, Jim Manzi, and see if they can cite sources for their statistics or account for the discrepancy. Update: Mr. Manzi emails that his source for the year 1900 statistics was this report from the Cleveland Fed, which cites the U.S. Census on the "percent of the labor force in agriculture," and says, "About a third of U.S. workers were employed in agriculture at the beginning of the century." Second Update: Dr. Gawande's research assistant emails that his source is this bulletin from the U.S. Department of Agriculture, which states that in 1900, "41 percent of workforce [was] employed in agriculture" and that early 20th century farming "employed close to half of the U.S. workforce."
In any event, this is more than just an obscure dispute over historical statistics, because the White House is using the New Yorker article to make the case that passing a health care overhaul will lead to cost reductions. If the changes in agriculture were market-based as much as, or more than, government-based, it undercuts that argument for passing the health care bill.