Cost of production without parity vs. costs of production in a parity system

How these two terms differ is an example of why clarity on parity is so important.

Price support vs income support

Policy that says farmers should receive the cost of production, or a percentage thereof, or cost of production plus a “reasonable profit” is justified because farmers ought to receive “fair prices.” If this policy is implemented as a price support, where actual market prices are supported at this level (a price floor) and the purchasers must pay that price for the commodity, then the cost to the government treasury can be virtually zero. This is a big selling point for policy makers focusing only on “fair prices” for farmers.