One of the recurring themes of Soviet propaganda was the tractor. Think for example of the film “Zemlya” by Alexander Dovzhenko, which features the triumphant arrival of the first tractor in a village and leaves no doubt that communism is to thank. Fast forward eighty years and this press release leave no doubt that the President of Georgia is to thank for the arrival of 126 tractors to Georgia.

The tractors will be allocated to 12 service centers across Georgia, giving small farmers access to modern agricultural equipment. It sounds like a great idea, it sounds like a zombie from the Soviet past. Once upon a time, Machine and Tractor Stations (Машинно-тракторная станции) supplied equipment to cooperatives, before the equipment was transferred to the Kolkhoz itself.

As with most government interventions, the government providing access to equipment could be justified by market failures. If markets would work efficiently small farmers would just purchase equipment themselves, possibly financed by bank loans. This apparently is not happening. One possible interpretation is that small farmers have no profitable use for tractors or other equipment.

More interestingly, if small farmers have a profitable use for tractors or other equipment, it could indicate that they are unable to purchase it because of a market failure. Maybe access to bank loans is the problem, in which case the government should try to address the market failure in credit markets instead of just purchasing tractors. Or it could be because tractors are large investments that are only worthwhile for large farms or a number of small farmers banding together. But in this case, the small farmers could just form a cooperative, and purchase and share the tractor. Or alternatively, private entrepreneurs rent out tractors for a few hours or days to individual farmers. This indicates that the government should encourage the formation of cooperatives instead of just purchasing tractors and providing them via service stations.

Why is the service station the worst possible solution? Because there is no built-in guarantee that the tractors will be used efficiently. There are two issues to consider here – incentives and information. Consider small farmers purchasing tractors themselves – either individually or via a cooperative. They face the right incentives as it is in their own interest to use the tractor as efficiently as is possible. They do not face an information problem since in principle they know how the tractor is used most efficiently. This holds even in a cooperative if the cooperative is well-designed and sufficiently small.

Contrast this with a government service station. The first problem is information, as the manager of the station will have no idea whether it is more efficient to give the tractor to farmer A or farmer B. Farmers themselves have no incentive to volunteer this information, and even worse the manager of the service station will have no incentive to really find out either. Of course, there is a solution: Just charge farmers and rent out the tractor at the market rate. But for this, the government is not needed, as this service could be provided by private entrepreneurs.