I agree that most small scale farms I've seen fail, but I don't think it's because of the economics, what I see is it's people who don't understand what their doing but are following ideologies. Most are in the early to mid 20's, coming from urban backgrounds with no working concept of how to grow let alone farm.
Here's an example of a small scale, localized sustainable farmer who's grossing over 100k on a couple acres, if I remember correctly his net was over the typical 20k/acre of commercial farming (I heard his lecture at the organics conference).
http://lagrelinette.com/
So it is possible to have good returns on small plots. Another example is SPIN farming, where people commonly gross over 20k/acre (often generating even more on less land).
When talking about developing nations, I just watched a documentary about agroforestry in Africa and how for minimal investment people and communities are becoming self-reliant through working with nature to restore balance instead of seeing it as the enemy. If anyone wants it I can try and find the link again, I usually try and reference my sources but couldn't find it in my quick search.
When people talk about the increase in cost associated with organic production, they often don't consider how heavily subsidized the petro-chem model is, artificially decreasing the cost through hiding it in taxes.
Urban sprawl is a huge issue, once again societal though as we're chasing an ideal, not pursuing what's sustainable. Look at the community of Arcosanti, through conscious design and choices they've kept the majority of land for agriculture use by concentrating their housing. It's been running for 43 years now, which proves to me it is possible to live in a eco-friendly sustainable way through conscious choice. That's a lot longer then we've tested GMO's as the only study longer then 3 months I know of found they (and associated pesticides) cause a significant increase in cancers and pancreatic damage.
I'm not advocating that we abandon technology, that would be absurd. I do believe we'll all be better off if we return to a small scale, polyculture model of localized production and distribution where more people are involved in direct farming and fewer in the marketing/middlemen/highly processed sections of the industry as that's were a lot of the problems are generated. Look at the waste produced by the current middlemen distribution system, we ship it all over the world costing huge amounts of fuel and wasting lots of produce to spoilage. We lose even more because marketing tells us that fruit and veges should be pristine, with no blemish, even though that has no inherent value and means there's a preponderance of poisons used to create it. So I advocate that we choose to abandon these artificial societal values that add no value at great expense in order to create a more sustainable society.
Food Inc. is a good introduction, focusing mostly on meat production, as to how dysfunctional our current system is. Also how many hurdles small scale organic farmers face because of the lobbies and entrenched system that don't want to lose their the revenue stream.
If the mod's feel this has gotten too far off topic or is too confrontational it makes sense to move it to hot topics. I try to ensure I'm just expressing my own views in a constructive manner but equally acknowledge that most people find my bluntness fairly a**hole-ish....
sorry for all the edits in the last post, my touchpad is over sensitive and likes to screw with me...