More theory,in theory

An important aspect of the milk and dairy industry in the European Community is the reaction of milk producers to milk prices. In theory farmers behave like the economic man of basic economic textbooks. In practice, farmers behave quite differently, ie they increase their production when prices fall. For policy makers in the field of dairy products it is essential to know the reaction of the farming industry. Surprisingly this information is not available in the EEC; there are various opinions and estimates but they are heavily disputed. However, we now have the results of a study which can settle the dispute.¹ It is interesting to see the results and to notice that there really is a fundamental problem involved, ie how to discriminate between economic models.