RESEARCH ORIENTATIONS AND THEIR IMPLICATIONS FOR AGRICULTURAL ECONOMISTS

Division of agricultural economics research into behavioural vs. policy alternatives is proposed to reduce ambiguities implied by a positive vs normative division. The thesis is argued with reference to growth of the farm firm. A specific model is proposed. Brief comparisons are provided with alternatives in behavioural and policy applications.     

A SYNTHETIC MODEL OF AGRICULTURAL SUPPLY

Over the past twenty-five years there have been important theoretical developments in the supply literature. Each has examined the likely impact on supply of introducing doses of realism into the standard neoclassical model. These have been administered for the most part independently, with the consequence that, though each has illuminated a single aspect of supply, no overall perspective has emerged. This essay seeks to provide a coherent and comprehensive framework of analysis and develops an estimatable model of supply within this framework.     

THE COMMON AGRICULTURAL POLICY: THE IMPLICATIONS FOR ITALIAN AGRICULTURE

The relative importance of Italian agriculture in the EC, both in terms of net value added and of employment, has never been matched by a comparable impact on the CAP policymaking process. Mediterranean agricultural products in particular have been less favoured by the overwhelming common policy instrument of product price support, which has also a negative impact on the economy as a whole. The most relevant effects of the CAP are reviewed: the impact on resource allocation, including international income transfers, and the effects on the environment, as well as the effects on interpersonal income distribution. An evaluation of CAP is then made from different points of view: the likely perspective of present Italian farmers, a national perspective and an overall perspective, including the interests of non EC countries and future generations. Lower and more balanced price support, together with higher concern for structural and environmental policies especially in less favoured areas, are advocated.     

A MODEL OF THE COMMON AGRICULTURAL POLICY

Several efforts have been made since 1980 to estimate the costs and benefits of the European Community's Common Agricultural Policy (CAP). This paper summarises the approach and method adopted in developing one such effort, which aims to provide results at country, commodity and interest group level both for the CAP as a whole, and for changes in it. Economic analysis of the effects of price changes in the CAP is carried out with the use of direct and crossprice elasticities of supply and demand for sixteen major commodities, using base levels of production, consumption, and gross trade flows in each member state, along with rest-of-world data. A number of CAP instruments, such as subsidies, levies, quotas and ‘green’ exchange rates, are built into the calculations and can be varied, along with support prices, to produce new situations in domestic markets and in world price levels. Both financial (budgetary) and welfare (economic surplus) effects of such exogenous price changes can be calculated. Certain policy changes, such as a move to ‘free’ markets, involve endogenous calculation of equilibrium prices. Trend projections subject to a priori constraints are used to produce results for years beyond the extent of data currently available. The types of model run commonly carried out are discussed, along with several strategic judgments that became necessary in carrying out the research. Finally, questions concerning the future development and use of the model are addressed.     

TOWARD A FRAMEWORK FOR EVALUATING AGRICULTURAL ECONOMICS RESEARCH*

Agricultural economists need to evaluate their own research priorities. The main difficulty in doing so is to value the types of information generated by economic research. Bayesian decision theory provides a framework for valuing information, and the results of selected studies using this methodology are collated. Most of the other determinants of research priorities can be encapsulated in a target return ratio measure. How such a framework might be used is illustrated by three 'hypotheticals'.     

COMPROMISE-RISK PROGRAMMING FOR AGRICULTURAL RESOURCE ALLOCATION PROBLEMS: AN ILLUSTRATION

This paper presents a novel approach for dealing with risk in agricultural resource allocation decisions by synthesising the conventional Markowitzean, or MOTAD, methods within a compromise programming model to generate ‘best-compromise’ solutions which come closest to an ideal point defined in terms of risk minimisation. This approach can be regarded as the compromise-risk programming model. The purpose here is to show how this ‘hybridisation’ of Markowitz/MOTAD and compromise programming approaches overcomes some of the weaknesses of the traditional approach to handling risk in resource allocation models.     

A CONCEPTUAL FRAMEWORK FOR ANALYSIS OF MARKET EFFICIENCY

Important agricultural marketing policies and decisions are constantly before industry and government. Much market research is being supported. There is a need to “bridge” research with policy. The core of this paper is to develop a conceptual framework that spans the needed analysis of marketing efficiency. The basic point is that marketing policy must focus on both competition and physical operations. The analysis of this paper builds upon Clark's concept of workable competition and Sosnick's extension to the concept of effective competition. Market efficiency is separated into operational efficiency and exchange efficiency components; the determinants of each component are diagnosed and analyzed in terms of costs and pricing. While the agricultural marketing process produces increments of product form, space, and time utility, costs are incurred. Cost analysis is central to the notion of operational efficiency; cost levels depend upon market organization and the feasible set of market logistics. Exchange efficiency refers primarily to price; the effectiveness with which price reflects costs depends upon market structures and the applicable competitive strategies. The conceptual framework developed in this paper integrates the preceding relationships and formalizes an approach for decisions. Trade-offs often exist between operational efficiency and exchange efficiency components of market efficiency. When a trade-off relationship exists, market efficiency is maximized by equalizing the gain in one component with the opportunity-cost loss in the other component. Le gourvernement el I'industrie font continuellemeni face à?importante décisions dans le domaine des marchés el de la politique agricloe. Ces deux groupes subven-tionnenl les recherches dans ce domaine. II y a un besoin de Her la recherche avec la politique. ?essentiel de cet article est de développer un côdre qui comprend ?analyse nécessaire pour ?efficacité du marché, le point important est que le politique du marché doit se concentrer sur le concurrence et les operations. L'analyse de cet article travail sur le théorie de concurrence réalisable de Clark et sur celle Sosnick traitant de ?Extension de la concurrence effective. ?efficacité du marché est diversé en deux éléments: ?exploitation efftcace el ?echange éfficace, les facteurs déterminant de chaque élément sont soumis à un diagnostic et à une analyse en termes du coût et du prix     

A QUARTERLY MODEL OF AGRICULTURAL INVESTMENT IN AUSTRALIA*

The aims of this study were (a) to attempt to develop a quarterly model to explain aggregate farm investment in Australia, and (b) to examine the concept of the implicit rental price of capital services as a method of taking account of taxation concessions in an investment equation.     

PROBLEMS OF CHANGE IN AUSTRALIAN AGRICULTURAL ECONOMICS

There has been a low level of methodological controversy within the Australian agricultural economics profession. Johnson's 1963 paper is the most significant and in it he passed criticisms on agricultural production economists not unlike those currently being made by political economists of economics in general. These past criticisms have in the main been ignored by the Australian profession but it is suggested that they are now being pushed with renewed vigour and they can no longer be ignored. It is argued that our policy work has by and large been successful and effective except for significant areas where our methodology was of restricted usefulness. In farm management the Johnsonian strictures would seem to apply but a more charitable interpretation is provided which should meet the approval of the political economists. Our almost complete neglect of development economics must soon draw to an end and we will find that the methodologies which we have relied on heavily and fairly successfully must be augmented as we become more involved in this field. The political economics challenge should be recognized and accepted with relish because the nature of our work is changing and will continue to change in the future. We have adapted fairly well as adjustment and equity have become major policy concerns. Meeting the political economics challenge will help this process of adaptation.     

A QUARTERLY MODEL OF THE AUSTRALIAN AGRICULTURAL SECTOR*

Several farm sector econometric models are reviewed initially and the aggregation problem highlighted. A thirty-equation model of the Australian agricultural sector is specified in which farm output, stocks and exports and the domestic demand for farm products are endogenous, as well as farm, export and retail prices. Disaggregation is into food and non-food components of unprocessed output, and the processing of food is traced through to final demand. The model is estimated by a modified 2SLS procedure using quarterly data covering the period 1960-1970.     

PRIVATISING THE PRODUCTION OF KNOWLEDGE: PROMISE AND PITFALLS FOR AGRICULTURAL RESEARCH AND EXTENSION

In the absence of some form of government intervention, knowledge is a classic public good which will be under-produced because of lack of price excludability. Government intervention may take the form of establishing intellectual property rights, or other means of shielding knowledge-based innovations from imitation or copying. Such intervention offers the prospect of 'privatising' the production of knowledge in the sense that a certain level of private knowledge production may become profitable if producers can appropriate at least part of the benefits of R&D. However, publicly funded R&D or extension still can 'crowd out' private knowledge production by charging lower prices. The principal finding of this study is that such 'crowding out' behaviour may be efficient in the sense of being potentially Pareto superior even if it is at the expense of public funding for so called 'orphan' areas of knowledge production which are privately unprofitable. The reason why conventional conclusions about privatisation and 'crowding out' of private goods need not apply to rural research and extension is that private goods are both rival in consumption and price excludable, while knowledge is intrinsically non rival in consumption even if it can be made price excludable.     

MODELS OF RESOURCE ALLOCATION IN PUBLIC AGRICULTURAL RESEARCH: A SURVEY

The identification of research priorities in public agricultural research has been the focus of investigation for a broad range of analytical and empirical studies. Pressure on budgets has meant that efficient resource allocation has become increasingly important to guarantee the continued productivity of agricultural research. This paper provides an overview of the various approaches that have been used in these studies. Generalisations are drawn from the findings of this research programme.     

ETHICS AND EXTERNALITIES: AGRICULTURAL STEWARDSHIP AND OTHER BEHAVIOUR: PRESIDENTIAL ADDRESS

Neo classical micro-economic theory of the firm and household rests on the foundations of profit maximising and utility maximising behaviour respectively. This paper explores the issue of whether market efficiency can be improved when economic agents' behaviour is motivated by ethical objectives such as fairness and altruism. In particular the paper examines agricultural stewardship as an ethically motivated form of behaviour, which is profit sacrificing, but which improves economic efficiency by reducing environmental externalities. The paper also reiterates the limitations of Pareto optimality as a criterion of economic welfare because its rejection of interpersonal welfare comparisons rules out ethical considerations of income and wealth distribution.     

PERSPECTIVES ON AGRICULTURAL BIOTECHNOLOGY RESEARCH FOR SMALL COUNTRIES

The Rockefeller Foundation currently provides about 7.0 million annually for a comprehensive programme of rice biotechnology research designed to meet the needs of the developing world. Early in the programme deliberate decisions were made by the Foundation to support all the components of research required to make new varieties ready for testing, from determining what plant traits should receive priority to strategic technique development through the incorporation of traits into varieties. Agricultural biotechnology research is risky, high-cost relative to other agricultural research, has a long time lag to payoff, and requires efficiently functioning ‘conventional’ research to be effective. Most small developing countries do not have the conditions necessary to make productive investments in agricultural biotechnology, except possibly for sharply defined tissue-culture activities. A wise use of funds would be to concentrate on producing enough indigenous talent to give knowledgeable advice to policy makers on the costs, time lags and possible benefits of agricultural biotechnology.     

THE THEORY OF AGRICULTURAL RESEARCH BENEFITS

This paper describes a new approach to the theory of agricultural research benefits based on component benefits rather than, as is customary, on surpluses. The surplus concept nevertheless emerges when the distribution of the national benefit is considered. Various published methods (Grossfield-Heath, Lindner-Jarrett, Akino-Hayami, Griliches I and II) are derived as special cases of the theory and numerically compared. Applications are briefly considered; Griliches II is used for the variability of crop yields and some typical results for the distribution of benefits are given.     

THE ELASTICITY OF AGGREGATE AUSTRALIAN AGRICULTURAL SUPPLY: ESTIMATES AND POLICY IMPLICATIONS

Annual time series data for the period 1950-51 through 1975-76 are used to estimate the price elasticity of aggregate Australian agricultural supply using two methods. The short-run elasticity is estimated to be highly inelastic but it has been increasing through time. The preferred estimate of the long-run elasticity is in the relatively inelastic range and it has also been increasing through time. Some implications of these results for intersectoral resource flows and compensatory assistance, the cost-price squeeze, the effects of the mineral boom and monetary policy are discussed.     

PROBLEMS OF AGRICULTURAL POLICY IN EUROPE–A DANISH POINT OF VIEW

Recent developments in the agricultural situation of Western Europe has led to inceased self-sufficiency in importing countries and stagnation in the world trade of agricultural products. An examination is made of the effects of these developments on Danish agriculture and the Danish economy, which has been subject to a very rapid change of structure. Characteristics of the Danish agricultural support policy are commented upon as well as the issue of price support versus income support in relation to the objectives of greater efficiency and improved farm structure. The importance of other measures is emphasised, including action to impove the mobility of agricultural manpower. On the basis of past experience some comments are finally made about the enlargement of E.E.C. and its possible effects on the world trade, on the situation of overseas producers, including the developing countries, and possible ways of reducing the difficulties.