PUBLIC CHOICE THEORY AND AUSTRALIAN AGRICULTURAL POLICY REFORM*

Recent discussion of the process of policy reform has tended to focus on public and private interest theories of public choice as alternative models. The analysis of Australian agricultural policy presented in this paper draws on several extensions of the private interest model including the contractarian framework, extra-rational considerations such as moral attitudes and the desire to participate. Recent agricultural policy reforms in Australia are examined in the light of those theories. This examination highlights the importance of ideas and changes in the rules for policy formulation in influencing policy outcomes. In some cases the private interest theory appears to offer an adequate explanation while, in others, it provides only a partial explanation of policy change, and requires extension if policy choice is to be influenced, or even understood. An important independent role for economists and policy makers is seen both in the formulation of policies and in the design of rules for policy choice.     

The Normative Analysis of Agricultural Policy: A General Framework and Review

The paper provides a general framework of normative agricultural policy analysis within which it is possible to unify forty years of literature. It is shown that the literature has gone from examining a very small set of simple policies to a much broader set of policies that combine policy instruments simultaneously. In ranking alternative policies agricultural economists have tried to consider distributive equity. While at a glance it may seem that many different methods have been used to consider distributive equity, we show that in general all these methods can be traced back to three alternative methods based on welfarism and Pareto efficiency.     

Food Choice in an Interdisciplinary Context

Reform of agricultural policies, notably the continuing elimination of production‐enhancing subsidies, makes it possible for policies to respond to social issues such as the rural environment and health in future. In this paper, we draw on a Rural Economy and Land Use (RELU) research project which is examining the potential for the development of healthy food chains and the implications for human health and the environment. One of the key issues to be addressed is consumers’ willingness to pay for the nutritionally enhanced food products from these new chains, but it is evident that only a partial understanding can be gained from a traditional economics approach. In the paper, we discuss how economists are beginning to incorporate views from other disciplines into their models of consumer choice.     

Towards Agricultural Policy 3.0 – an agenda for agricultural research

This article reviews the development from market‐based support measures (‘Agricultural Policy 1.0’) towards direct and decoupled payments (‘Agricultural Policy 2.0’) which are increasingly justified by environmentally friendly practices (‘Agricultural Policy 2.1’) to which payments are bound. It describes frequent problems connected with today's agri‐environmental programmes, particularly non‐compliance and a too indirect link between practices paid for and environmental effects. Other programmes have started to pay farmers more directly for environmental outputs on their fields, such as the number of valuable plants on their grassland. Transaction costs for the administration and control of these programmes have been shown to remain at an acceptable level, so that such output‐related policies may be effective and promising options. It is suggested to direct the work of agricultural researchers, including economists, into looking for a stronger link between environmental outputs and public support, something that could be termed Agricultural Policy 3.0. This could lend some more visibility, relevance and attractiveness to our discipline .     

THE NATIONAL INTEREST,WESTMINSTER, AND PUBLIC CHOICE*

There has been increasing scrutiny of government policy decisions and advice in recent years. The supremacy of the national interest has been questioned and self interest theories explored. Administrative systems have been reformed, and the role of the Westminster model of government decision-making endlessly reviewed. Increased interest by economists in the policy process has created a new subject area in economics, namely, public choice theory. It places greater emphasis on individual choice and hence on the way political institutions meet society's needs. It provides a suitable framework for explaining political decision making and administrative processes. In this Address, New Zealand agricultural policies and processes in the last two decades are explored from this viewpoint and the applicability of the theory assessed.     

Does anybody like water restrictions? Some observations in Australian urban communities*

Mandatory water restrictions continue to be the immediate response to urban water shortages in most major cities in southern Australia. Whilst generally rejected by economists on efficiency grounds, restrictions and the enforcement regimes used to invoke them are, nonetheless, viewed by some in the community as a positive way of dealing with water scarcity. Given the likelihood that urban water restrictions will persist for some time, there is value in understanding householders’ attitudes in this context. The impact and acceptability of differing approaches to enforcement is of particular interest, because this has wider ramifications for the administration of policy generally. This paper uses the results from a choice experiment to investigate the interplay between different components of a water restriction regime. In stark contrast to prevailing views that focus on the community benefits from ‘sharing the pain of water shortages’, results point to the significance of being able to inform on ones neighbours as a component of the enforcement regimes.     

Judging agricultural policies: a survey

This survey provides a structured picture of 40 years of literature which uses welfare economic tools to judge agricultural policy. Challenges and developments of normative agricultural policy analysis are discussed in an easily accessible graphical framework. It is shown how the literature has gone from examining a very small discrete set of simple policies to a much broader (often continuous) set of policies that combine policy instruments simultaneously. The importance of the Pareto criterion, used to explore the limits of how government can affect welfare, is revealed. Moreover, given the importance of the objective of income redistribution in agricultural policy, agricultural economists have often departed from the purely efficiency‐oriented tradition in economics. It is shown that they have tried to incorporate equity considerations by either adding these criteria as constraints to the social welfare function, or directly incorporating these criteria in the functional form of the social welfare function.     

Are we risking too much? Perspectives on risk in farm modeling

Risk and uncertainty have been extensively studied by agricultural economists. In this paper we question (a) the predominant use of static frameworks to formally analyse risk; (b) the predominant focus on risk aversion as the motivation for considering risk and (c) the notion that explicitly probabilistic models are likely to be helpful to farmers in their decision making. We pose the question: for a risk‐averse farmer, what is the extra value of a recommendation derived from a model that represents risk aversion, compared to a model based on risk neutrality? The conclusion reached is that for the types of the decision problems most commonly modelled by agricultural economists, the extra value of representing risk aversion is commonly very little.     

Land use,the environment and development in post-socialist Mongolia

This paper describes the economic policies that have transformed the pastoral sector in post-socialist Mongolia, and their impact on pastoral land use. These policies reflect the influence of development economists from the Asian Development Bank who have been advising the Mongolian government, and their conviction that exclusive private rights to land are a necessary precondition of an efficient rural market economy. These assumptions stand in marked contrast to indigenous Mongolian conceptions of rights over land, and the policy debate reflects the contested nature of knowledge of the Mongolian environment. However, far from preventing damage to the resource base, evidence suggests that these policies of land allocations may actually be exacerbating problems of pasture degradation. This paper argues that policies of this kind reveal a misunderstanding of the nature of Mongolian pastoralism and the conditions that have made it viable in the past. Although international development agencies lionize a romanticized notion of Mongolian “traditions” as reflecting a “respect for nature”, there is little appreciation of the actual institutions that successfully conducted pastoralism until recently, the concrete embodiment of Mongolian pastoral knowledge. Environmentalist agendas reflect a familiar western interest in promoting western conservationist ideology and establishing and expanding protected areas to harbour wildlife and biodiversity. Mongolian practices tend to be cast as “traditions” to be utilized for the greater goal of conservation as conceived of in western terms, rather than seen as part of wider social and political institutions of land use.     

The Generic Advertising Controversy: How Did We Get Here and Where Are We Going?

Since the 1980s, generic advertising programs for dozens of farm commodities have been entangled in a great deal of litigation. The author looks at the history of generic advertising policies, discusses why the litigation arose when it did, and argues that the current round of litigation is simply an inevitable outgrowth of fairly recent Supreme Court rulings on commercial speech. The author further examines some of the economic studies that have been performed. The author predicts an increase in generic advertising litigation based upon the degree of collectivization in an industry and urges economists to bring the controversy into their modeling.     

A critical assessment of the political preference function approach in agricultural economics

The policy preference function (ppf ) approach has become popular with economists seeking to explain the origin of government policies. In this paper, a distinction between positive and normative work with the ppf concept is made. Positive work is shown to suffer from a variety of shortcomings including the misspecification of traditional ppfs and the failure to consider the importance of institutions, constraints and the interaction between different commodity policies. These weaknesses are reflected in the counter-intuitive results of a simple ppf model designed to reflect the interaction between the EC's wheat and barley policies. Furthermore, it is demonstrated that ppf weights change as a result of both political preferences and market parameters. Hence, changes in ppf weights cannot be attributed to changes in preferences alone. Tests of the axioms of revealed preference theory are used to demonstrate that even though ppf weights derived for the EC's wheat and barley markets have fluctuated considerably since the early 1970s, we are not able to conclude that there has been a shift in political preferences. The paper concludes with some comments about the use of ppfs in a normative framework. The underlying assumption that policy-makers optimise seems, not surprisingly, often to lead practitioners to the conclusion that observed policies are not so bad after all. Economists should also beware of the tendency to overlook possible differences between the ppf and the social welfare function.     

SOME DEVELOPMENT OPTIONS FOR THE COMMON AGRICULTURAL POLICY

This paper begins with a summary of the current state of Community financing of the Common Agricultural Policy. A brief survey of the currently discussed options for change leads to the conclusion that feasible developments will involve extension of the use of existing instruments rather than wholesale reform. If agreement on such extensions cannot be reached, there is likely to be unplanned nationalisation of agricultural support expenditures. The economic impacts of three measures to cope with surplus production using existing policy instruments-price reductions, co-responsibility levies and supplementary levies-are analysed, as is a possible budgetary solution to the surplus problem-surplus contributions. The paper concludes with some remarks about the desirability of these various development options and the role of economists in the debate about CAP reform.     

农村土地承包经营权可抵押性及其约束条件分析 ——以湖北与江苏的试点为例

研究目的：辨明农村土地承包经营权可抵押的约束条件,为农地抵押试点提供可靠的理论依据和可行的政策建议。研究方法：基于湖北天门和江苏新沂的典型案例,从经济条件、职能分工、试点政策与进展等方面对两地试点进行比较研究。研究结果：农村土地承包经营权可抵押性受到法律因素和经济因素的共同制约;在相同的法律制度下,其可抵押性更多地由农业生产水平、土地流转市场、农村社会保障水平等经济条件决定。研究结论：试点应选择在经济发展水平较高、农业生产水平较高、土地流转市场相对完善的地区开展,相关法律政策也应在此类地区有选择地放开。     

Consumer Behavior, Public Policy, and Country-of-Origin Labeling

Recent work by agricultural economists has failed to adequately identify why consumers desire country-of-origin labeling, a key piece of information needed to determine whether a market-failure exists. This paper brings to the attention of agricultural economists a sizable body of literature on country-of-origin effects from the marketing and business disciplines. Based on this literature, we draw a distinction between several consumer motivations for origin labels and we identify which of these is cause for public policy. We propose several research questions that require answers if the consequences of country-of-origin labeling policy are to be fully understood.     

Estimating the costs and benefits of soil conservation in Europe

Economics is about problems of choice. In erosion control, both public authorities and private land users are faced with such problems. What is the impact of erosion, both on-site and off-site, and to what extent can this impact be quantified? If we conceptualize this impact in terms of sustainability, how can we compare one type of effect against another? The former question can be answered only by natural scientists, the latter by economists and other social scientists. Weighing different aspects of sustainability requires value judgments, and economists are sometimes accused of having a jaundiced view of reality, wrongly supposing that decisions are based on rationality and denying the importance of emotion.However, let us assume that there is some mileage to be gained out of attempting to estimate the cost of erosion in an economic sense—which consists of converting the various effects into a common denominator: euros. If we can predict the impact of erosion control measures on erosion rates, we can know the benefit of these measures. The cost also needs to be calculated, not in terms of money but in terms of resources expended (which could have been used for other purposes) and in terms of possible negative impacts of erosion control (for instance, increased use of herbicides in reduced-tillage systems).There are important other considerations which economists may study. Firstly, there is the comparison of present versus future costs and benefits: how much can we sacrifice today for higher sustainability tomorrow?Secondly, there is the issue of private versus public costs and benefits: how do the goals of private land users differ from (those of?) the public good, how can this help us to predict land users’ behaviour, and what incentives would be appropriate to make them behave in such a way as to maximize the public good? Thirdly, how do we deal with uncertainty and risk?These problems loomed large in a study to support an extended impact assessment for the EU Soil Thematic Strategy, in 2005. Whereas much research has been done on erosion and its impact, much of this is on a small scale. The extent of the problem on a national, let alone a continental or a global scale, is still poorly known. The paper discusses how these problems were faced, which is not the same as saying they were resolved.     

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.     

林业经济理论研究的一种可能的新思路

为探讨林业经济理论研究的新思路,首先回顾了我国林业经济理论的发展阶段,对国内外林业经济理论的研究对象及内容进行了分析和评价,随后介绍了新兴古典经济学中的分工与专业化思想,并简单分析了其在林业经济理论研究方面的可行性,认为经济系统的分工与专业化演进思想可以成为林业经济理论研究的理论基础,并可能成为一条新的可行的研究思路。     

Human behavior and the use of experiments to understand the agricultural,resource, and environmental challenges of the XXI century

The use of laboratory¹ experiments in economics, and their later deployment in the field as a tool for exploring how actual decision‐makers respond to information, incentives or institutions has brought a revolution to how we model economic systems, and design policies for them. This new century will bring challenges for the study of agriculture, natural resources and the environment, where it will be necessary to have a better understanding of human behavior, in a world where climate on the one hand, and land, labor and food markets are ever more unstable. This article reviews the intellectual history of a rich dialogue between theory and experiments with a particular focus on its relevance for agricultural, resource and environmental issues. Special attention will be given to the case of common‐pool resources where this dialogue between models, field work and laboratory experiments continues to provide a rich cross‐fertilization for the advance in the understanding of the economic systems that governs these resources. I will close by arguing that agricultural, environmental and resource economists will have to take part of this behavioral revolution by embracing experiments in their teaching, their research and their policy design.     

Adding value to spatially managed inputs by understanding site-specific yield response

Many mechanized crop producers and agribusinesses are fascinated with precision agriculture technology, but adoption has lagged behind the expectations. Among the reasons for slow adoption of precision agriculture technology is that initial users focused excessively on in‐field benefits from variable‐rate fertilizer application using regional average fertilizer recommendations. This article illustrates how greater use of site‐specific crop response information can improve variable rate input application recommendations. Precision agriculture is spatial information technology applied to agriculture. The technologies include global position systems (GPS), geographic information systems (GIS), yield monitoring sensors, and computer controlled within‐field variable rate application (VRA) equipment. Experimentation with these technologies is occurring everywhere there is large scale mechanized agriculture. Commercial use has been greatest in the US, where 43% of farm retailers offered VRA services in 2001. Except for certain high‐value crops like sugar beet, farmer adoption of VRA has been modest. The farm level profitability of VRA continues to be questionable for bulk commodity crops. The theoretical model and illustration presented here suggest that VRA fertilization has not yet reached its profitability potential. Most VKA field trials to date have relied upon existing state‐wide or regional input rate recommendations. Unobserved soil characteristics can potentially interact with an input to make its effect on yield vary site‐specifically within fields. Failure to use site‐specific response functions for VRA applications may lead to a misallocation of inputs just as great as that which results from using uniform applications instead of VRA. Agricultural economists have a long history of estimating output response to input applications. Several have started to develop tools to estimate site‐specific responses from yield monitor and other precision agriculture data. Likewise, agricultural economists have developed an important body of research results on information value based on managing variability—typically in temporal settings. With these tools, a major potential exists to develop further benefits from precision agriculture technologies that permit truly spatially tailored input applications.     

Editorial - An international association of forest economics

While forestry issues and forest economists' interests are increasingly global, the costs of creating an international association have plummeted. These twinned trends suggest that the time is ripe to form an international association of forest economics.Anecdotally, forest economists have expressed considerable interest in international debates and scholarly exchanges. This anecdotal evidence includes expressed interest in a series of informal conversations with forest economists from around the world, the success of international journals such as the Journal of Forest Economics, and the success of international conferences and meetings organized by ad hoc committees. This increasing interest in international activities appears to reflect on-going trends of increased international trade, standardization of forest economic approaches, and increased mobility of forest economists, many of whom are accepting positions outside of their native country or region.Historically, the costs of organizing and sustaining an international association were extremely high. However, the improvement of communication technologies during the past two decades in the form of e-mail, the internet and fax machines have dramatically decreased the costs of many of the basic functions of an international association including interactions between members on scholarly issues, meeting and conference announcements, and members' direct participation in an international organization. These technological advances have been important to the success of the Journal of Forest Economics and to ad hoc organizing committees of international conferences and meetings. Associations can now be primarily virtual in the sense that the only non-electronic aspects of the organization are delivering paper copies of journals, and actual attendance at a conference and meeting.Currently no organization effectively serves as an international organization of forest economics. Existing forest economics associations are regional or national by design. International forestry organizations such as IUFRO, EFI and CIFOR are generally not led by forest economists, are not designed to promote timely scholarly exchanges among forest economists, and usually are unable to change rapidly in response to the changing needs of forest economists.Over the past few years at several meetings a number of forest economists have either discussed organizing an international association of forest economics or expressed strong interest in becoming a member of an international association of forest economics. The Journal of Forest Economics Editorial Board has expressed support of an international association with some members willing to assist the organizing effort. Other forest economists not associated with the Journal of Forest Economics have offered to help organize an association. Some of these forest economists have expressed particular interest in assisting with setting up internal communications for an international association, or organizing a conference under the auspices of an international association.Although previous discussions and preliminary attempts at organizing have not successfully created an international association of forest economics, they have helped uncover strong interest in an international association. There is reason to be more optimistic about the current organizing effort. Probably the most important source of optimism is that it appears likely that IUFRO will now assist efforts to form an international organizational of forest economics by providing both organizing effort and financial resources.A number of significant issues need to be resolved to form a viable international association of forest economics. These issues include:Clarifying the benefits and responsibilities of membership in an international association.Developing a mutually supportive relationship with both regional associations of forest economists, forest economics research centres and international forestry organizations.Determining the range of activities that the international association will routinely address including internal and external communications, the possibility of association sponsored conferences or meetings, organization details and other possible activities.Forming an international association of forest economics is both timely, and will enhance scholarship in forest economics. If you have interest in joining with others to form an international association of forest economics, I urge you to e-mail, brazee@uiuc.edu, the current initial contact point for the organizing effort.