The Divergence in Canada-U.S. Grain and Oilseed Policies

This paper discusses U.S. and Canadian farm programs for grains and oilseeds. In spite of the passage of the U.S. FAIR Act in 1996, where subsidies were to be greatly reduced, subsidies reached an all-time high of over $20 billion in 2000. In Canada, just the opposite occurred, as support for the grains and oilseeds sector has dropped sharply since the mid-1990s. In addition to differences in support levels, the farm prog rams are very different. NISA and AIDA are prominent in the landscape in Canada, while under FAIR, loan deficiency payments are a key ingredient. We provide some explanations for the divergence in farm programs between the two countries, including a discussion of rent seeking and public choice.     

Consumer expectations and short-horizon return predictability

Lettau and Ludvigson [Lettau, M., Ludvigson, S, 2001. Consumption, aggregate wealth and expected stock returns. Journal of Finance 56, 815–849] argue that fluctuations from the equilibrium ratio of consumption to wealth (cây) reflect changing expectations of asset returns and document significant short-horizon predictability based on cây. This paper further explores the role of consumer expectations in modeling time variation of expected equity returns by considering two measures of consumer expectations: (i) consumer behavior as reflected in cây, and (ii) a more-direct measure of expectations captured by the Index of Consumer Sentiment (ICS). We report strong regression-based evidence of return predictability based on cây, which remains evident even after accounting for various sources of estimation risk. However, the regression-based evidence of predictability does not necessarily imply that shifts in aggregate consumption and the components of aggregate wealth give rise to economically significant investment signals. The survey-based measure of expectations (ICS) is shown to complement the behavioral measure (cây) but has no apparent stand-alone predictive value in forecasting equity returns.     

Social Science and Social Policy: A Comment

A bstract . The notion that a social science can be value-free ignores the fact that the concepts upon which the social sciences remain dependent cannot possibly be. The emphasis upon methodology, mainly responsible for that position continues, but in recent years it has been paired with emphasis upon policy, applied social science. Value free social policy is within possibility— but it would be irrelevant.     

North-south trade: An impasse in policy formulation

The strains that exist in commercial relations between the industrialized world (the North) and the developing world (the South), can be attributed to the over-simplified analysis brought to the dialogue by spokespersons from both groups. Spokespeople for the North talk in terms of the desirability of free trade without any recognition of the costs of adjustment which sharp increases in imports inflict. Southern spokespeople take the northern rhetoric at face value and believe that political pressures which impede southern exports are simple evidence of northern greed and intransigeance. If short-run costs of adjustment were to be explicitly recognized by both parties, it would again be possible for the two blocs to conduct a positive dialogue which would recognize the mutual benefits which can be derived from co-operation.     

Economic Measures of Sustainability

Sustainable Agriculture is a term that has grown out of global call for sustainable development. Unfortunately, the term has been very widely adopted to represent a variety of initiatives. If the term is to retain any meaning it must be refined and defined. In this paper sustainability was defined as: The maintenance of the net benefits agriculture provides to society for present and future generations. This definition is very much a humanist approach, which includes both consumer and producer surplus. The paper identifies the conflict that may occur between consumer surplus, producer surplus and total economic surplus. From a consumer surplus point of view food security, and discounting are major issues. The compensating variation of a famine may be infinite making food security a primary goal of many nations. The maximization of the net returns from agricultural production represents me producer surplus point view. A second, somewhat related concern is the maintenance of minimum level of income in the agricultural sector. Consumer surplus is threatened by food scarcity, and agricultural income is threatened by surpluses. Price is the best measure we have of scarcity. To discuss sufficiency in the absence of price is very misleading. Similarly, describing sustainability in terms of expected output and prices is also misleading. It is unplanned scarcity and abundance that threatens food security and economic viability respectively. It is therefore, the ability of the agricultural system to respond and rule out extreme price that is central to the issue of sustainability. Given the inelastic nature of the demand the ability for sustainable agriculture may largely be a function of the elasticity of supply. The ability of fixed factors such as land to enter and exit a sector may also augment sustainability. A thirdsource, of economic flexibility is alternative technologies that can be applied at very low or high prices. This flexibility has to be valued not at expected prices but rather for the option values at extreme prices. Government has a role in sustainability. Governments should pursue policies which enhance the elasticity of supply. Policies that stabilize income through prices have the opposite effect. These programs should at a minimum be decoupled. Secondly, governments should spend research dollars on technologies that enhance the elasticity of supply. Finally, land set aside programs, add great deal to the elasticity of supply.     

Gains to Research in the Presence of Intellectual Property Rights and Research Subsidies

The influx of private investment into crop research, which has accompanied the establishment of intellectual property rights (IPRs) and the introduction of biotechnology, suggests high rates of return. However, the empirical analysis of the canola research sector shows a decline in the total net return to research during a period of increased investment, indicating that net marginal returns to research have been negative. The indication of immiserizing research suggests that the combined effect of IPRs and public incentives has driven the quantity of research beyond the socially optimal level.     

The political economy of the ‘recurrent cost problem’ in the West African Sahel

The syndrome of development projects in agriculture and the social sectors languishing after completion of their foreign-aided establishment phase, due to lack of host government budget support, is particularly characteristic of, though by no means limited to, the eight countries of the West African Sahel. A two-year study of the problem by a multilateral working group attributed the problem substantially to donor policies causing recipients to attach a low opportunity cost, only a fraction of nominal value, to project-specific aid resources, as against the high opportunity cost, corresponding to a shadow price well over 1.0, attached to use of their own uncommitted budget resources.