Download Introduction To Agricultural Economics and more Essays (university) Agricultural policy in PDF only on Docsity!
Agricultural economics or agronomics is an applied field of economics concerned with the application of economic theory in optimizing the production and distribution of food and fibre—a discipline known as agronomics. Agronomics was a branch of economics that specifically dealt with land usage. It focused on maximizing the crop yield while maintaining a good soil ecosystem. Throughout the 20th century the discipline expanded and the current scope of the discipline is much broader. Agricultural economics today includes a variety of applied areas, having considerable overlap with conventional economics. [1][2][3] [4]^ Agricultural economists have made substantial contributions to research in economics, econometrics, development economics, and environmental economics. Agricultural economics influences food policy, agricultural policy, and environmental policy.
Economics has been defined as the study of resource allocation under scarcity. Agronomics, or the application of economic methods to optimizing the decisions made by agricultural producers, grew to prominence around the turn of the 20th century. The field of agricultural economics can be traced out to works on land economics. Henry Charles Taylor was the greatest contributor with the establishment of the Department of Agricultural Economics at Wisconsin in 1909.[5] Another contributor, 1979 Nobel Economics Prize winner Theodore Schultz, was among the first to examine development economics as a problem related directly to agriculture. [6]Schultz was also instrumental in establishing econometrics as a tool for use in analyzing agricultural economics empirically; he noted in his landmark 1956 article that agricultural supply analysis is rooted in "shifting sand", implying that it was and is simply not being done correctly. [7] One scholar summarizes the development of agricultural economics as follows: "Agricultural economics arose in the late 19th century, combined the theory of the firm with marketing and organization theory, and developed throughout the 20th century largely as an empirical branch of general economics. The discipline was closely linked to empirical applications of mathematical statistics and made early and significant contributions to econometric methods. In the 1960s and afterwards, as agricultural sectors in the OECD countries contracted, agricultural economists were drawn to the development problems of poor countries, to the trade and macroeconomic policy implications of agriculture in rich countries, and to a variety of production, consumption, and environmental and resource problems."[8] Agricultural economists have made many well-known contributions to the economics field with such models as the cobweb model,[9]^ hedonic regression pricing models,[10]^ new technology and diffusion models (Zvi Griliches), [11]^ multifactor productivity and efficiency theory and measurement, [12][13]^ and the random coefficients regression.[14]^ The farm sector is frequently cited as a prime example of the perfect competition economic paradigm. In Asia, agricultural economics was offered first by the University of the Philippines Los Baños Department of Agricultural Economics in 1919. Today, the field of agricultural economics has transformed into a more integrative discipline which covers farm management and production economics, rural finance and institutions, agricultural marketing and prices, agricultural policy and development, food and nutrition economics, and environmental and natural resource economics. Since the 1970s, agricultural economics has primarily focused on seven main topics, according to a scholar in the field: agricultural environment and resources; risk and uncertainty; food and consumer economics; prices and incomes; market structures; trade and development; and technical change and human capital.[
Agricultural environment and natural resources
In the field of environmental economics, agricultural economists have contributed in three main areas: designing incentives to control environmental externalities (such as water pollution due to agricultural production), estimating the value of non-market benefits from natural resources and environmental amenities (such as an appealing rural landscape), and the complex interrelationship between economic activities and environmental consequences.[16]^ With regard to natural resources, agricultural economists have developed quantitative tools for improving land management, preventing erosion, managing pests, protecting biodiversity, and preventing livestock diseases. [
Food and consumer economics
While at one time, the field of agricultural economics was focused primarily on farm-level issues, in recent years agricultural economists have studied diverse topics related to the economics of food consumption. In addition to economists' long-standing emphasis on the effects of prices and incomes, researchers in this field have studied how information and quality attributes influence consumer behavior. Agricultural economists have contributed to understanding how households make choices between purchasing food or preparing it at home, how food prices are determined, definitions of poverty thresholds, how consumers respond to price and income changes in a consistent way, and survey and experimental tools for understanding consumer preferences.
Production economics and farm management
Agricultural economics research has addressed diminishing returns in agricultural production, as well as farmers' costs and supply responses. Much research has applied economic theory to farm-level decisions. Studies of risk and decision-making under uncertainty have real-world applications to crop insurance policies and to understanding how farmers in developing countries make choices about technology adoption. These topics are important for understanding prospects for producing sufficient food for a growing world population, subject to new resource and environmental challenges such as water scarcity and global climate change
Development economics
Development economics is broadly concerned with the improvement of living conditions in low-income countries, and the improvement of economic performance in low-income settings. Because agriculture is a large part of most developing economies, both in terms of employment and share of GDP, agricultural economists have been at the forefront of empirical research on development economics, contributing to our understanding of agriculture's role in economic development, economic growth and structural transformation. Many agricultural economists are interested in the food systems of developing economies, the linkages between agriculture and nutrition, and the ways in which agriculture interact with other domains, such as the natural environment.[20][21]
Professional associations
The International Association of Agricultural Economists (IAAE) is a worldwide professional association, which holds its major conference once every three years. The association publishes the journal Agricultural Economics. There also is a European Association of Agricultural Economists (EAAE), an African Association of Agricultural Economists [AAAE]and an Australian Agricultural and Resource Economics Society. Substantial work in agricultural economics internationally is conducted by the International Food Policy Research Institute. In the United States, the primary professional association is the Agricultural & Applied Economics Association (AAEA), which holds its own annual conference and also co- sponsors the annual meetings of the Allied Social Sciences Association (ASSA). The AAEA publishes the American Journal of Agricultural Economics and Applied Economic Perspectives and Policy.
Careers in agricultural economics
Graduates from agricultural and applied economics departments find jobs in many sectors of the economy: agricultural management, agribusiness, commodities markets, education, the financial sector, government, natural resource and environmental management, real estate, and public relations. Careers in agricultural economics require at least a bachelor's degree, and research careers in the field require graduate-level training.[22]^ A 2011 study by the Georgetown Center on Education and the Workforce rated agricultural economics tied for 8th out of 171 fields in terms of employability.[
Agricultural economics , study of the allocation, distribution, and utilization of the resources used, along with the commodities produced, by farming. Agricultural economics plays a role in the economics of development, for a continuous level of farm surplus is one of the wellsprings of technological and commercial growth.
In general, one can say that when a large fraction of a country’s population depends on agriculture for its livelihood, average incomes are low. That does not mean that a country is poor because most of its population is engaged in agriculture; it is closer to the truth to say that because a country is poor, most of its people must rely upon agriculture for a living.
Agriculture And Economic Development
As a country develops economically, the relative importance of agriculture declines. The primary reason for that was shown by the 19th-century German statistician Ernst Engel, who discovered that as incomes increase, the proportion of income spent on food declines. For example, if a family’s income were to increase by 100 percent, the amount it would spend on food might increase by 60 percent; if formerly its expenditures on food had been 50 percent of its budget, after the increase they would amount to only 40 percent of its budget. It follows that as incomes increase, a smaller fraction of the total resources of society is required to produce the amount of food demanded by the population.
Progress in farming
READ MORE ON THIS TOPIC
the agricultural sciences: Agricultural economics
The field of agricultural economics includes agricultural finance, policy, marketing, farm and agribusiness management, rural sociology, and agricultural law. The idea that the individual farm enterprise forms a unit—affected by location, production techniques, and market factors—originated during the 19th century. It was later supplemented by the theory of optimum utilization of...
READ MORE
That fact would have surprised most economists of the early 19th century, who feared that the limited supply of land in the populated areas of Europe would determine the continent’s ability to feed its growing population. Their fear was based on the so-called law of diminishing returns: that under given conditions an increase in the amount of labour and capital applied to a fixed amount of land results in a less-than-proportional increase in the output of food. That principle is a valid one, but what the classical economists could not foresee was the extent to which the state of the arts and the methods of production would change. Some of the changes occurred in agriculture; others occurred in other sectors of the economy but had a major effect on the supply of food. SIMILAR TOPICS
Spinach field with irrigation system.
© aimandshoot/Fotolia
BRITANNICA STORIES
DEMYSTIFIED / SCIENCE
What’s the Difference Between Venomous and Poisonous?
SPOTLIGHT / ARTS & CULTURE
How a Rejected Block of Marble Became the World’s Most Famous Statue
SPOTLIGHT / PHILOSOPHY & RELIGION
Too Good to Rot? Saints with Incorrupt Bodies
DEMYSTIFIED / SCIENCE
How Do You Tell the Difference Between Total, Annular, Solar, and Lunar Eclipses?
Fortunately, many advances in applied science do not require massive amounts of capital, although it may be necessary to expand marketing and transportation facilities so that farm output can be brought to the entire population. One difficulty in giving priority to agriculture is that most of the increase in farm output and most of the income gains are concentrated in certain regions rather than extending throughout the country. The remaining farmers are not able to produce more and actually suffer a disadvantage as farm prices decline. There is no easy answer to that problem, but developing countries need to be aware of it; economic progress is consistent with lingering backwardness, as has been seen in parts of southern Italy or in the Appalachian area of the United States.
Peasant agriculture
SCIENCE LIST
Meet the Microbes: 5 Tiny Protozoans and Algae
HEALTH & MEDICINE QUIZ
The Human Brain
POP CULTURE LIST
10 Famous Clowns: From Comical to Creepy
The increased use worldwide of high-yielding varieties of rice and wheat from the 1960s showed that farmers were willing and able to adopt new crops and farming methods when their superiority was demonstrated. Those high-yielding varieties, however, required increased outlays for fertilizer, as well as expanded facilities for storage and distribution, and many developing countries were unable to afford such expenditures.
The labour force
As economic development proceeds, a large proportion of the farm labour force must shift from agriculture into other pursuits. That fundamental shift in the labour force is made possible, of course, by an enormous increase in output per worker as agriculture becomes modernized. That increase in output stems from various factors. Where land is plentiful, the output per worker is likely to be higher because it is possible to employ more fertilizer and machinery per worker.
Land, Output, And Yields
Only a small fraction of the world’s land area—about one-tenth—may be considered arable, if arable land is defined as land planted to crops. Less than one-fourth of the world’s land area is in permanent meadows and pastures. The remainder is either in forests or is not being used for agricultural purposes.
There are great differences in the amount of arable land per person in the various regions of the world. The greatest amount of arable land per capita is in Oceania; the least is in China. No direct relationship exists between the amount of arable land per capita and the level of income.
The relationship between land, population, and farm production is a complex one. In traditional agriculture, where methods of production have changed little over a long period of time, production is largely determined by the quality and quantity of land available and the number of people working on the land. Until the early years of the 20th century, most of the world’s increase in crop production came either from an increase in land under cultivation or from an increase in the amount of labour used per unit of land. That generally involved a shift to crops that would yield more per unit of land and required more labour for their cultivation. Wheat, rye, and millet require less labour per unit of land and per unit of food output than do rice, potatoes, or corn (maize), but generally the latter yield more food per unit of land. Thus, as population density increased, the latter groups of crops tended to be substituted for the former. That did not hold true in Europe, where wheat, rye, and millet expanded at the expense of pasture land, but those crops yielded more food per acre than did the livestock that they displaced.
Harvesting wheat on a farm in the grain belt near Saskatoon, Saskatchewan, Canada. A potash mine …
George Hunter
CONNECT WITH BRITANNICA
As agriculture becomes modernized, its dependence upon land as well as upon human labour decreases. Animal power and machinery are substituted for human labour; mechanical power then replaces animal power. The substitution of mechanical power for animal power reduces the need for land. The increased use of fertilizer as modernization occurs also acts as a substitute for both land and labour; the same is true of herbicides and insecticides. By making it possible to produce more per unit of land and per hour of work, less land and labour are required for a given amount of output.
Efforts To Control Prices And Production
In the second half of the 20th century, governments undertook to control both prices and output in the agricultural sector, largely in response to the pressures of the farmers themselves. In the absence of such control, farm prices tend to fluctuate more than do most other prices, and the incomes of
these plans were incredibly detailed, specifying the crops to be grown, the times of plowing, planting, and harvesting, the quantities of fertilizer and manures to be used, and the kinds of livestock to be maintained. On state farms the land and all other means of production are owned by the state. The workers are paid in wages, and management decisions are made by individuals directly responsible to the state.
Kinds of farm operation
If a family farm is defined as one for which the farm operator and family members supply at least half of the labour, the majority of farms in the world are family farms. Family farming is carried on under a wide range of conditions, from the small farms of Asia to the highly mechanized farms of Canada, the United States, and the United Kingdom. The family farm may be owned by the farmer or rented. The most rapidly expanding type of tenure in the United States is that in which the farmer owns part of the land and rents the remainder; almost one-third of all farmland in the United States consists of part-owner farms. This arrangement enables the farmer to increase the size of the farm through renting and to invest capital in machinery and livestock. Family farms may be large in terms of total assets or sales. The relative importance of family farms among the largest farms in the United States has increased over the past few decades. One of the more striking changes in industrial countries has been the increased importance of nonfarm income received by farm families. In the United States, Canada, and Japan more than half of the total income of farm families comes from nonfarm sources, while in most western European countries at least a third of the income of farm families is earned outside of agriculture.
A system of tenant farming known as sharecropping developed in the South of the United States following the freeing of the slaves in the 19th century. It was essentially an adjustment of the plantation system created to permit the owners to maintain a large measure of control over farm operations. The sharecroppers usually supplied only the labour, while the owners provided animal power, machinery, and most of the other inputs in the form of an advance. The sharecroppers received what was left after they had paid back the owners—generally about half of what had been produced.
For various reasons, including the exodus of blacks from American agriculture, the introduction of farm machinery, and the reduction in the acreage of cotton, the number of sharecroppers in the South has diminished drastically since 1935.
In the second half of the 20th century, there began a growth of large-scale farming run as a business enterprise. Such “industrial farms” are of growing significance in world agriculture. There are farms covering extensive areas of land in Africa, South America, Australia, and the United States, where farms became larger as their numbers grew smaller. Such large farms tend to specialize in the production of vegetables, fruits, cotton, poultry and poultry products, and livestock.
Comparative strengths and weaknesses
If they were free to choose, most farm families would want to own the land they farm. Wherever collectivization of private farmers has been carried out, it has required the use of force or the threat of force. But if family farming is to be viable, it must function efficiently, which means that farmers must have access to adequate sources of credit; must be able to obtain fertilizers, machinery, and other equipment; and must be able to market their produce easily. Laws and institutions must be sufficiently flexible to permit the average size of farms to increase as economic growth occurs.
Collective farming did not fulfill the hopes of its early advocates. In the Soviet Union the collective farm was used by Joseph Stalin as a means of exploiting the rural population in order to finance the expansion of industrialization. In the post-Stalin era the incomes of collective farm members increased, and it was believed that many remaining difficulties could be eliminated if the farms were given greater freedom in running their affairs. Nothing in the concept of the collective farm required the imposition of delivery quotas, centralized control of farm investment, or a particular organization of farm labour. Another weakness of collective farms was the failure to provide adequate incentives for individual members. Because of the difficulties involved in rewarding members for their individual work on the common land, the household plots of the members all too often tended to flourish at the expense of the collective. There is no ideal form of organization that fits all farming. Under some circumstances the ownership of land may absorb so much capital that other investments, such as machinery and livestock, are neglected. Land rental may be a better alternative for many families, especially those with limited capital. The Israeli kibbutz has made it possible for many people with little or no agricultural experience to learn farming techniques quickly and efficiently. The most important consideration is whether the other institutions—economic, political, and social—are adequate to provide farmers with a wide range of resources and alternatives.
