Presentation on theme: " “…an applied social science that deals with how producers, consumers and societies use scarce resources in the production, processing, marketing and."— Presentation transcript:
“…an applied social science that deals with how producers, consumers and societies use scarce resources in the production, processing, marketing and consumption of food and fiber products ”.
Here development means what happens over time change, evolution, growth it may be an improvement… or not. We focus on what happens to the whole country to the entire agricultural sector, given overall economic development: higher income, production and consumption improved health and life expectancy and many other changes…
A key change over time is that people get richer, so when we talk of “more” or “less” developed, what we usually mean is “richer” or “poorer”. We will usually be descriptive, asking: › what happens over time, as countries get richer? › what differs across countries between rich & poor? And sometimes we will be prescriptive, asking › what should be done, to help people get what they want?
Development involves accumulation, that economists call “capital”: › physical capital (houses, roads, machines) › human capital (education, health) › institutional capital (“rules of the game”) The accumulation of capital makes it more abundant and cheaper. But accumulation doesn’t happen automatically. To build up capital, people must save and invest from one year to the next.
Development also involves innovation, which economists call “technical change”: › new physical things (seeds, chemicals, etc.) › new ideas (crop rotations, etc.) › new institutions (futures markets, etc.) Innovation makes it possible to produce more of what people want, from the resources they have. But innovation doesn’t happen automatically. To innovate, people must be able to change what they do.
Source: GW Norton and J Alwang, Introduction to Economics of Agricultural Development. New York: McGraw Hill, 1993.
YEARSSHARE OF AGRICULTURE (%)SHARE OF INDUSTRY (%)SHARE OF SERVICES (%) ,220,555, ,621,555, ,721,955, ,622, ,323,156, ,423, ,82556, ,224,957, ,325,156, ,625,957, ,325,957, ,126,557, ,826,557, ,526, ,326,658, ,427,757, ,758, ,728,159, ,427, ,427,958, ,127, ,728,557, ,729,356, ,629,957,5
Function 1: Provide food for humankind Malthus’ theory of the capacity of world to feed humankind: Geometric increase in human population vs. arithmetic increase in food poduction.
Function 2: Provide raw material for the industry Function 3: Provide opportunity for rural lanscape Function 4: Source for capital accumulation for development Function 5: Source of labor for the industry
Inelastic income elasticity of demand for staple foods: as per capita income rises, declining proportion of household expenditure is devoted to food. By Engel's law, as per-capita income rises, the proportion of income spent on food declines relative to other products.
As household demand for food declines in relation to other products, relative prices of foods decline, other things equal. This in turn reduces returns to factors used in agricultural production, causing a net migration of labor and capital to other sectors. Share of agriculturen declines over the economic development process..
Almost always, agriculture declines › In employment share › In share of GDP or GNP (national income) › In share of consumer expenditure Do farmers get poorer? Are there fewer farmers?
Policy is guiding principle leading to a course of action that is pursued by the government. Policies and programs Major forces for policy change: › Instability › Globalization › Technology › Food safety › Environmeny › Industrialization of agriculture › Politics › Unforseen events
A subset of public policy directed primarily but not exclusively at the farm and agribusiness sectors of society.
1. AGRICULTURAL INPUT MARKETS USE OF LAND AND OTHER NATURAL RESOURCES AGRICULTURAL CREDIT AND FINANCE LABOR INDUSTRIAL PRODUCTS 2. AGRICULTURAL OUTPUT MARKETS PRODUCTION CONSUMPTION MARKETING INTERNATIONAL TRADE
Read: Economic Importance of Economic Importance of Agriculture for Poverty Reduction Answer the following questions: 1. What is the role of agriculture in poverty reduction ? 2. What is the major research question in the paper? 3. What is the conclusion of the paper?