1. AGEC 640 Tues., August 22, 2017 Introduction to Agricultural Development & Policy
Today:
Housekeeping
Motivation
Background readings: Otsuka (2012); WDR (2008)
Thursday:
The world food and financial crises of
Readings: Abbott (2009); Masters (2008)

2. EMERGENCY PREPAREDNESS – A MESSAGE FROM PURDUE
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There are nearly 300 Emergency Telephones outdoors across campus and in parking garages that connect directly to the PUPD. If you feel threatened or need help, push the button and you will be connected immediately.
If we hear a fire alarm during class we will immediately suspend class, evacuate the building, and proceed outdoors. Do not use the elevator.
If we are notified during class of a Shelter in Place requirement for a tornado warning, we will suspend class and shelter in [the basement].
If we are notified during class of a Shelter in Place requirement for a hazardous materials release, or a civil disturbance, including a shooting or other use of weapons, we will suspend class and shelter in the classroom, shutting the door and turning off the lights.
Please review the Emergency Preparedness website for additional information
One final piece of Purdue business before we begin: as we start this semester I want to take a few minutes to discuss emergency preparedness. Purdue University is a very safe campus and there is a low probability that a serious incident will occur here. However, just as we receive a safety briefing each time we get on an aircraft, we want to emphasize our emergency procedures for evacuation and shelter in place incidents. Our preparedness will be critical if an unexpected event occurs.
Purdue prepares for natural disasters or human‑caused incidents with the ultimate goal of maintaining a safe and secure campus, but nin the end, emergency preparedness is your personal responsibility. Let’s quickly review the following procedures:

3. Housekeeping
Introductions & handout (questions for the semester ahead)
Syllabus & assignments (assignments, exam and paper)
Homework #1 due Tues 9/5 (now available)
Explore drivers of change, using FAO & WDI data
This could be time consuming, so…
…don’t procrastinate; start now!

4. Motivation
Why this class?
subject
method

5. Motivation Why this class?
The subject
“agricultural”
= production, consumption, markets (the food and fiber system)
“policy”
to understand and inform policymakers
to explain and predict policy choices (= “political economy”)
“development”
≡ changes (possibly improvements) over a long time horizon
≈ differences across all of the world’s countries
…this is an introduction to the “policy” side of ag econ.

6. Motivation (continued)
The method
we’ll do economics
use data and models to explain and predict
and thereby help inform decision-makers’ choices
in 640, it’s a lot of data and a few simple models
later classes build more difficult models
we’ll do economic analysis of policy choices
specifically …

7. Motivation What do we mean by “policy choices”?
For this class, we define policy broadly as:
actions of the government, as opposed to individuals
may be backed by police power
having “no policy” means using only voluntary arrangements.
Policy choices of the government include:
institutions (written or unwritten rules and organizations)
explicit: quality certification through USDA
implicit: disaster victims can expect special treatment
instruments (a particular action by those institutions)
negative restrictions: a regulation, quota or tax
positive incentives: an offer to buy, sell or subsidize

8. Motivation What do we mean by “economic analysis”?
By analysis, we mean:
quantifiable models, in which
policy instruments are represented by a specific variable, &
endogenous effects of policy change are predicted, given
exogenous conditions fixed by data & model structure.
By economic analysis, we mean:
all agents are optimizing something, subject to constraints
all outcomes are an equilibrium between the agents
the combination of optimization and equilibrium gives us:
consistent results, that may be interesting;
realistic results, that can be taken to the data.

9. Motivation How useful is economic policy analysis?
Focus on quantifiable things:
we generally ignore the stated objectives of policy, and many important aspects of government such as legitimacy, democracy and freedom.
Use optimization to describe behavior:
we generally ignore non-rational behavior (which may be especially important where information is limited -- as in risk perceptions, investments, etc.)
Advanced economics often addresses subtle issues involving non-quantifiable and non-rational factors, but it’s much harder to do!

10. Motivation Some limitations, and strengths, of economics…
This is a highly simplified world!
“In order to know anything, it is necessary to know everything, but to talk about anything, it is necessary to neglect a great deal.”
(Joan Robinson, Economica 1941)
It captures something real, i.e. “stylized facts”
“I show life as it is, but stylized.”
(Marcel Marceau in an NPR interview, 25 March 1998)
…although it may seem weird:
“Mathematicians are like Frenchmen: whatever you say to them
they translate into their own language and all at once it is something completely different.”
(Johann Wolfgang von Goethe, Maxims and Reflexions, 1829)

11. What’s ahead? Thursday: The world food and financial crisis
Readings:
Abbott’s global overview for OECD
Masters’ paper for African Technology Dev. Forum
Next week: Introduction to agricultural policy
Norton, et al. (2006) textbook chapter
Tomich, et al. (1995) selections
Montgomery notes on the demographic transition
Homework #1 due the following Tuesday (9/5)