AGEC 640 Tues., August 26,

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2014. Introduction . to Agricultural Development . & Policy. Today: . Housekeeping. Motivation. Background . reading (optional. ): WDR . 2008, . online only. Thursday:. The . world food and financial crises of 2007-09 . ID: 725065 Download Presentation

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AGEC 640 Tues., August 26,

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Presentations text content in AGEC 640 Tues., August 26,


AGEC 640Tues., August 26, 2014Introduction to Agricultural Development & Policy





reading (optional

): WDR


online only



world food and financial crises of 2007-09

Readings: Abbott

(2009) and Masters (2008), online


To report an emergency, call 911. To obtain updates regarding an ongoing emergency, sign up for Purdue Alert text messages, view 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.



HousekeepingIntroductions & handout (questions for the semester ahead)Syllabus & assignments (HWKs, exams & paper)Feedback mechanismsHomework #1 due Tues 9/9 (now available)Explore drivers of change, using FAO & WDI dataThis could be time consuming, so…don’t procrastinate; start now!



MotivationWhy this class?subjectmethod4


MotivationWhy 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”)


changes (possibly


) over a long time horizon

≈ differences across all of the world’s countries…this is an introduction to the “policy” side of ag econ.



Motivation (continued)The methodwe’ll do economicsuse data and models to explain and predictand thereby help inform decision-makers’ choicesin 640, it’s a lot of data and a few simple modelslater classes build more difficult


we’ll do economic analysis of policy choices

specifically …



MotivationWhat do we mean by “policy choices”? For this class, we define policy broadly as:actions of the government, as opposed to individualsmay be backed by police powerhaving “no policy” means using only voluntary arrangements.

Policy choices of the government include:institutions (written or unwritten rules and organizations)explicit: quality certification through USDAimplicit: disaster victims can expect special treatment


(a particular action by those institutions)

negative restrictions: a regulation, quota or tax

positive incentives: an offer to buy, sell or subsidize



MotivationWhat do we mean by “economic analysis”? By analysis, we mean:quantifiable models, in whichpolicy instruments are represented by a specific variable, &endogenous effects

of policy change are predicted, given

exogenous conditions fixed by data & model structure. By


analysis, we mean:

all agents are


something, subject to constraints

all outcomes are an


between the agents

the combination of optimization and equilibrium gives us:consistent results, that are nonetheless interesting;realistic results, that can be made to fit the data. 8


MotivationHow 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


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!



MotivationSome 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


, 1829)



What’s ahead?Thursday: The world food and financial crisisReadings: Abbott’s global overview for OECDMasters’ paper for African Technology Dev. ForumNext week: Introduction to agricultural policyReadings:Norton, et al. (2006) textbook chapterTomich, et al. (1995) selections

Montgomery notes on the demographic transition

Homework #1 due the following Tuesday (9/9)11

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