Agricultural Economics

Agricultural Economics has evolved to offer research based and extensive agricultural, natural resource, and environmental and applied economics, businessperspectives; policy guidelines, and rural and community development information for the growth of the agriculture industry.

Agricultural economics is an expert and applied field of economics concerned with the application of economic theory in optimizing the production and distribution of food and fibre.

Agricultural economics started as a branch of economics that specifically dealt with optimal land usage. It focused on how to optimally and competitively maximizeagricultural productivity, expanded tonow include a variety of applied areas, with considerable overlap to conventional economics.

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, Agricultural environment and natural resources; Food and consumer economics, Production economics and farm management and Development economics

Economics has been defined as the study of resource allocation under scarcity. Agricultural economics, or the application of economic methods to optimizing the decisions made by agricultural producers, grew to prominence around the turn of the 20th century.

Econometrics has been added in as a tool for analysing agricultural economics empirically and combines the theory of the firm with marketing, organization theory, and grew as an empirical branch of general economics.

Agricultural economists have made many well-known contributions to the economics field with such models as the cobweb model, hedonic regression pricing modelsnew technology and diffusion models, multifactor productivity and efficiency theory and measurement, and the random coefficients regression.

The farm sector is frequently cited as a prime example of the perfect competition economic paradigm.

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.

Agricultural economics has primarily focused on seven main topics:

  1. Agricultural environment and resources;
  2. Risk and uncertainty;
  3. Food and consumer economics;
  4. Prices and incomes; market structures;
  5. Trade and development;
  6. Technical change
  7. Human capital.

Agricultural environment and natural resources

In the field of environmental economics, agricultural economists have contributed in three main areas:

  1. designing incentives to control environmental externalities (such as water pollution due to agricultural production),
  2. estimating the value of non-market benefits from natural resources and environmental amenities (such as an appealing rural landscape),
  3. and the complex interrelationship between economic activities and environmental consequences.

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

The agricultural economics field has focused primarily on farm-level issues inspiredby diverse topics related to the economics of food consumption.

Economists’ long-standing emphasis on the effects of prices and incomes, agriculture economics researchers have also studied how information and quality attributes influence consumer behaviour.

Agricultural economists have contributed significantly to the understanding ofhow households make choices between:

  1. purchasing food or preparing it at home,
  2. how food prices are determined,
  3. definitions of poverty thresholds,
  4. how consumers respond to price and income changes in a consistent way,
  5. 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.

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