Bridging Theory, Evidence, and Practice in Food, Resources, and Sustainability

A comprehensive new textbook, Agricultural Economics and Policy, by David Zilberman, Ruiqing Miao, and Jian Rong (World Scientific).

Over the past forty years, I have taught graduate courses in agricultural and resource economics. When I was a graduate student at Berkeley, no course in this area was offered. The faculty who had previously taught it had retired or passed away, so I had to build the class from the ground up. That challenge became an education in itself: I learned from the literature, from colleagues’ notes, and from the contributions of students and teaching assistants. During last three years, I collaborated with Ruiqing Miao and Jian Rong—drawing on my own notes and notes compiled by Carlo Cafiero—and developing new materials for our graduate-level textbook in agricultural economics and policy. Below is an overview of its content.

Prologue and Chapter 1

The Prologue and Chapter 1 introduce readers to agricultural economics. In the Prologue, we present the field’s breadth—production, demand, trade policy, environmental policy, and more—and acknowledge the individuals who blazed the research paths that shaped these areas. Readers meet John Kenneth Galbraith, Vernon Ruttan, Theodore W. Schultz, Irma Adelman, Zvi Griliches, and other giants who built the profession.

Chapter 1 offers a concise history of U.S. agriculture: from the seventeenth-century arrival of settlers on the East Coast, through nineteenth-century westward expansion, to the twentieth‑ and twenty-first-century eras of intensification, farm support policies, and environmental regulation. Before readers dive into technical details, they need context. We emphasize that economics is not merely a mathematical exercise—it is an approach to addressing human challenges.

The emphasis on theory and relevance

The book introduces what we consider the essential topics in agricultural economics and policy. For each topic, we provide an overview of the main research questions and describe the analytical and methodological approaches used to address them. We emphasize developing theory through modeling and discussing its implications and contributions to understanding real-world phenomena. Our goal is for readers to grasp the methods presented and to be inspired to develop applied theories that guide resource allocation and policy interventions suited to specific contexts.

These theoretical analyses can yield testable hypotheses, provide relationships that can be used for simulations, and explain observed situations. Each chapter includes sections that address central economic and policy questions. The purpose is twofold: to inform readers about the structure, challenges, and policies of agriculture, and to equip them with conceptual tools to tackle these challenges effectively. Complementary courses should emphasize econometric applications that test and refine these theoretical frameworks.

Perhaps I am old-fashioned, but I believe that agricultural and resource economists are called upon to confront emerging problems by combining an understanding of the past with rigorous tools to develop hypotheses and quantitative measures that lead to effective interventions. Building applied theories is the starting point—and it is precisely these theories that we emphasize throughout this book.

The Foundational chapters

Chapters Two through Seven present some of the fundamental issues addressed by agricultural economists—particularly the economics of production, demand, risk, welfare, and political economy. We assume that readers are already familiar with the basic concepts of microeconomics, such as supply and demand and the production function. Building on this foundation, our analysis highlights several unique contributions of this book.

In the case of production (Chapter Two), we emphasize productivity and aggregation. Special attention is given to models that distinguish between the short run and the long run, as well as between micro and macro production relationships. We develop mathematical relationships that allow us to move from micro-level production behavior to macro-level relationships, thus providing a bridge between individual decision-making and aggregate economic performance. The modeling allows us to trace the introduction of new technologies over time, and provides a foundation to assess the evolution of prices and the impact of policies.

Chapter 3 analyzes consumer behavior. It emphasizes household production functions that recognize that market goods are processed in-house to produce the final food and other products that people make, and highlight the importance of product quality. This framework is crucial to analyze development and environmental economics, and provides a better understanding of the economic considerations in designing new products. 

Chapter 4 provides an overview of some of the fundamental models of decision making under risk and uncertainty. They include expected utility models that can be applied to explain resource and land allocation by farms, as well as technology adoption, behavioral models including prospect theory developed by Kahneman and Tversky, the similarity and safety rule models, as well as models concerning decision making under ambiguity. This chapter provides a sound footing under risk and uncertainty, but also some of their main applications in agriculture.

Chapter 5 provides a model of major agricultural policy using a welfare economic framework. For example, it has a discussion analyzing the impact of price support and crop insurance in agriculture, as well as the economics of environmental regulation when agricultural industries are affected by agricultural policies, e.g., deficiency payments. 

Chapter 6 has one element that hasn’t been emphasized in other books on Agricultural Economics and Policy and it is the Political Economy. We introduced models of voting, rent-seeking, and other frameworks, and showed how the distribution of political power and different voting mechanisms may affect the biotechnology, biofuel, and water policy.

Innovation, Adoption, Supply Chain

One of the significant features of modern agriculture is the high rate of innovation, but innovations are diffused relatively slowly, and the introduction of innovations frequently requires a supply chain to market, distribute, and support the introduction of the product. 

Chapter 7 provides an overview of the literature of innovation, including models of induced innovation that are expected to take into account uncertainty consideration, the directed innovation models of Acemoglu, political economic models of allocation of resources to different lines of innovation, as well as the use of various instruments, including patents and other models of intellectual property rights. 

Chapter 8 presents models of adoption and diffusion that combine information from economics and marketing. It emphasizes the heterogeneity of potential adoption and the dynamic processes of learning by doing that affect the diffusion of technology over time. The process of adoption by individuals starts from awareness affected by information, selection that may be explained by risk aversion, and the re-evaluation that may result in the return of a product or discontinuing its use over time. Borrowing from marketing, the chapter suggests that adoption is affected by marketing tools such as advertisements, product demonstrations, and money-back guarantees. It demonstrates how this concept affects individual decision-making frameworks. 

Chapter 9 has an analysis of the agricultural supply chain. It recognizes that the supply of final products is going through a change that includes production of agricultural commodities, processing, and distribution, and it provides tools to understand when supply chains will be vertically integrated, rely on contracts, or consist of sequences of competitive markets. The chapter makes a distinction between the supply chain of innovations (that may start as university research, developed by startups, and commercialized by multinationals) and the supply chain and products. The two are symbiotic, so there is continuous feedback between the innovation and the product supply chain. This chapter provides a good foundation to understand agribusiness behavior, and the book can be targeted toward advanced students in agribusiness.

 

Health and the Environment

Health and resource economics are key elements of agricultural economics, and Chapters 10 through 13, as well as the epilogue, emphasize these issues and provide knowledge that is relevant in resource economics classes as well. 

Chapter 10 addresses issues of health, food security, and food safety. We introduce the basic model of risk assessment to be used for the evaluation of health regulation. These models estimate the probability of death of a member of a population during a period and are affected by probabilities of a contaminating event, exposure, and vulnerability. The government can reduce the likelihood with regulations against leakages, requiring protective clothing, and developing medical services. This framework allows us to understand issues of food safety, where the risk comes from toxic materials, and food security, where the source of risk is a lack of food. In addition to the methodological, the chapter provides an overview of the magnitude of food security and food safety, factors that cause it, and how it can be controlled using the results of empirical studies. 

Chapter 11 is about a crucial topic, the economics of pest and disease control in agriculture. One can view pest and disease control as medical treatment of plants. Agricultural practices, pesticides, and biotechnology can control pests. We introduce methodologies to assess the productivity of different pest treatments, and address challenges like the emergence of resistance, predator/prey problems, etc. We also develop models to determine the health risk of pesticide use and the development of policies that balance risk and benefit. 

Chapter 12 is the economics of land, part of which expands the old von Thunen model for the allocation of land between the urban and rural sectors. The second part presents models of payment for ecosystem services. These models compare alternative strategies to pay farmers for engaging in stewardship. The third part of the chapter develops an overview of some models of land pricing and how they’re modified over time. 

Chapter 13 is about climate change and its impact on agriculture. We present a model of change in land use over time as a result of climate change. It shows that quite frequently, the major problem resulting from climate change is migration from regions that become too hot to continue farming, and there are actually gainers from climate change in areas that may be able to produce more. The second part emphasizes alternative approaches to adaptation to climate change, and the third part is on the mitigation of climate change. The last section of the chapter presents the notion of climate-smart agriculture, where the emphasis is on policies that combine mitigation, adaptation, and increased productivity. 

The epilogue of the book is a discussion of sustainable development, which we define as improving productivity in the present without harming the future. That is followed by measurement of the overall impact of technological change that takes into account not only changes in the GDP, but also changes in natural and human capital and other variables. This is followed by a discussion of the microeconomic analysis of sustainable development, which captures the basic ideas of the book, an emphasis on multidisciplinary, modeling, and measuring production and pollution risk functions, recognizing heterogeneity, emphasizing technologies that increase input use efficiency and pest damage, circularity, and supply chain and life cycle analysis.  

The book also has a mathematical appendix, which develops some of the basic techniques that are used for agricultural economics, including linear programming, optimal control, and others. And then we have a section with six problem sets and selected solutions. 

Concluding comments

This book serves multiple purposes. It can be a textbook for a class in agricultural resource economics and policy. The teacher can pick and choose what sections to emphasize and how to augment them with other readings. Still, we have a vision that agricultural economics and policy include production and environmental issues, political economy, and require conceptual thinking. We didn’t cover all the topics of agricultural policies; for example, we don’t have much about trade. Agricultural economics and policy sequences may include this book as a first class, and it would be complemented by a second class that addresses macro and trade issues. The book can also be used as a reference book for individuals who want to enter the field. Our vision of agricultural economics and policy is that they are growing beyond the farm gate, and therefore, we require an analysis of supply chains and agribusiness. We present a broad view of agricultural and resource economics, not covering all topics, and many issues didn’t get the attention they needed, but this is a start. We hope that the readers will be inspired to study the field further.