AGRICULTURE AND THE STATE: MARKET PROCESSES AND BUREAUCRACY

Abstract

Abstract This paper considers the political economy of agriculture and the implications for economic analysis. In doing so, four topics are addressed. First, problems of private choice are contrasted with those encountered in collective choice. Second, the “market failure” rationale for government redistribution programs in agriculture is contrasted with “rent seeking”. Third, implications of information and incentive problems inherent in collective choice are explored. The subjective nature of cost is shown to be important in economic regulation, including cost of production as a basis for agricultural price supports. Finally, the results of the analysis are related to the work agenda of agricultural economists. The Robbinsian maximization approach is contrasted with radical subjectivism. If information about means and ends is assumed given, the economic problem becomes computational. The challenge is to develop economic analyses that provide more satisfactory explanations of human behavior in a world of uncertainty, where outcomes of plans differ from predictions. Economic efficiency studies traditionally have focused on outcomes of the market process. However, since costs and benefits are subjective, it is argued that efficiency is more appropriately judged by the process through which transactions are carried out than by the results. Insights from public choice theory and neo-Austrian economics are held to be important in improving the institutional framework in public policy analysis.