New Approaches in Agricultural Policy Research: Discussion

Abstract

For welfare economics the raison d'etre, as the present authors seem to believe, is policy evaluation. Hallam has provided a very good summary of approaches to measuring welfare change for individual consumers and firms in a competitive market environment, with mention of the intractability of the aggregation problem at the present point in time. Yet, this discussion centers on the competitive market environment and not the weaknesses which create a need for agricultural policy. This is where the excellent paper by Hallam, in my opinion, has erred. Where has the progress been made in agricultural policy research? The forefront is in the conceptual arena. We now know better what conceptual welfare measures we are identifying, but we are often using the same tools and procedures which were used a decade ago. The exception to this statement comes in nonmarket valuation research, in which attempts are made to provide value estimates for the public goods and externalities which often create the need for agricultural policy. In this area, two things have happened. First, a few techniques for valuation, most notably the travel cost and contingent valuation methods, have had a much firmer foundation laid by the new welfare economics. This has aided their acceptance as legitimate economic tools. Second, the theoretical advances discussed by Hallam have led to the development of new approaches to the valuation of public goods and externalities, particularly the hedonic price and household production methods. It would not be possible to use either approach without the theoretical advances of the past few decades. These are major contributions to agricultural policy research of developments in welfare change measurement.