RISK EVALUATION IN FARM PLANNING* A STATISTICAL APPROACH

Abstract

Economic planning implies decision‐making based on the comparison of alternative courses of action, viewed against a background (in the real world at any rate) of uncertainty and imperfect knowledge. Successful planning is thus heavily dependent on the reliability of prediction which lea & inevitably to the domain of probability theory and its application to planning models. In spite of the considerable attention given to the application of mathematical models in farm management research work in recent times(1) to(9) and (15) there is stilla paucity of applied work with respect to evaluating the nature of risk associated with planning projects at the individual farm level. In addition, very little published data is available on either a regional or production‐type basis that gives a clear understanding of the nature of probability distributions for planning variables. This paper formulates a simple model which can be used in practical planning exercises and also demonstrates that with a new generation of statistically‐processed planning data the application of the classical concepts of probability to routine economic planning is both practicable and worthwhile.