AGEC 640 Tues., August 22, 2017 Introduction to Agricultural Development & Policy Today: Housekeeping Motivation Background readings: Otsuka (2012); WDR (2008) Thursday: The world food and financial crises of 2007-09 Readings: Abbott (2009); Masters (2008)

EMERGENCY PREPAREDNESS – A MESSAGE FROM PURDUE To report an emergency, call 911. To obtain updates regarding an ongoing emergency, sign up for Purdue Alert text messages, view www.purdue.edu/ea. There are nearly 300 Emergency Telephones outdoors across campus and in parking garages that connect directly to the PUPD. If you feel threatened or need help, push the button and you will be connected immediately. If we hear a fire alarm during class we will immediately suspend class, evacuate the building, and proceed outdoors. Do not use the elevator. If we are notified during class of a Shelter in Place requirement for a tornado warning, we will suspend class and shelter in [the basement]. If we are notified during class of a Shelter in Place requirement for a hazardous materials release, or a civil disturbance, including a shooting or other use of weapons, we will suspend class and shelter in the classroom, shutting the door and turning off the lights. Please review the Emergency Preparedness website for additional information. http://www.purdue.edu/ehps/emergency_preparedness/index.html One final piece of Purdue business before we begin: as we start this semester I want to take a few minutes to discuss emergency preparedness. Purdue University is a very safe campus and there is a low probability that a serious incident will occur here. However, just as we receive a safety briefing each time we get on an aircraft, we want to emphasize our emergency procedures for evacuation and shelter in place incidents. Our preparedness will be critical if an unexpected event occurs.   Purdue prepares for natural disasters or human‑caused incidents with the ultimate goal of maintaining a safe and secure campus, but nin the end, emergency preparedness is your personal responsibility. Let’s quickly review the following procedures:

Housekeeping Introductions & handout (questions for the semester ahead) Syllabus & assignments (assignments, exam and paper) Homework #1 due Tues 9/5 (now available) Explore drivers of change, using FAO & WDI data This could be time consuming, so… …don’t procrastinate; start now!

Motivation Why this class? subject method

Motivation Why this class? The subject “agricultural” = production, consumption, markets (the food and fiber system) “policy” to understand and inform policymakers to explain and predict policy choices (= “political economy”) “development” ≡ changes (possibly improvements) over a long time horizon ≈ differences across all of the world’s countries …this is an introduction to the “policy” side of ag econ.

Motivation (continued) The method we’ll do economics use data and models to explain and predict and thereby help inform decision-makers’ choices in 640, it’s a lot of data and a few simple models later classes build more difficult models we’ll do economic analysis of policy choices specifically …

Motivation What do we mean by “policy choices”? For this class, we define policy broadly as: actions of the government, as opposed to individuals may be backed by police power having “no policy” means using only voluntary arrangements. Policy choices of the government include: institutions (written or unwritten rules and organizations) explicit: quality certification through USDA implicit: disaster victims can expect special treatment instruments (a particular action by those institutions) negative restrictions: a regulation, quota or tax positive incentives: an offer to buy, sell or subsidize

Motivation What do we mean by “economic analysis”? By analysis, we mean: quantifiable models, in which policy instruments are represented by a specific variable, & endogenous effects of policy change are predicted, given exogenous conditions fixed by data & model structure. By economic analysis, we mean: all agents are optimizing something, subject to constraints all outcomes are an equilibrium between the agents the combination of optimization and equilibrium gives us: consistent results, that may be interesting; realistic results, that can be taken to the data.

Motivation How useful is economic policy analysis? Focus on quantifiable things: we generally ignore the stated objectives of policy, and many important aspects of government such as legitimacy, democracy and freedom. Use optimization to describe behavior: we generally ignore non-rational behavior (which may be especially important where information is limited -- as in risk perceptions, investments, etc.) Advanced economics often addresses subtle issues involving non-quantifiable and non-rational factors, but it’s much harder to do!

Motivation Some limitations, and strengths, of economics… This is a highly simplified world! “In order to know anything, it is necessary to know everything, but to talk about anything, it is necessary to neglect a great deal.” (Joan Robinson, Economica 1941) It captures something real, i.e. “stylized facts” “I show life as it is, but stylized.” (Marcel Marceau in an NPR interview, 25 March 1998) …although it may seem weird: “Mathematicians are like Frenchmen: whatever you say to them they translate into their own language and all at once it is something completely different.” (Johann Wolfgang von Goethe, Maxims and Reflexions, 1829)

What’s ahead? Thursday: The world food and financial crisis Readings: Abbott’s global overview for OECD Masters’ paper for African Technology Dev. Forum Next week: Introduction to agricultural policy Norton, et al. (2006) textbook chapter Tomich, et al. (1995) selections Montgomery notes on the demographic transition Homework #1 due the following Tuesday (9/5)