“…an applied social science that deals with how producers, consumers and societies use scarce resources in the production, processing, marketing and.

“…an applied social science that deals with how producers, consumers and societies use scarce resources in the production, processing, marketing and consumption of food and fiber products”.

Here development means what happens over time change, evolution, growth it may be an improvement… or not.

We focus on what happens to the whole country to the entire agricultural sector, given overall economic development:

higher income, production and consumption improved health and life expectancy and many other changes…

A key change over time is that people get richer, so when we talk of “more” or “less” developed, what we usually mean is “richer” or “poorer”.

We will usually be descriptive, asking:›what happens over time,

as countries get richer?›what differs across countries

between rich & poor? And sometimes we will be prescriptive, asking

› what should be done,

to help people get what they want?

Development involves accumulation, that economists call “capital”:› physical capital (houses, roads, machines)› human capital (education, health)› institutional capital (“rules of the game”)

The accumulation of capital makes it more abundant and cheaper.

But accumulation doesn’t happen automatically. To build up capital, people must save and invest from one

year to the next.

Development also involves innovation, which economists call “technical change”:

› new physical things (seeds, chemicals, etc.)

› new ideas (crop rotations, etc.)› new institutions (futures markets, etc.)

Innovation makes it possible to produce more of what people want, from the resources they have.

But innovation doesn’t happen automatically. To innovate, people must be able to change what

they do.

Source: GW Norton and J Alwang, Introduction to Economics of Agricultural Development. New York: McGraw Hill, 1993.

Source: GW Norton and J Alwang, Introduction to Economics of Agricultural Development. New York: McGraw Hill, 1993.

Source: GW Norton and J Alwang, Introduction to Economics of Agricultural Development. New York: McGraw Hill, 1993.

0

50.000

100.000

150.000

200.000

250.000

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

GNP (Millions, $) GNP in Agriculture (Millions, $)

0

20.000

40.000

60.000

80.000

100.000

120.000

140.000

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

GNP (Billions, TL) AGRICULTURE (Billions, TL) INDUSTRY (Billions, TL) SERVICES (Billions, TL)

0

10

20

30

40

50

60

1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002

Share of Agriculture (%) Share of Industry (%) Share of Services (%)

YEARS SHARE OF AGRICULTURE (%) SHARE OF INDUSTRY (%) SHARE OF SERVICES (%)

1980 24,2 20,5 55,4

1981 22,6 21,5 55,9

1982 22,7 21,9 55,4

1983 21,6 22,4 56

1984 20,3 23,1 56,6

1985 19,4 23,6 57

1986 18,8 25 56,2

1987 17,2 24,9 57,9

1988 18,3 25,1 56,7

1989 16,6 25,9 57,5

1990 16,3 25,9 57,9

1991 16,1 26,5 57,4

1992 15,8 26,5 57,8

1993 14,5 26,5 59

1994 15,3 26,6 58,1

1995 14,4 27,7 57,9

1996 14 27,7 58,3

1997 12,7 28,1 59,2

1998 13,4 27,6 59

1999 13,4 27,9 58,7

2000 13,1 27,8 59

2001 13,7 28,5 57,8

2002 13,7 29,3 56,9

2003 12,6 29,9 57,5

0

10.000.000

20.000.000

30.000.000

40.000.000

50.000.000

60.000.000

70.000.000

1927

1935

1940

1945

1950

1955

1960

1965

1970

1975

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

POPULATION (TOTAL) POPULATION (CITY) POPULATION (VILLAGE)

0

10

20

30

40

50

60

70

80

90

100

1927 1940 1950 1960 1970 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000

VILLAGE POPULATION / TOTAL POPULATION (%)

VILLAGE POPULATION / TOTAL POPULATION (%)

0

5.000

10.000

15.000

20.000

25.000

1923 1930 1940 1950 1960 1970 1980 1985 1990 1995 1996 1997 1998 1999 2000 2001 2002 2003

EMPLOYMENT (x1000) EMPLOYMENT IN AGRICULTURE (x1000)

0

10

20

30

40

50

60

70

80

90

100

1923 1930 1940 1950 1960 1970 1980 1985 1990 1995 1996 1997 1998 1999 2000 2001 2002 2003

SHARE OF AGRICULTURE IN EMPLOYMENT (%)

SHARE OF AGRICULTURE IN EMPLOYMENT (%)

0

5.000

10.000

15.000

20.000

25.000

1988

1989

1990

1991

1992

1993

1994

1994

1995

1996

1997

1998

1998

1999

1999

2000

2001

(1)

LABOR IN AGRICULTURE (x1000) LABOR IN INDUSTRY (x1000) LABOR IN SERVICES (x1000) TOTAL (x1000)

Function 1: Provide food for humankindMalthus’ theory of the capacity of world

to feed humankind: Geometric increase in human population vs. arithmetic increase in food poduction.

Function 2: Provide raw material for the industry

Function 3: Provide opportunity for rural lanscape

Function 4: Source for capital accumulation for development

Function 5: Source of labor for the industry

Inelastic income elasticity of demand for staple foods: as per capita income rises, declining proportion of household expenditure is devoted to food.

By Engel's law, as per-capita income rises, the proportion of income spent on food declines relative to other products.

As household demand for food declines in relation to other products, relative prices of foods decline, other things equal.

This in turn reduces returns to factors used in agricultural production, causing a net migration of labor and capital to other sectors.

Share of agriculturen declines over the economic development process..

Almost always, agriculture declines › In employment share› In share of GDP or GNP (national income)› In share of consumer expenditure

Do farmers get poorer? Are there fewer farmers?

Policy is guiding principle leading to a course of action that is pursued by the government.

Policies and programs Major forces for policy change:

› Instability› Globalization› Technology› Food safety› Environmeny› Industrialization of agriculture› Politics› Unforseen events

A subset of public policy directed primarily but not exclusively at the farm and agribusiness sectors of society.

1. AGRICULTURAL INPUT MARKETS USE OF LAND AND OTHER NATURAL RESOURCES AGRICULTURAL CREDIT AND FINANCE LABOR INDUSTRIAL PRODUCTS 2. AGRICULTURAL OUTPUT MARKETS PRODUCTION CONSUMPTION MARKETING INTERNATIONAL TRADE

Read: Economic Importance ofAgriculture for Poverty ReductionAnswer the following questions:1.What is the role of agriculture in

poverty reduction?2.What is the major research

question in the paper?3.What is the conclusion of the

paper?