Agricultural economics is an applied field of economics concerned with the application of economic theory in optimizing the production and distribution of food and fiber. Agricultural economics began as a branch of economics that dealt with land usage, it focused on maximizing the crop yield while maintaining a good soil ecosystem. Throughout the 20th century the discipline expanded and the current scope of the discipline is much broader. Agricultural economics today includes a variety of applied areas, having considerable overlap with conventional economics. Agricultural economists have made substantial contributions to research in economics, development economics, environmental economics. Agricultural economics influences food policy, agricultural policy, environmental policy. Economics has been defined as the study of resource allocation under scarcity. Agricultural economics, or the application of economic methods to optimizing the decisions made by agricultural producers, grew to prominence around the turn of the 20th century.
The field of agricultural economics can be traced out to works on land economics. Henry Charles Taylor was the greatest contributor with the establishment of the Department of Agricultural Economics at Wisconsin in 1909. Another contributor, 1979 Nobel Economics Prize winner Theodore Schultz, was among the first to examine development economics as a problem related directly to agriculture. Schultz was instrumental in establishing econometrics as a tool for use in analyzing agricultural economics empirically. One scholar summarizes the development of agricultural economics as follows: "Agricultural economics arose in the late 19th century, combined the theory of the firm with marketing and organization theory, developed throughout the 20th century as an empirical branch of general economics; the discipline was linked to empirical applications of mathematical statistics and made early and significant contributions to econometric methods. In the 1960s and afterwards, as agricultural sectors in the OECD countries contracted, agricultural economists were drawn to the development problems of poor countries, to the trade and macroeconomic policy implications of agriculture in rich countries, to a variety of production and environmental and resource problems."Agricultural economists have made many well-known contributions to the economics field with such models as the cobweb model, hedonic regression pricing models, new technology and diffusion models, multifactor productivity and efficiency theory and measurement, the random coefficients regression.
The farm sector is cited as a prime example of the perfect competition economic paradigm. In Asia, agricultural economics was offered first by the University of the Philippines Los Baños Department of Agricultural Economics in 1919. Today, the field of agricultural economics has transformed into a more integrative discipline which covers farm management and production economics, rural finance and institutions, agricultural marketing and prices, agricultural policy and development and nutrition economics, environmental and natural resource economics. Since the 1970s, agricultural economics has focused on seven main topics, according to a scholar in the field: agricultural environment and resources. In the field of environmental economics, agricultural economists have contributed in three main areas: designing incentives to control environmental externalities, estimating the value of non-market benefits from natural resources and environmental amenities, the complex interrelationship between economic activities and environmental consequences.
With regard to natural resources, agricultural economists have developed quantitative tools for improving land management, preventing erosion, managing pests, protecting biodiversity, preventing livestock diseases. While at one time, the field of agricultural economics was focused on farm-level issues, in recent years agricultural economists have studied diverse topics related to the economics of food consumption. In addition to economists' long-standing emphasis on the effects of prices and incomes, researchers in this field have studied how information and quality attributes influence consumer behavior. Agricultural economists have contributed to understanding how households make choices between purchasing food or preparing it at home, how food prices are determined, definitions of poverty thresholds, how consumers respond to price and income changes in a consistent way, survey and experimental tools for understanding consumer preferences. Agricultural economics research has addressed diminishing returns in agricultural production, as well as farmers' costs and supply responses.
Much research has applied economic theory to farm-level decisions. Studies of risk and decision-making under uncertainty have real-world applications to crop insurance policies and to understanding how farmers in developing countries make choices about technology adoption; these topics are important for understanding prospects for producing sufficient food for a growing world population, subject to new resource and environmental challenges such as water scarcity and global climate change. Development economics is broadly concerned with the improvement of living conditions in low-income countries, the improvement of economic performance in low-inc
Education economics or the economics of education is the study of economic issues relating to education, including the demand for education, the financing and provision of education, the comparative efficiency of various educational programs and policies. From early works on the relationship between schooling and labor market outcomes for individuals, the field of the economics of education has grown to cover all areas with linkages to education. Economics distinguishes in addition to physical capital another form of capital, no less critical as a means of production – human capital. With investments in human capital, such as education, three major economic effects can be expected: increased expenses as the accumulation of human capital requires investments just as physical capital does, increased productivity as people gain characteristics that enable them to produce more output and hence return on investment in the form of higher incomes. Investments in human capital entail an investment cost.
In European countries most education expenditure takes the form of government consumption, although some costs are borne by individuals. These investments can be rather costly. EU governments spent between 3% and 8% of GDP on education in 2005, the average being 5%. However, measuring the spending this way alone underestimates the costs because a more subtle form of costs is overlooked: the opportunity cost of forgone wages as students cannot work while they study, it has been estimated that the total costs, including opportunity costs, of education are as much as double the direct costs. Including opportunity costs investments in education can be estimated to have been around 10% of GDP in the EU countries in 2005. In comparison investments in physical capital were 20% of GDP, thus the two are of similar magnitude. Human capital in the form of education shares many characteristics with physical capital. Both require an investment to create and, once created, both have economic value. Physical capital earns a return because people are willing to pay to use a piece of physical capital in work as it allows them to produce more output.
To measure the productive value of physical capital, we can measure how much of a return it commands in the market. In the case of human capital calculating returns is more complicated – after all, we cannot separate education from the person to see how much it rents for. To get around this problem, the returns to human capital are inferred from differences in wages among people with different levels of education. Hall and Jones have calculated from international data that on average that the returns on education are 13.4% per year for first four years of schooling, 10.1% per year for the next four years and 6.8% for each year beyond eight years. Thus someone with 12 years of schooling can be expected to earn, on average, 1.1344 × 1.1014 × 1.0684 = 3.161 times as much as someone with no schooling at all. Economy-wide, the effect of human capital on incomes has been estimated to be rather significant: 65% of wages paid in developed countries is payments to human capital and only 35% to raw labor.
The higher productivity of well-educated workers is one of the factors that explain higher GDPs and, higher incomes in developed countries. A strong correlation between GDP and education is visible among the countries of the world, as is shown by the upper left figure, it is less clear, how much of a high GDP is explained by education. After all, it is possible that rich countries can afford more education. To distinguish the part of GDP explained with education from other causes, Weil has calculated how much one would expect each country’s GDP to be higher based on the data on average schooling; this was based on the above-mentioned calculations of Jones on the returns on education. GDPs predicted by Weil’s calculations can be plotted against actual GDPs, as is done in the figure on the left, demonstrating that the variation in education explains some, but not all, of the variation in GDP; the matter of externalities should be considered. When speaking of externalities one thinks of the negative effects of economic activities that are not included in market prices, such as pollution.
These are negative externalities. However, there are positive externalities – that is, positive effects of which someone can benefit without having to pay for it. Education bears with it major positive externalities: giving one person more education raises not only his or her output but the output of those around him or her. Educated workers can bring new technologies and information to the consideration of others, they can act as an example. The positive externalities of education include the effects of personal networks and the roles educated workers play in them. Positive externalities from human capital are one explanation for why governments are involved in education. If people were left on their own, they would not take into account the full social benefit of education – in other words the rise in the output and wages of others – so the amount they would choose to obtain would be lower than the social optimum. A 2013 study assesses demand- and supply-side factors that affect educational access and attainment in development countries, it shows that addressing demand-side factors, such as geographic gaps between rural and urban areas, higher levels of population growth and child labour, can have greater impact on increasing levels of education in developing countries than supply-side factors, such as constructing additional school facilities, hiring more teachers etc.
The dominant model of th
Public economics is the study of government policy through the lens of economic efficiency and equity. At its most basic level, public economics provides a framework for thinking about whether or not the government should participate in economic markets and to what extent it should do so. In order to do this, microeconomic theory is utilized to assess whether the private market is to provide efficient outcomes in the absence of governmental interference. Inherently, this study involves the analysis of government taxation and expenditures; this subject encompasses a host of topics including market failures and the creation and implementation of government policy. Public economics builds on the theory of welfare economics and is used as a tool to improve social welfare. Broad methods and topics include: the theory and application of public finance analysis and design of public policy distributional effects of taxation and government expenditures analysis of market failure and government failure.
Emphasis is on analytical and scientific methods and normative-ethical analysis, as distinguished from ideology. Examples of topics covered are tax incidence, optimal taxation, the theory of public goods; the Journal of Economic Literature classification codes are one way categorizing the range of economics subjects. There, Public Economics, one of 19 primary classifications, has 8 categories, they are listed below with JEL-code links to corresponding available article-preview links of The New Palgrave Dictionary of Economics Online and with similar footnote links for each respective subcategory if available: JEL: H – Public Economics JEL: H0 – General JEL: H1 – Structure and Scope of Government JEL: H2 – Taxation and Revenue JEL: H3 – Fiscal Policies and Behavior of Economic Agents JEL: H4 – Publicly Provided Goods JEL: H5 – National Government Expenditures and Related Policies JEL: H6 – National Budget and Debt JEL: H7 – State and Local Government. In 1971, Peter A. Diamond and James A. Mirrlees published a seminal paper which showed that when lump-sum taxation is not available, production efficiency is still desirable.
This finding is known as the Diamond–Mirrlees efficiency theorem, it is credited with having modernized Ramsey's analysis by considering the problem of income distribution with the problem of raising revenue. Joseph E. Stiglitz and Partha Dasgupta have criticized this theorem as not being robust on the grounds that production efficiency will not be desirable if certain tax instruments cannot be used. One of the achievements for which the great English economist A. C. Pigou is known, was his work on the divergences between marginal private costs and marginal social costs. In his book, The Economics of Welfare, Pigou describes how these divergences come about:...one person A, in the course of rendering some service, for which payment is made, to a second person B, incidentally renders services or disservices to other persons, of such a sort that payment cannot be extracted from the benefited parties or compensation enforced on behalf of the injured parties. In particular, Pigou is known for his advocacy of what are known as corrective taxes, or Pigouvian taxes: It is plain that divergences between private and social net product of the kinds we have so far been considering cannot, like divergences due to tenancy laws, be mitigated by a modification of the contractual relation between any two contracting parties, because the divergence arises out of a service or disservice to persons other than the contracting parties.
It is, possible for the State, if it so chooses, to remove the divergence in any field by "extraordinary encouragements" or "extraordinary restraints" upon investments in that field. The most obvious forms which these encouragements and restraints may assume are, of course, those of bounties and taxes. Externalities arise when consumption by individuals or production by firms affect the utility or production function of other individuals or firms. Positive externalities are education, public health and others while examples of negative externalities are air pollution, noise pollution, non-vaccination and more; the government can intervene in the market, using an emission tax for example to create a more efficient outcome. Pigou describes as positive externalities, examples such as resources invested in private parks that improve the surrounding air, scientific research from which discoveries of high practical utility grow. Alternatively, he describes negative externalities, such as the factory that destroys a great part of the amenities of neighboring sites.
In 1960, the economist Ronald H. Coase proposed an alternative scheme whereby negative externalities are dealt with through the appropriate assignment of property rights; this result is known as the Coase theorem. Public goods, or collective consumption goods, exhibit two properties. Something is non-rivaled if one person's consumption of it does not deprive another person, a firework display is non-rivaled - since one person watching a firework display does not prevent another person from doing so. Something is non-excludable. Again, since one cannot prevent people from viewing a firework display it is non-excludable. Conceptually, another example of public good is the service, provided by law enforcement organizations, such as sheriffs and police. Cities and towns are served by only one
Service economy can refer to one or both of two recent economic developments: The increased importance of the service sector in industrialized economies. The current list of Fortune 500 companies contains more service companies and fewer manufacturers than in previous decades; the relative importance of service in a product offering. The service economy in developing countries is concentrated in financial services, retail, human services, information technology and education. Products today have a higher service component than in previous decades. In the management literature this is referred to as the servitization of products or a product-service system; every product today has a service component to it. The old dichotomy between product and service has been replaced by a service-product continuum. Many products are being transformed into services. For example, IBM treats its business as a service business. Although it still manufactures computers, it sees the physical goods as a small part of the "business solutions" industry.
They have found that the price elasticity of demand for "business solutions" is much less than for hardware. There has been a corresponding shift to a subscription pricing model. Rather than receiving a single payment for a piece of manufactured equipment, many manufacturers are now receiving a steady stream of revenue for ongoing contracts. Full cost accounting and most accounting reform and monetary reform measures are thought to be impossible to achieve without a good model of the service economy. Since the 1950s, the global economy has undergone a structural transformation. For this change, the American economist Victor R. Fuchs called it “the service economy” in 1968, he believes that the United States has taken the lead in entering the service economy and society in the Western countries. The declaration heralded the arrival of a service economy that began in the United States on a global scale. With the rapid development of information revolution and technology, the service economy has shown new development trends.
This is seen in green economics and more specific theories within it such as Natural Capitalism, as having these benefits: Much easier integration with accounting for nature's services Much easier integration with state services under globalization, e.g. meat inspection is a service, assumed within a product price, but which can vary quite drastically with jurisdiction, with some serious effects. Association of goods movements in commodity markets with negative commodity public bads so that no commodity can be traded without assuming responsibility for damage done by its extraction, shipping and sale - its comprehensive outcome Easier integration with urban ecology and industrial ecology modelling Making it easier to relate to the Experience Economy of actual quality of life decisions made by human beings based on assumptions about service, integrating economics better with marketing theory about brand value e.g. products are purchased for their assumed reliability in some known process.
This assumes that the user's experience with the brand is far more important than its technical characteristicsProduct stewardship or product take-back are words for a specific requirement or measure in which the service of waste disposal is included in the distribution chain of an industrial product and is paid for at time of purchase. That is, paying for the safe and proper disposal when you pay for the product, relying on those who sold it to you to dispose of it; those who advocate it are concerned with the phases of product lifecycle and the comprehensive outcome of the whole production process. It is considered a pre-requisite to a strict service economy interpretation of "commodity" and "product" relationships, it is applied to paint and other goods that become toxic waste if not disposed of properly. It is most familiar as the container deposit charged for a deposit bottle. One pays a fee to buy the bottle, separately from the fee to buy. If one returns the bottle, the fee is returned, the supplier must return the bottle for re-use or recycling.
If not, one has paid the fee, this can pay for landfill or litter control measures that dispose of diapers or a broken bottle. Since the same fee can be collected by anyone finding and returning the bottle, it is common for people to collect these and return them as a means of gaining a small income; this is quite common for instance among homeless people in U. S. cities. Legal requirements vary: the bottle itself may be considered the property of the purchaser of the contents, or, the purchaser may have some obligation to return the bottle to some depot so it can be recycled or re-used. In some countries, such as Germany, law requires attention to the comprehensive outcome of the whole extraction, distribution and waste of a product, holds those profiting from these responsible for any outcome along the way; this is the trend in the UK and EU generally. In the United States, there have been many class action suits that are product stewardship liability - holding companies responsible for things the product does which it was never advertised to do.
Rather than let liability for these problems be taken up by the public sector or be haphazardly assigned one issue at a time to companies via lawsuits, many accounting reform efforts focus on achieving full cost accounting. This is the financial reflection of the comprehensive outcome - noting the gains and losses to all parties involved, not just those investing or purchasing; such moves have made moral purchasing