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Concept Version 5
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Evaluating Policies

Agriculture requires a vast support system and a great deal of oversight, addressing industry threats and utilizing policy-based tools.

Learning Objective

  • Evaluate the economics of agriculture policies.


Key Points

    • The political frame of the agriculture market is complex, with a wide range of critical concerns that need to be addressed both domestically and internationally.
    • Concerns to keep in mind revolve around the international markets, bio-security, infrastructure, technology, water, and resource allocation to enable effective agricultural markets.
    • Governments can use import quotas, subsidies, price floors, price ceilings, and aid to control their domestic market supply, demand, and equilibrium price point.
    • Combining the issues above with tools provided, the agricultural business can change dramatically as a result of the concerns and activities of the respective government in a given economy.

Terms

  • infrastructure

    The basic facilities, services, and installations needed for the functioning of a community or society.

  • Biosecurity

    The protection of plants and animals against harm from disease or from human exploitation.


Full Text

The political frame of the agriculture market is hugely complex, with a wide range of critical concerns that need to be addressed both domestically and internationally. Agricultural policy differs from nation to nation, but has a number of key questions and considerations that occur across the board. The purpose of this atom is to outline the various trends in agricultural economic policy, and how these governmental policies can be evaluated for efficacy in their respective markets.

Policy Concerns

Agriculture requires a vast support system and a great deal of oversight, as the consumption of grown foods poses a huge safety threat alongside a critical need for the health and survival of a civilization. Below is a list of core questions to keep in mind when evaluating agricultural policy:

  • Biosecurity: The ability of a country to consistently provide enough food for its citizens is a major concern. Pests and diseases are a significant threat to yield rates and must be closely observed and regulated.
  • International Trading Environment: Global agricultural trade is a complex issue, with quality control, pricing (dumping), and import/export tariffs. The dangers of biosecurity, or lack thereof, in particular are quite stringent.
  • Infrastructure: Transporting goods, irrigation facilities, land utilization, and a variety of other logistics concerns are required by the government to enable effective economic trade (domestically and internationally).
  • Technology: This is a critical driving force in increasing yield and lowering costs in the agriculture business. Enabling technological progress is a critical investment and something governments must provide incentives for.
  • Water:Access to clean, potable water is a basic necessity to which not everyone has access.Effective sewage systems for irrigation and effective water treatment for sanitation are a required input, and must be provided via governmental centralized infrastructure.
  • Resource Access: Ensuring access to land and biodiversity is another important component to a successful agricultural industry. Protection of environmental land and the overall ecosystem is an important policy consideration.

Policy Tools

With the above concerns in mind, it is also useful to understand some of the tools leveraged by governments to enable this industry:

  • Subsidies: The government can utilize subsidies to reduce price points and increase the overall supply within a system . The use of subsidies in developed nations has been a major point of international contention, since they may force developing nations out of the global agriculture market.
  • Price Floors/Ceilings: Price floors provide a minimum price point for a given product while price ceilings create a maximum price point. These are used to ensure appropriate pricing in a given industry (see ), and are often used in agriculture to control price points.
  • Import Quotas: Policy makers often implement quotas in agriculture to retain more control over prices and protect domestic incumbents. Quotas, like other forms of trade protection, benefit the local industry.
  • Aid: When aggregate supply is too high in a home country or there is a crisis in another, governments can provide their surplus to nations in need of food. This is both a way to provide utilitarian value while reducing aggregate supply.

Combining the issues above with tools provided, the agricultural business can change dramatically as a result of the concerns and activities of the respective government in a given economy. This is useful in controlling food prices, reducing waste, enabling efficiency and avoiding biosecurity issues.

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