Department of Agricultural and Resource Economics ARE 241 ARE 241

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1 Department of Agricultural and Resource Economics ARE 241 University of California at Berkeley D. Zilberman (w/ Dave Sunding) Fall, 1999 General ARE 241 AGRICULTURAL AND ENVIRONMENTAL POLICIES: Economics of Production, Technology, Risk, Agriculture, and the Environment Tuesdays and Thursdays 2:00 p.m. to 3:30 p.m. 332 Giannini Hall The class will cover major bodies of literature in agricultural resource economics pertaining to production, risk, agricultural input, water, pesticides, technology adoption, and agricultural and resource policy. Many of the topics are pertinent for resource and development economics, and most of the presentations will rely on work that was done in our Department addressing California agricultural and resource problems. Several lectures will be devoted to student presentations. Each student will be given the opportunity to present a policy brief on current policy issues. Last year s student presentations addressed issues on the Endangered Species Act, the Sugar Program, U. S. Aid Policies, Agricultural Labor and Immigration, and Intellectual Property Rights. Some of the lectures will be quite technical and present widely used models in detail. Other lectures will be more general and overview several important bodies of literature and their relation to policy and historical development. There will be three homework assignments. I. Overview Outline A. Overview of U. S. Agricultural and Resource Policy (2 lectures) B. Industrialization of Agriculture and Its Implication C. Productivity of Agricultural Research and the Land-Grant System II. Economics of Production A. Alternative Approach to Analyzing Production and Productivity B. Putty-Clay Models C. Aggregation from Micro to Macro D. Family Production Function III. Economics of Decision Making Under Uncertainty A. Economic Modeling of Behavior Under Risk B. Measures of Risk Aversion and Their Interpretation

2 C. Measuring Risk: Mean-Preserving Spread and Stochastic Dominance D. Safety Rules E. Uncertainty in Production F. Mean Variance Models G. Estimation of the Risk Aversion Coefficient H. Validity of the EU Model IV. Economics of Technological Change A. Induced Innovation B. Technology Adoption C. Diffusion V. Practical Policy Analysis VI. VII. Student Presentations Economics of Agricultural Resources A. Pesticides B. Water C. Endangered Species D. Purchasing Funds IX. Sustainable Development Reading List I. Overview of U. S. Agricultural and Resource Policy Gardner, Bruce L. "Changing Economic Perspectives on the Farm Problem." Journal of Economic Literature, Vol. XXX (March, 1992), pp Carlson, Gerald A., and David Zilberman. "Emerging Resource Issues in World Agriculture," in Agricultural and Environmental Resource Economics, edited by G. A. Carlson, D. Zilberman, and J. A. Miranowski. New York: Oxford University Press, II. Economics of Production Just, Richard E., David Zilberman, Eithan Hochman, and Zvi Bar-Shira. "Input Allocation in Multicrop Systems." American Journal of Agricultural Economics, Vol. 72, No. 1 (February, 1990), pp Just, Richard E., David Zilberman, and Eithan Hochman. "Estimation of Multicrop Production Functions." American Journal of Agricultural Economics, Vol. 65, No. 4 (November, 1983), pp Lancaster, Kelvin J. "A New Approach to Consumer Theory." Journal of Political Economy, Vol. 74, No. 2 (April, 1966), pp

3 Michael, R. T., and G. S. Becker. "On the New Theory of Consumer Behavior." Swedish Journal of Economics (1973), pp Rosen, Sherwin. "Hedonic Prices and Implicit Markets: Product Differentiation in Pure Competition." Journal of Political Economy, Vol. 82, No. 1 (January, 1974), pp Salter, W. E. G. Productivity and Technological Change, 2d ed. Cambridge: Cambridge University Press, 1960, Chapter 1. Zilberman, David. "The Appropriate Model for the Choice of Agricultural Inputs: Primal, Dual, or Other." An invited paper presented at the Annual Meeting of the American Economics Association, Atlanta, Georgia, December 30, III. Economics of Decision Making Under Uncertainty Arrow, Kenneth J. Essays in the Theory of Risk Bearing. Chicago: Markham Publishing Co., 1971, Chapter 3, pp Buschena, David E., and David Zilberman. "What Do We Know About Decision Making Under Risk and Where Do We Go From Here?" Journal of Agricultural and Resource Economics, Vol. 19, No. 2 (1994), pp Roumasset, J. A., J. M. Boussard, and I. Singh, eds. Risk, Uncertainty and Agricultural Development. New York: Agricultural Development Council, 1973, Chapter 3. Saha, A. "Expo-Power Utility: A 'Flexible' Form for Absolute and Relative Risk Aversion." American Journal of Agricultural Economics, Vol. 75, No. 4 (1993), pp Sandmo, Angmar. "On the Theory of the Competitive Firm Under Price Uncertainty." American Economic Review, Vol. 61, No. 2 (March, 1971), pp IV. Economics of Technological Change Binswanger, H. P. "A Microeconomic Approach to Induced Innovation." Journal, Vol. 84, No. 336 (December, 1974), pp Economic Carlson, Gerald A., David Zilberman, and John A. Miranowski, eds. Agricultural and Environmental Resource Economics. New York: Oxford University Press, 1993, Chapter 5, pp Feder, Gershon, Richard E. Just, and David Zilberman. "Adoption of Agricultural Innovations in Developing Countries: A Survey." Economic Development and Cultural Change, Vol. 32, No. 2 (January, 1985), pp Griliches, Z. "Research Costs and Social Returns: Hybrid Corn and Related Innovations." Journal of Political Economy, Vol. 66, No. 4 (October, 1958), pp

4 Just, Richard E., and David Zilberman. "Stochastic Structure, Farm Size, and Technological Adoption in Developing Agriculture." Oxford Economic Papers, Vol. 35, No. 2 (1983), pp Mansfield, E. "Technical Change and the Rate of Imitation." Econometrica, Vol. 29, No. 4 (October, 1961), pp V. Policy Analysis Rausser, Gordon C. "Political Economic Markets: PESTs and PERTs in Food and Agriculture." American Journal of Agricultural Economics, Vol. 64, No. 5 (December, 1982), pp Rausser, Gordon C. "Predatory Versus Productive Governments: The Case of U.S. Agricultural Policy." Journal of Economic Perspectives, Vol. 6, No. 3 (Summer, 1992), pp Rausser, Gordon C. "Government Agricultural Policy, the United States," in The Encyclopedia of Agricultural Sciences, edited by C. J. Arntzen. San Diego, Calif.: Academic Press, 1994, Vol. 2, pp Rausser, Gordon C., and Harry de Gorter. "The Political Economy of Commodity and Public Good Policies in Agriculture: Implications for Policy Reform." European Review of Agricultural Economics, Vol. 18 (1991), pp Taylor, Robert C., and Richard Howitt. "Aggregate Evaluation Concepts and Models," in Agricultural and Environmental Resource Economics, edited by G. A. Carlson, D. Zilberman, and J. A. Miranowski. New York: Oxford University Press, VI. Student Presentations VII. Economics of Agricultural Resources A. Pesticides Carlson, Gerald A., and Michael E. Wetzstein. "Pesticides and Pest Management," in Agricultural and Environmental Resource Economics, edited by G. A. Carlson, D. Zilberman, and J. A. Miranowski. New York: Oxford University Press, Cropper, Maureen. "The Determinants of Pesticide Regulation: A Statistical Analysis of EPA Decision Making." Journal of Political Economy, Vol. 100, No. 1, (February, 1992), pp Feder, Gershon, and Uri Regev. "Biological Interactions and Environmental Effects in the Economics of Pest Control." Journal of Environmental Economics and Management, Vol. 2 (1975), pp Hueth, Darrell, and Uri Regev. "Optimal Agricultural Pest Management with Increasing Pest Resistance." American Journal of Agricultural Economics, Vol. 56, No. 3 (August, 1974), pp

5 Zilberman, David, Andrew Schmitz, Gary Casterline, Erik Lichtenberg, and Jerome B. Siebert. "The Economics of Pesticide Use and Regulation," Science, Vol. 253 (August 2, 1991), pp B. Water Boggess, William, Ronald Lacewell, and David Zilberman. "Economics of Water Use in Agriculture," in Agricultural and Environmental Resource Economics, edited by G. A. Carlson, D. Zilberman, and J. A. Miranowski. New York: Oxford University Press, Burness, H. S., and J. P. Quirk. "Appropriative Water Rights and the Efficient Allocation of Resources." American Economic Review, Vol. 69 (1979), pp Chakravorty, Ujjayant, Eithan Hochman, and David Zilberman. "Dynamic Considerations in the Design of Drainage Canals," in The Economics and Management of Water and Drainage in Agriculture, edited by Ariel Dinar and David Zilberman. Norwell, Mass.: Kluwer Academic Publishers, Gisser, M. "Groundwater: Focusing on the Real Issue." Journal of Political Economy, Vol. 91, No. 6 (1983), pp Gisser, M., and D. A. Sanchez. "Competition Versus Optimal Control in Groundwater Pumping." Water Resources Research, Vol. 16 (August, 1980), pp Shah, Farhed, and David Zilberman. "Resource Conservation and the Transition from Queuing Rules to Markets: The Case of Surface Water." Working Paper. Department of Agricultural and Resource Economics, University of California, Berkeley. Sunding, David, David Zilberman, Richard Howitt, Ariel Dinar, and Neal MacDougall. "The Costs of Reallocating Water from Agriculture." Department of Agricultural and Resource Economics, University of California, Berkeley, July, Tsur, Yacov. "Managing Drainage Problems in a Conjunctive Ground and Surface Water System," in The Economics and Management of Water and Drainage in Agriculture, edited by A. Dinar and D. Zilberman. Norwell, Mass.: Kluwer Academic Publishers,

6 VIII. Sustainable Development Carlson, Gerald A., and David Zilberman. "Emerging Resource Issues in World Agriculture, " in Agricultural and Environmental Resource Economics, edited by G. A. Carlson, D. Zilberman, and J. A. Miranowski. New York: Oxford University Press, Chavas, Jean-Paul. "On Sustainability and the Economics of Survival." American Journal of Agricultural Economics, Vol. 75, No. 1 (February, 1993), pp Howarth, Richard B., and Richard B. Norgaard. "Intergenerational Resource Rights, Efficiency and Social Optimality." Land Economics, Vol. 66, No. 1 (1990). Ruttan, Vernon W. "Sustainable Growth in Agricultural Production: Poetry, Policy and Science." Staff Paper P Department of Agricultural and Applied Economics, University of Minnesota, Institute of Agriculture, Forestry and Home Economics, November, Solow, Robert. "An Almost Practical Step Toward Sustainability." An Invited Lecture on the Occasion of the Fortieth Anniversary of Resources for the Future, Resources for the Future,