Lecture notes: Economics of Development Introduction



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Transition from subsistence to mixed and specialized farming


How do we think about a transformation of the subsistence economy using the notion of capability to function as measure of development (cf. A Sen)? A commonly used way of thinking about the evolution of agrarian systems is in three stages. 1) is subsistence farming widely used in Africa. 2) is mixed or diversified farming partly devoted to production of food for the family, but also producing a significant share for the market as cash crop. 3), finally, is high productivity specialized farming producing only for the market as we find in developed economies.

Are there any strategies for moving from the first stage to the second and the third stages that increase the capability of the population to function and, thus, can be considered as development? Many economists in the field of development economics point to export markets as lever for development. Thus, the vent-for-surplus theory of international trade provides a strategy for moving from subsistence to mixed family farming. However, this theory is based on the assumption that there are resources in the subsistence farming system that are unemployed.

/figure 12.2 about here/

In referring to the Gambia, we may think about “Export” as rice, which is a staple food in this region. At the same time, the nourishment of rice has a lower quality than that of vegetables and fruit. If “Import” consists of fruit and vegetables, then moving from V to C increase the level of development in the sense that the capability for function has increased. Yet, as mentioned before, it is not clear that there are any unemployed land and labor in the Gambia any longer, which makes this strategy less adequate.

There are other difficulties with a move from the first to the second stage, which become obvious when looking at the role women by tradition has played in African subsistence farming. Gender- relations are crucial determinants of many social and cultural institutions in African farming. Thus, the provision of food security for the family is, probably, one of the most important role of women. Therefore, it is not surprising that in an agrarian system where subsistence farming dominates as in Africa, 60 – 80% of agricultural labor is provided by women; to be compared with 40% in Latin America. But when traditional subsistence farming is transformed through commercialization and increased role of cash crops (crops produced entirely for the market), then the role of women in agriculture tend to be reduced. Instead, the amount of resources controlled by men increases. Cash cropping increases at the expense of women’s vegetable gardens.

It should be noted that this transformation may reduce the well-being of the whole family. The responsibility for the provision of the family’s food security still stay with the women, who now have to buy a larger share of nourishments on the market with less money than before. If the increased incomes of the husbands do not compensate for reductions in women-incomes, or the husbands refuse to reallocate income to the women, then the well-being of the whole family decreases.

Of different reasons already mentioned subsistence farming in its present form is not sustainable (shifting cultivation cause deforestation and desertification). Using “the growth diagnostic framework” (p 182) we may say that the environment is the most binding constraint on economic growth. Attention is thus drawn to the need of innovations in the method of shifting cultivation. Accordingly, many policy makers and researchers in the field have focused on increasing agricultural productivity by diffusion of technology such as new seed varieties, use of fertilizers and irrigation. However, we are asking for transformation of an agrarian system occupied by small and usually poor farmers, who usually are risk averse and successful adoption of new technology is uncertain making innovations risky.

Instead of explaining failures of development strategies for new technology adoptions by farmers being irrational and backwards, economists should recognize that farmers usually are rational, given their information and ability to interpret this information. Economist studying new technology adoption have applied frameworks for analyzing decisions at the farm level; usually based on standard theory for profit maximization. For example, maximization of expected profit subject to land and credit availability. Technology is chosen from a mix of traditional and modern technology.

However, as T/S are arguing, the knowledge about various technologies are limited and the transaction costs for obtaining information are high. Another modification of the standard model of new technology adoptions in subsistence farming suggested by the authors take into consideration the facts that farmers are in a poverty trap, implying that maximization of income is not the main decision criterion, but the family’s chances for survival.

Adoption of new technology, for the most part, means that you only have some information about the new technology and the information is complete only after the technology is fully adopted. To introduce new technology, thus, is a learning process where you step by step increase your knowledge about new fertilizers, new seed or livestock varieties. This learning is costly and the costs are often excluded in the standard neoclassical model of economic decisions. This is a severe weakness when the model is applied to increase our understanding of the transition from subsistence to mixed and specialized farming as the transition concerns peasants exposed to real danger of starvation and therefore cannot afford these learning costs.

As many farmers are unable to read and training is limited, learning by doing is common. Cultivation depends on rainfall and the livestock is exposed to various diseases. With regard to endemic breeds of livestock and native crops farmers have learned by own experience and know quite well how the traditional crops function in case of rainfall or draught and with regard to livestock they know the threats of different diseases. If adapting new technology in the shape of new seed varieties and livestock breeds they are less certain about how these varieties and breeds function in the actual climate. For a subsistence farmer , producing close to the minimum consumption level, who make decisions that assure the family’s chances for survival, it is rational not to adapt the new technologies.

T/S analyze the behavior by poor farmers assuming that they are risk-averse

/figure 9.6 about here/

The authors refer to crop yield, while I will illustrate by yield of livestock. Endemic livestock in West Africa are well adapted and productive in tsetse infested areas, they are tolerant to heat and resistant/resilient to certain diseases flourishing in the region. However, despite their multiple adaptive attributes, endemic breeds are often perceived by farmers as inferior to new alien breeds in terms of productivity and marketing. Consequently, their habitats degrade threating the survival of the endemic livestock.

Endemic livestock with lower average yield is associated with technique A and new alien breeds are associated with technique B. Since the variance in yields is larger for B than A, the risk is also higher for B than A and B therefore will be rejected by a poor risk-averse farmer. In doing this choice, the poor pay a self-insurance equal to the difference in average yield.

It should be mentioned, however, to be able to draw the probability distributions in figure 9.6, the farmers need more information than they usually have.


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