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Ravinder raju ambati

Indian Council of Medical Research

True improving the productivity of agril brings prosperity to people in general and small farms particular but returns to farmers will be reduced due to price fall or it doesnt give price advantaged prosperity to average farming community

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Ravinder raju ambati

Indian Council of Medical Research

The real earnings were improved for cotton farmers when prices or at above certain level . Lower productivity witrh very low yields are not going to improve returns to Indian cotton farmers. Small farmers improved productivity with improved marketable surplus for food grains may not be much advantageous when over all higher productivity lead depressed prices like rice/ wheat.. All these vary geopolitically, therefore one can not generalise.

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Bill R. Miller

University of Georgia

Ravinder==Yes, concentrating on productivity is not enough. Don't assume competitive markets. in a developing country I suspect the existing market structure cannot adequately support new productivity. Start with the market. See millerbillr.com

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Hector Maletta

University of the Pacific (Peru)

Bill R: Productivity is actually increasing faster in developing than developed countries. The reason is that the latter are already (mostly) at the technological frontier, and must wait for further scientific advancements to occur and to be translated into inputs in the market, while developing countries can improve productivity not only that way but also through catching up by adopting existing technology that is not yet used in their area. More than 90% of all agricultural growth is due to higher productivity per hectare and per person employed (somewhat less, but still the vast majority, in Asia --due to increases in low-productivity labor employment); about one third of that higher productivity per hectare and per employed person is due to more capital per hectare, and the rest is increases in total factor productivity. The latter in turn is more or less equally divided into technical progress proper, and efficiency gains (the latter being jargon for catching up).

Of course, nothing of this would be possible without accompanying developments in infrastructure and markets. Both go together, and investments or improvements in these off-farm components are as important as the on-farm variety,

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1 Recommendation

Bill R. Miller

University of Georgia

Solving the Armenian food crisis depended on developing a sustainable production-marketing system. Simply providing humanitarian production loans to a village failed completely as a development initiative, (See millerbillrl.com Chapter 5) but when a village was provided a full scale market development approach including advise on technology, cooperative management, education, and credit clubs, the result was a growth in number of milk marketing cooperatives from one in 1999 to more than 30 in 2011 that produced an estimated 5,000 tons of milk by more than 10,000 small farms. (See millerbillr Chapter 6).

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Hector Maletta

University of the Pacific (Peru)

I concur with the conclusions drawn by Bill from the Armenian case.

In Bolivia, for instance, the government imposed an export ban on large commercial farmers, and gave production support to small farmers. Both measures backfired. Large farmers sharply reduced area planted, creating a fall in production at the next season; and small farmers failed completely to increase production in spite of the huge amount of aid received. The result was a huge increase in imports the following year, and domestic prices increased more sharply than import prices.

Inability of small farmers to respond quickly to production incentives were probably due to a number of factors, but inadequate marketing systems was surely one.

In neighboring Peru, instead, the government did nothing of the sort. No export bans, no special subsidies, no price caps. They were at the time entering a free trade agreement with the US, that was enforced since 2008, and this mandated trade liberalization and a number of other such measures to be taken in 2007 and afterwards. A tax on food imports was eliminated, as mandated by the preexisting trade liberalization policy. The very small subsidy that millers were receiving since years before continued on its pattern of gradual reduction (mandated by trade liberalization policies and agreements). The country has a floating exchange rate, that appreciated gradually during those years, and this reduced the impact of import price increases. It also of course reduced export revenues in domestic currency, but exports (including agricultural exports, mostly non cereal) are soaring anyway as the country becomes more competitive and grows strongly. As regards food, domestic prices in Peru (contrary to Bolivia) rose by LESS than food import prices, and domestic production consistently increased (even in products that were supposed to be "threatened" by the US-Peru trade agreement such as maize, wheat, rice, vegetable oil, sugar and others) except that some productions were somewhat affected by climatic events at certain periods (El Niño-induced drought and floods in 2010) and some stagnation in international demand affected some commodity export volume and prices following the 2008 financial crisis.

Whereas some initial measurements of nutritional status of vulnerable populations in Bolivia appear to have worsened between 2005 and 2009, the opposite happened in Peru with surveys at approximately the same dates; but this evidence is still very preliminary: improvement or worsening may be due to a variety of causes, not just prices or related factors; but these preliminary pieces of evidence do suggest a lot.

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Bill R. Miller

University of Georgia

Hector This is a very interesting case study of free trade. I hope you publish the fully documented case other than in notes here on Researchgate. And PS: Case studies are important.

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Hector Maletta

University of the Pacific (Peru)

Thanks, Bill. Paper is in preparation, but it is just one of my current projects. Hope to finish soon. The case study is not exactly in free trade only, but on the whole array of policies and institutional arrangements through which countries enter the world economy. It expresses itself in trade but also in domestic growth, savings, investment (foreign and domestic), technological progress, governance, and so on.

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Charles Kirchofer

University of Massachusetts Lowell

This is a false dichotomy. I agree that you need to re-work your question and come back. Answering this in its current form is not possible.

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Bill R. Miller

University of Georgia

Charles, I have shown that when marketing, technical advice, and education are added to humanitarian loans then prosperity does result. There is no dichotomy. I am searching for additional data to supplement my case study and allow an appropriate econometric analysis of an important problem. We must not continue to pour trillions of dollars into humanitarian aid that is inadequate for needed development.

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Bill R. Miller

University of Georgia

Greenwell, you are so right; thus, the appropriate approach is to first discover the market. Once a market is discovered and appropriate infrastructure is in place, you then move to develope production capacity that will sustain the market. We did it in Armenia with leasing and strategic loans for market infrastructure followed by credit clubs (microcredit) for farmers. This approach can be replicated. See miller bills.com

Humanitarian loans that only increases production are to be admired, but are grossly inefficient for needed development. This issue needs more documentationk

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Alemseged gerezgiher Hailu

Addis Ababa University

what about the market side of productivity? I believe that access to lucrative markets for smallholders is the best for improved livelihoods in rural areas. identifying factors that affect access to markets and designing strategies to minimize the negative effects will be highly demanded in the era of intensive competition and globalization.

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Nisha Malhotra

UBC, Faculty of Medicine

Depends on so many factors.

The answer surely isn't yes

That's like saying no one other than the farmers benefit from India's past Green Revolution.

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Ajao Olajide

Ladoke Akintola University of Technology

It depends on so many factors and which economy one is dealing with. For instance in Africa, Agriculture has for many years been the backbone of the economy and the potential sources of economic growth despite all its weaknesses. , agricultural sector holds the key to economic growth as well as addressing the problem of poverty and income inequality in the continent because the population is largely agrarian. It is widely acknowledged in literature that agricultural productivity growth is required for a meaningful industrialization to take place. For an African its more than an humanitarian aid

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1 Recommendation

Bill R. Miller

University of Georgia

Ajao Olajice--Your general hypothesis is absolutely correct in saying the agricultural sector holds the key to economic growth as well as addressing the problem of poverty and income equality. Unfortunately adding new varieties of crops and more fertilizer on small farms will not get the job done. There must be infrastructure for getting products from the farm gate to the consumer table. Their is no market magic that makes this happen. Any development project for agriculture on small farms is doomed to failure, except for humanitarian aid, unless market mechanisms are not simultaneously addressed. We demonstrated how to do it in Armenia. See millerbillr.com

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THOMAS H.W. Ziesemer

Maastricht University

Higher productivity allows doing the same work with less people. Some can then work elsewhere (Ajao's point) or go to school before. All this indeed only if countereffects don't dominate. 0.5 % per worker productivity growth in Africa mentioned above is meagre given the higher population growth and also in view of the 2.5% achieved by India and China.

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Evodia Silva-Rivera

Universidad Veracruzana

This is not a well formulated question, as agriculture continues to be the basis of our societies; and whether it is for commerce or for self subsistence, you cannot label agriculture as an activity that will ever come to a point of having to be maintained for humanitarian reasons.

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2 Recommendations

Hector Maletta

University of the Pacific (Peru)

I agree with Evodia Silva that the original question was very poorly formulated.

One comment on Thomas Ziesemer's remark: " 0.5 % per worker productivity growth in Africa mentioned above is meagre given the higher population growth".

This refer to a previous exchange in which there is probably some confusion between production and productivity. Population growth is to be compared with production growth; productivity growth, instead, is the extra growth of production over and above the growth in the employed labour force, in this case, labour force in the agricultural sector.

In fact, both agricultural production and agricultural productivity in Africa are growing. Production is certaInly growing faster than total population, hence increasing agricultural production per capita, and is also increasing faster than agricultural employment, thus increasing agricultural productivity per employed farm worker. Productivity growth is larger than production growth per capita, because rural population (and agricultural employment) is a diminishing portion of total population or the total labour force, due to rural-urban migration and international out-migration.

Between 2000 and 2010, and for the entire continent of Africa, net agricultural output at constant prices grew at 3.47% per year, just a whisker below the 3.51% achieved in Asia. The African rate in the 2000s was higher than the 3.04% per year in the preceding decade, and faster than at any previous decade since 1960. Agricultural production per agricultural worker, in turn, increased at an annual rate of 1.2% in the 2000s. This is faster than the annual 1.0% in 1990-2000, and this in turn was faster than the really meagre 0.09% growth in farm labor productivity that obtained between 1970 and 1990 (which included an actual decline in 1970-80 and some recovery in 1980-90). These figures are computed from data in the FAOSTAT system on net value of agricultural production at constant prices, and total agricultural employment.

A large share of the growth in agricultural productivity, however, is concentrated on the more modern sections of the African agricultural sector, and especially in some countries. Many subsistence peasants (and most of them in many countries) still use traditional methods of production, with very low productivity; some increased productivity also accrues to them (e.g. some better seeds), but these effects are generally minor. That is precisely the reason why many of them escape the misery of the countryside to seek better lives in towns and abroad.

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Bill R. Miller

University of Georgia

Evodia Silva is on target; agriculture can not and will not be sustained as a humanitarian effort. But millions on development dollars continue to be spent on the old missionary concept of "teach a man to fish" etc. etc. Unfortunately, teaching a farmer to be productive is not enough. Alemsegd Hailu and I agree that there is more to the story. See his comment above. Hector Mallte paints a rosy picture for Africa, I hope he is right. But no matter, agricultural productivity has never been shown to be a sufficient condition for economic development; necessary yes, but one can never escape market development as a requirement for development.

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Hector Maletta

University of the Pacific (Peru)

Bill R., my picture of Africa is not "rosy". Even if they are growing faster, they are still poor. If you earn $100 a month, and grow for ten years at 3.4% per year, you'll be still poor at the end. But you are not worsening, you are improving.

In economics, nothing is valued intrinsically, but by comparison with an alternative. One is not "well" but "better than" or "worse than".

Old joke: One economist greets another: "Hi! How's your wife?" The other economist answers: "Compared to whom?" He's no way of evaluating anything in absolute terms

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Hector Maletta

University of the Pacific (Peru)

Totally agree with the final remarks of Bill:

" agricultural productivity has never been shown to be a sufficient condition for economic development; necessary yes, but one can never escape market development as a requirement for development."

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Evodia Silva-Rivera

Universidad Veracruzana

There are serious issues posing fundamental threats to the planet wellbeing that will have to be taken in consideration sooner than we can imagine. Perhaps in the future there will not necessarily be 'the farmer', 'the poor farmer', and the urban consumer; but a fusion of both. And I say this especially in the light of the environmental crises caused by deforestation, GMOs and agrochemical use and abuse, and biodiversity loss, among others.

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Hector Maletta

University of the Pacific (Peru)

Evodia, in capitalist countries the "fusion" already exists, in several forms. The most important one, the one with higher impact on production and productivity, is corporate farming. Company owners are shareholders, living anywhere. The farms may be owned or rented, crops are sown, harvested and sold, and cattle is bought, fattened and sold, with the help of a few farm hands and machinery operators. This is how, for instance, 2% of the active population of the US (employed in agriculture) produce food for about 500 million people, or more (depending on how you count), far more anyway than the total population of the US. This is not only a large phenomenon: it is also expanding to other areas of the world, in many forms, including land grabbing and other undesirable ways, as well as though the normal operation of markets. Bad or good, it is happening anyway.

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Bill R. Miller

University of Georgia

There is nothing intrinsically wrong with the corporate form of ownership. Historically, large corporations have not been interested in farming because the combination of yield and price risk is such that the profit or loss risks are not merely additive they are multiplicative in nature. I have not seen recent data on corporate farming, but I am not aware of rapid growth. Contract farming has long been on the increase, but this is not all together tied by ownership, There is no doubt, however, that the rise in size of farming units (and yes in the U.S.) is tied more to market failure for small holder farms than it is tied to concepts of economies to size.(whether corporate or not)

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Hector Maletta

University of the Pacific (Peru)

"Contract farming has long been on the increase, but this is not all together tied by ownership", correctly notes Bill R. Indeed, owning the land is not necessary for farming to occur. Agrarian capitalism in Britain started and flourished through rent-paying tenants in the lands of the nobility.

But this possibility of separation between ownership and corporate organization of production is not limited to contract farming. Nowadays, in some parts of the world (notably Argentina, Brazil, parts of the US) there are several ways of organizing production on a large scale, not necessarily involving the purchase of all the land, and even less the purchase of large tracts of contiguous land.

In the case of Argentina, for instance, a number of big corporate conglomerates own each a large number of farms of various sizes, and rent other pieces of land on a short term basis to carry out production (chiefly growing short-cycle crops, or fattening cattle); I directly know of one or two, for instance, owning about 200 medium and large farms or ranches, and annually renting probably just as many, to carry out a number of (coordinated) agricultural activities. These agricultural activities are often combined, under the same corporate umbrella, with a number of ancillary activities, owned or contracted by the corporate group, such as owning and renting machinery, offering grain storage space, supplying inputs, wholesale trading, exporting, and more. Some of the groups also manage investment funds, where people can put money to share in the corporation's investments (say, to purchase cattle and fatten it along one year). Thus these conglomerates may be combining agriculture, industry, trade, finance and more. Very often the conglomerate supplies itself with some inputs or services (which it may also sell to others), while purchasing or renting or taking on lease other goods or services they do not wish to produce or own themselves.

What activities a firm carries out internally, and what activities it procures in the market, is an interesting question in economics. R. Coase showed many years ago, and later got a Nobel prize for it, that those decisions rest mainly on transaction costs, and expected risks associated with those transaction costs. In many cases, each activity has an "optimum size" (actually an optimum size range) that is best not to deviate much from, in order to be done efficiently. Also, each company is best at doing certain things and mediocre in others. These are often reasons to absorb or not to absorb certain activities or assets within a company.

The relative weight of market relations (as distinct from hierarchical command relations) is mostly determined by these factors, at least within the private sector. Each economic activity needs to be coordinated with many other activities. Activities carried out inside the firm are coordinated by command; activities procured outside are coordinated through market mechanisms (chiefly prices). The flexibility of the capitalist organization of the economy enables firms actually to decide which activities are coordinated either way.

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Bill R. Miller

University of Georgia

Thank you Hector, I believe you have presented some interesting evidence to support my general hypothesis that what happens off the farm is more important in determining farm size than what happens on the farm. As for R. Coase, apparently he neglects the concepts of technical and price efficiency which are the final arbiters of economic efficiency (and are no doubt the determinants of transaction costs.) Thus, I still hold as true the concept that development projects that are targeted only to production agriculture on small holder farms will provide only humanitarian relief if there is no marketing component in the project.

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Hector Maletta

University of the Pacific (Peru)

Bill: Coase neglected nothing of the sort. He just revolutionized economic science, with a seminal article in the late 1930s and then more some decades later, on the economic role of institutions and the importance of transaction costs. These elements have been now incorporated into standard economic theory, along with other recent innovations such as bounded rationality, Nash equilibria in non cooperative games, and more.

I fully agree with your final sentence about the importance of marketing components in agricultural development projects.

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Bill R. Miller

University of Georgia

Hector, there is no doubt about the importance of institutions; they are invaluable for development of human capital. I put this foremost in any recommendation for development work. See my work with USDA and Texsas A&M on developing the Agribusiness Teaching Center in Armenia. Search on ATC Armenia.

Likewise, transaction costs and economies there of are at the heart of economic efficiency.in marketing which, again, to be redundant, is necessary for development of small holder farms. As for the recent innovations you mention I have found no practical use for them in my work in applied economics.

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Hector Maletta

University of the Pacific (Peru)

Bill, both Coase's ideas as well as Nash's and others I mentioned have found a lot of practical applications. A host of practical interventions in developing countries nowadays are based on the purpose of ensuring good governance and solid institutions, not for their own sake only but to provide grounds for better economic development. The best economic models are no longer based on a notion of pure abstract rationality but on the bounded kind of rationality that mortals can achieve in real time with imperfect information; even such mundane affairs as the rules for public competitive bids are now molded on the work of Nash and his good use of the theory of games. It is not here the place to develop all these ideas, but rest assured that their practical import is quite extensive.

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1 Recommendation

Marcus Sangster

Nottingham Trent University

In the UK in forestry we have seen productivity increase by about 3% annually for several decades. But prices in real terms have fallen. What is happening is that the producers have little pricing power as they are small and diverse compared to the buyers. So the buyers capture all the productivity gains. That's in a weatlhty Western country. Overseas I imagine the sellers are lucky to get any benefit at all from productivity gains. I can provide data on the UK is you are interested.

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Bill R. Miller

University of Georgia

Marcus: I am interested. Any case of market failure for small holder farms needs to be highlighted. In the U.S. it appears common for pulpwood mills to own forests harvested only when it appears there is upward pressure on prices at the farm woodlot . Size matters in the market. In development work it is wise to "go small" in market development. The only time I agreed to "go large" I had regrets. See the end of Chapter 13 (MILLERBILLR.COM) for my results with tomato processing.

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THOMAS H.W. Ziesemer

Maastricht University

It has helped China avoiding food imports. Otherwise we would have had higher food prices.

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Bill R. Miller

University of Georgia

I would llke to know more about small landholder farms in China. There is little doubt that import substitution (local production for imported food) is the starting point for developing markets for production from small landholders. My question is: Who takes the goods away from the farm gate? Is it the State? Can the State be efficient? This marketiing model worked for 70 years in the former Soviet Union and then fell to bankruptcy. See Chapter 22 of millerbillr.com

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Jonathan Feldman

Stockholm University

You can't expect productivity to lead to prosperity without clarifying the system of distribution, taxation and the relative power of various shareholders. Otherwise, you get trickle down which might hold for just a limited time period.

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Hector Maletta

University of the Pacific (Peru)

Jonathan, yours is a declaration of principle, but in my humble opinion has little practical import. Of course, if all the fruits of increased productivity attained in your farm end up elsewhere, you will have no benefit, that is obvious to the point of tautology. But distribution is not something that happens arbitrarily, or just according to government policy or relative power: distribution is a result of the economic organization of production.

For instance, if you have a minuscule subsistence plot and no capital, you will obtain a minuscule income, not enough even tu survive (forcing you to seek additional income elsewhere). E.g., one hectare of traditional maize in Africa, say in Mozambique or Senegal, may yield, say, 2 tonnes of maize, worth a gross value of about 300 USD per year, minus costs, a net income of probably no more than $250, or similar amounts for other subsistence crops. If for some reason your productivity doubles (quite difficult to achieve for many), your income would still be low (500 USD per year). And increasing productivity normally involves investment in physical capital, acquiring superior skills, and accessing markets. It is extremely difficult that you could achieve all that if you have only your plot, no skills, no capital, and little access to markets, no matter how much relative power you may have.

That is the reason why only very few subsistence peasants evolve to be successful family farmers that rise above subsistence by improving their original plot of land. The usual way out of their condition is not usually that, but livelihood diversification in the same rural area (commerce, wage jobs, etc.) and migration to towns or to other countries. That is also the reason why the percentage of subsistence peasants in total employment, or their share of total agricultural production, is rapidly declining all over the world.

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2 Recommendations

Bill R. Miller

University of Georgia

Thank you Jonathan Feldman. I believe you are exactly right, but Hector I respectfully disagree with you that Jonathan's statement has no practical import. I think it has tremendous practical import if you accept my hypothesis that providing technical assistance in production to small landholders without simultaneously providing marketing assistance and infrastructire will result in humanitarian aid and little else. See Chapters 5 an 6 of millerbillr.com According to World Bank economists, (Moyo in particular) ) about 60 billion dollars have been spent on technical aid to agriculture with no improvement in the level of living among those receiving aid.

PS. I believe Hector's data is in full support of my hypothesis. He adds a post script that many small landholders find off farm employment. Yes, they do, but this usually means they had no alternative.

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Anjan Chakrabarti

University of North Bengal

Sir Maletta, you have rightly directed our attention towards subsistence peasants. It has observed in many states in India where population pressure is high on agriculture, large percentage (more than 60 per cent in many cases) are surviving on very small plot (less than a hectare). Rising input costs are making their farming difficult and lack of non -farm employment are either forcing them to remain jobless or move towards urban informal sector (Todaro model operates) or becoming wage laborers. Indebtedness adding distress. Gain in productivity is closely linked with autonomous and induced technological changes but access to technology is gradually becoming difficult for these small and marginal peasants. as a result not only the agricultural productivity would suffer, a vast percentage of agrarian community is equally suffering. Therefore, state must play proactive role to redistribute the existing resources to make Pareto's second theorem valid.

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Hector Maletta

University of the Pacific (Peru)

Anjan, I agree with you except on the following:

1. Neither Todaro's model nor Pareto's theorem can "operate" or be made valid, or have any effect. Reality does not conform to theories. Theories, rather, are attempts to reflect reality (not always successfully).

2. Redistribution of resources by the State has been attempted in the past, with not very encouraging results.

3. Spare me the "Sir", please: I'm no baronet.

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1 Recommendation

Molly Elizabeth Brown

University of Maryland, College Park

Bill, don't you think that the problem is not in efforts to increase agricultural production but the way in which it is done? The program of 'technical aid' and the $60 billion dollars was mostly spent in the United States and other developed countries on wages for US experts, corporate profits and support items and not actually on the farm itself. In addition, increasing production on farms without changing the rest of the distribution system does, in fact, do little to increase living standards, but it may increase food consumption in the area where it occurs. That is not without value.

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1 Recommendation

Anjan Chakrabarti

University of North Bengal

Dear Professor Maletta, I accepted your erudite view that theory, more than often, does not corroborate the reality, possibly situation changed when economteric model-building advocated vigorously and as a consequence, regional heterogeneity, implications of many non-economic factors , institutions, history rather become obscure. Econometrics became guiding principle instead of being viewed as statistical tool and research problems are more and more become homogeneous, and we are increasingly looking at the world from a single window. Coming to the to the point of re-distributive policy whether to be followed or not to be followed by the state, I would like cite the example of West Bengal, one of the Indian states, largely agrarian in nature. Here, offering quasi-property rights and distributing ceiling surplus land (kind of re-distributive policy) to the sharecroppers as well as land-less labourers in late-seventies brought substantial improvement in agricultural productivity and state's economy also benefited. But subsequent failure of the state to make commensurate public investment in agriculture, withdrawal of the state from input distribution partly or fully and leaving the price determination solely in the hand of market, fueled the escalation of cost to the extent that small and marginal farmers find agriculture a non remunerative venture. Market (with all its necessary distortions)did not expand to the extent to provide economic space outside agriculture. The end result has already been discussed by you. Therefore, whether we are reaching at imaginary optimal or sub-optimal level as conceived by Pareto may be debatable or ignored but role of state in conceiving re-distributive policy could not be ignored per se. Many would argue that rise in food prices should help farmers to reap benefit but they have already ripped off from producing surplus.

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Hector Maletta

University of the Pacific (Peru)

Anjan,

the story you recall of land reform in West Bengal has been repeated in many other places. Taking the land and distributing it is relatively easy, if a government has enough power to do it, and the immediate impact can be very positive.

Following with effective agricultural development is tougher. Many governments have tried to do it, but generally failed, in many different political styles and ideological backgrounds. After a few years their agriculture falls behind because the necessary ingredients, that you mention, are never adequately implemented.

This does not mean that land reform is not to be done when the land is concentrated in the hand of traditional and backward large landowners. Eliminating a traditional oligarchy opens the gates to social, economic and political progress ((although some land reforms also destroyed the few modern commercial farms that happened to exist, and they are very difficult to revive).

But after taking the land from the traditional rural oligarchy, do not expect that the beneficiaries of land reform would rapidly turn into modern rural entrepreneurs and that the land, now distributed, would flourish because of land reform alone.

I cannot really remember a long-tern successful example, really; even the ones nearest to success (such as Japan, where the American occupants promoted Land Reform in the late 1940s) have ended up with an agriculture that can only survive under heavy subsidies and trade barriers, in an economy so cluttered by bureaucracy that it no longer grows.

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1 Recommendation

Bill R. Miller

University of Georgia

To: Messers Chakrabarti and Maletta: Mr. Chakrabarti's scathing criticism of econometrics is followed by disclosure of smilar failures on West Bengal small farms. I commend both efforts. Certainly econometrics has had little to say about the subject of how to achieve economic development. The failue lies in assumptions about random error. In economics the extreme points of the data are likely to be the most important and certainly not to be dismissed as "outliers". The extreme points of economcs data are the most important for understanding. On the one hand they may describe massive inefficiency, or, alternatively, they may describe the "frontier" of the phenomena being studied. We ave M.J. Farrell of the Royal Stattistical Society to thank for this insight. With respect to West Bengal it seems to that here again we see massive failure of markets for small farm productivity. Such failure is observed world wide. And why should we be surprised?

Contrary to what Adam Smith may have told you--competitive markets are not naturally occurring, Competition requires regulatory oversight and I dare say a touch of democratic morality. It can be done. I have seen it in Poland, Armenia and to some extent in America. I would wish to see more.

I think Maletta correctly informs that land reforms may not be the answer. That is not to say that we don't need some redistribution of resources, but the redistribution

needed is to increase public funding for marketing infrastructure that benfits small landholders.

Again I say; Incressing productivity of small landholders is no more than humanitarian aid, but could be much more if public policy were directed to providing consumers who have the ability to pay with what they want, when they want it and at the tiime they want it. I offer you ar corrolary to my hypothesis that started this discussion and that is ---What happens off the farm is more important in determing farm size and succes than what happens on the farm.

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1 Recommendation

Hector Maletta

University of the Pacific (Peru)

I concur also with the critiques of many econometric accounts in this matter. Besides criticisms related to randomness of error I have some other criticisms of a more fundamental nature that are related to the neoclassical economic approach on which most modern econometrics is founded. To mention but a few:

1. Neoclassical economic theory is able to prove the existence, and describe the properties, of equilibrium points in which all supplies and demands coincide with each other, but has no theory at all to predict or explain economic behavior in situations out of equilibrium (except in a most general way, e.g. by saying that in the presence of a new exogenous price agents will adjust their quantities supplied or demanded). To say it in a more provocatorial manner: in equilibrium no agent is required to act in any way; out of equilibrium there is no theory of economic behavior. Econometric models are based on economic models of equilibrium situations, but apply it to non-equilibrium situations.

2. Related to the "outlier" issue remarked upon by Bill R: markets are a competitive and very selective process. What happens to the "representative agent" is often not the key question. To pose a simple example: football (soccer) players reach the big leagues after being detected and selected, first in neighborhood playfields, then in local teams or leagues, and finally in the big. 20 years ago, Lionel Messi was a 6 year'old kid playing football in a poor neighborhood's dirt street, near the industrial town of Rosario (Argentina). Millions of other children were doing the same. Lionel was first detected in primary school, leaving behind a lot of its pals to be trained and later play in a juvenile team; during his teenage years he was hired by a well known Rosario team, where he finally got spotted by a talent-scourer on behalf of the Barcelona, where he is still playing (and getting the world award for Best Player year after year). Now look at the representative poor-neiborhood kid playing football in dirt streets across Argentina (or across the world): nearly all of them failed to make news. The process of "player selection" seems to be a total failure; almost nobody succeeds. A few dozen made it into local or national clubs, very few into international teams, and only one is Messi. But the whole purpose of the process is not to enhance the fortunes of all those kids, but to competitively select the very best. One-in-a-million wunderkind Lionel is worth all the other failures. So much for outliers.

This "natural selection"-like process operates also in markets. Half the new American corporations disappear in their first 5 years, and a much higher fraction of small business fail to survive. Many are the called, but few are the chosen. Or the selected, to be more precise. Markets are not designed to create equal outcomes, not even similar outcomes: they are designed (have evolved) to select for the most competitive. They are selective by nature. To my knowledge, no usual econometric model (nor ordinary economic modelling) tries to account for this feature of markets (except in the relatively marginal school called "evolutionary economics").

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Hector Maletta

University of the Pacific (Peru)

My previous comment was in part inspired by a recent study of mine on intergenerational social mobility of Latin American subsistence peasants. According to my (still preliminary) estimates, from 1950-2010 only a maximum of 2% of subsistence peasant families of 1950, or their descendants, are successful family farmers (above subsistence) in 2010. About 20% of the survivors and descendants are still subsistence peasants, some 15% are in non-farm rural occupations, and about two thirds are urban or emigrated abroad; some of them are still poor, but with a much lower prevalence of poverty and at lower depths of poverty than they (or their parents) suffered as subsistence peasants by 1950.

Now, from 1950 to 2010 countless billions have been spent on programs of Land Reform, Rural Development, microfinance, agricultural extension, technical assistance, agricultural marketing, rural industries, nearly all of which aimed at converting subsistence farmers into small commercial farmers able to escape poverty by means of improved agriculture (with only some recent exceptions that also aim at diversifying rural livelihoods). No program at all aimed, for example, at creating skills that would be useful in cities or abroad (which is the majority destination of all those survivors and descendants); those seeking their fortunes in big towns or in other countries had to manage by themselves, thus reducing their chances of earning good wages in those places, and reducing as well the amount of their remittances home. The "rate of return" of development expenditure aimed at improving traditional farming has been, overall, extremely meager. Most subsistence peasants are no longer subsistence peasants as a principal source of earnings. On farm consumption is no longer a significant share of their food consumption (in fact, those still relying on on-farm consumption show the highest rates of poverty and malnutrition).

(A Spanish version of preliminary findings from my recent research on this matter is linked at my Linkedin profile; a less preliminary report including an English version will be completed soon, I hope).

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John Scanlon

Probably this increases the inequality of income in the agrarian sector by increasing the entry cost into farming. As the initial investmetn required increases, farmers sell out to agricultural corporations who have the money to invest in high tech. These leaves farmers two choices to gamble on an investment in land and farm tech or to get out and become cheap labour. As the supply of food increases, the unit cost drops making small farmers increasing poorer and with distribution also held in fewer and fewer hands, price fixing is more likely on the retail side and price reduction on the farming side is likely.

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Mamudu Abunga Akudugu

University for Development Studies

I agree largely with all the submissions on this topic so far. In my view, increasing productivity of agriculture, especially in Africa has so far been proving to be only beneficial to agricultural produce traders and other allied service providers and not peasant farmers themselves. This is because of poorly developed market infrastructure coupled with information asymmetry. Because farmers have limited access to output markets and lack credible market information, agricultural produce traders offer very low prices to them which make them worse off. The traders take advantage of the fact that most agricultural produces are persishable with farmers not having access to improved storage facilities to cheat them (farmers). Otherwise, why are farmers still the poorers of the poor despite years of interventions of billions of dollars in aid targeting them? The fact is that there are so many people across the world benefiting from their poverty. Indeed, they are poor because other people have to be rich. Simple!

In effect, increase agricultural productivity can only bring about prosperity to farming communities if governments and donor agencies are committed to providing storage facilities, market infrastructure, and efficient transport systems among others which will help boost the barganining powers of farmers.

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John Scanlon

They are not poor because other people need to be rich, they are poor because of a lack of education, organization and aspects such as the one you mentioned, storage facilities. Agriculture is also probably the riskiest business to enter due to the amount of land needed, risk aspects such as weather, crop or animal diseases and access to markets and pricing or the output being unforeseeable. Things like wireless internet and iphones should help address the assymetricality of information.

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Bill R. Miller

University of Georgia

Mamoud Akudugu--Thanks for your comment on the role of market development needed along with production development on small farms. What a shame that major donors do not understand as well as you and I.. But as John Scanlon points out farmers are not poor because others must be rich. There are other issues to be addressed. The issue of how to develop markets for the products of small farms is seldom a part of efforts to increase productivity of small farms. I hope you will read millerbillr.com as a case study on what needs to be and can be done.

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Mamudu Abunga Akudugu

University for Development Studies

Scalon and Bill -- I appreciate your perspectives but in the context of the developing world, especially Africa, you have to understand that in most cases salaries and allowances of agricultural project staff and implementers as well as evaluators far exceed the amounts allocated to the project itself. For instance, what do think of an agricultural credit project funded by a multinational development organization where the amount devoted as credit to farmers is £500,000 but salaries and allowances of consultants and project staff is $700,000? These are the issues I am talking about. I was part of a team of researchers asked to evaluate an agricultural credit project in one of the Sub-Saharan African countries funded by one of the donor organizations. It came out that each beneficiary farmer was given on the average $25 as credit to be repaid with interest within 9 months. Meanwhile, the least amount paid to those who did the evaluation was $100/day for over two weeks. The fact is that in most cases less than 50% of the help that is supposed to get to farmers to increase their productivity reach them. In effect, I still stand by my earlier point that farmers, particularly in Africa are poor because project designers, implementers and evaluators are rich. You may disagree with me because of your experiences in America, Europe, etc., but from my experiences in Africa, that is my stance.

Note that wireless internet and iphones among other ICT tools are non-existent in most of African rural areas where agricultural production takes place. We need as academics to understand that there are no universal solutions to increasing agricultural productivity which can translate into improved welfare across the world. What may be the right approach in America or Europe may be a worse approach for Asia or Africa and the vice versa. Thus context specific interventions are needed. While I agree with the proposals by Bill, Scalon and others on the way forward, I disagree that these suggestions are universal. My disagreement stems from the fact that differences in socio-economic, and politico-cultural context among others within which agricultural actors across the world find themselves will not allow that to work.

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Mamudu Abunga Akudugu

University for Development Studies

I meant $500,000 and not £500,000.

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John Scanlon

I think it is normal and one of the criticisms that are leveled at international aid agencies, especially ones such as UNIDO and other UN agencies. The worst thing is that the results of many international agencies don't live up to the promises. I think we need to seriously rethink the way that aid is composed and delivered.

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Bill R. Miller

University of Georgia

Mamoud Akudugu and John Scanion are high on my list of those who understand how technical aid is delivered to small land holders with possible exception to Akudugu's statement, curious to me, that farmers are poor because aid givers are rich. Yes, aid givers are rich compared to farmers but they don't make farmers poor. Farmers are poor because there is no good route for them to develop. As Scanion says, "we seriously (need) to rethink the way aid is composed and delivered." I couldn't agree more.

Micro-finance would be a good place to start. Akudugu's observations on micro-credit should be read by all those who are interested in this area of work. I don't assume that our Marketing Assistance Project in Armenia could succeed the same way elsewhere, but I do recommend the way we treated micro-credit. Members of our credit Clubs only received credit if they had a profitable farm plan that included a known market. Furthermore, our cost of credit was lower than any agency in Armenia.

Do read Chapter seven of Millerbillr.com

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C. A. Zúniga-González

National Autonomous University of Nicaragua, León

@ Bil, the problem that if the increase in production can be replaced by productivity, I believe that this is a partial and not modern. In the DEA approach actulidad talk where productivity is measured in relation to the rate of population growth, ie a technology means the worker's capacity and the technology itself in terms of how to do the work, so that if productivity grows at a slower rate than the population rate in error and we must identify. I give you the link of my cento where to look in dissemination pudes some applications that measure productivity with this approach. http://cicaea.unanleon.edu.ni/english_version/index_eng.html

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Bill R. Miller

University of Georgia

I see your point Carlos and certainly an increase in technical efficiency is always desirable. And furhermore, M.J Farrell and others point out that economic efficiency can be shown, both theoretically and in practicality, to be equal to the product of technical and price efficiency, Herein lies a basic problem for developing economies. Unless small farmers can attain price efficiency, only available to them thru an efficient marketing system, then any technical efficiency that may obtain from on-farm production is muted by the lack of economic efficiency and increases in on-farm technical efficiency will be wasted except for the humanitarian benefit to farmers.

I look forward to reviewing your link in hopes that you are dealing with this problem.

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Daan Francois Toerien

University of the Free State

The debate this far seems to miss an important issue - the differences between producing commodity products and producing differentiated products. Most small farmers (but not all) produce commodities like coffee beans that compete with similar commodities produced elsewhere. Michael Porter, the Harvard guru on business strategy, taught us that to have a competitive advantage in commodities you have to have cost leadership. Commodities are produced all over the world, so the competition is tough. On the other hand differentiated products have uniqueness and as a consequence can attract price premiums. A simple example: an American wine can never be a French wine, or vice versa. The debate also has to focus on the differences between commodities and differentiated products.

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C. A. Zúniga-González

National Autonomous University of Nicaragua, León

@all, discussion indicates that productivity must be analyzed with respect to the rate of population growth, as such a technology should be valued enterminos cost, resource allocation, market prices and the technology itself. Professor Tim Coelli provides DEA approach these problems. http://www.uq.edu.au/economics/cepa/software.php

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Bill R. Miller

University of Georgia

Carlos-I have no doubt that you are right from the viewpoint of macroeconomics, however, I don't believe macroeconomics provides any insight on how to evaluate the economic problems of small landholders.

Kudos to Daan Toerien for bringing up the issue of differentiated products.

First, many products are differentiated by the market. I have had three dollar wine in France and three dollar wine in the U.S.. They are quite the same. And of course you can't sell cognac (otherwise brandy) unless it comes from France. Similarly, you can sell a Texas sweet onion and call it a Vidalia onion only if the Texas sweet onion is grown in Georgia.

Second, there is Toerien's important point about agricultural commodities produced on a global scale such as cotton, wheat, corn, sugar, and many others. Global commodity markets are well developed and they favor large farms. Marketing efficiency for products of large farms has a completely different set of marketing problems that differ greatly from the marketing problems of small landholders.

My concern remains for the obvious market failure for products of small landholders and I offer the working hypothesis that introducing new technology of production on small farms without considering market development is at most a humanitarian effort; will not result in economic development and be a very inefficient use of development funds.

What will be the dynamics then of development of small farms? I offer a corollary to my working hypothesis: What happens off the farm is more important to farm size than what happens on the farm. I believe that you will find that economies to size (scale, please try to forget this) to be greatly exaggerated. My work with World Bank economists in Poland showed the myth of large farms in Poland. Reference available.

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Evodia Silva-Rivera

Universidad Veracruzana

I haven't followed through the whole conversation but with regards to the last two comments, the discussion continues to be in macroeconomic terms. I think attention has to go further. There needs to be a radical change of thought from policies making sure that people have 'sufficient' food', towards food sovereignty; which implies looking at the ways in which food is produced, (including power relations, access and control, essentially the capitalist logic) the choices people make regarding the quality of the available products locally, the distance that food has travelled to reach consumers, etc.. Many non Western societies have a very different stake regarding food production; before the rise of capitalist logic, the market was one of several elements involved in food production but not the main driving force which by the way has continued to fail over the past seventy years by encouraging inequity and irremediably deteriorating biodversity.

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Daan Francois Toerien

University of the Free State

Evodia, are you not dodging the question? If the issue is food production and food is more effectively produced on large rather than small farms, is the way to go not to pursue policies that will lead to larger and effective farms? If the issue is to improve the situation of small farmers, then ways must be sought to have them produce products with a better differentiation potential or to get them, perhaps collectively, positioned higher in a value chain. Daan Toerien

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Hector Maletta

University of the Pacific (Peru)

Three remarks on Evodia's comment:

1. The question of food security is not sufficient food production: the world produces more than enough food for everybody, and has yet more capacity to produce more, The question is access to food, and this is mostly a matter of poverty.

2. Capitalism is not a "logic", a rule of discourse, a doctrine, an ideology. Capitalism is the real economic system in which we all live, that emerged and evolved through several centuries, starting in Europe and gradually covering the entire globe. People have choices on how to adapt to that system in certain respects (and then bear the consequences of such choices), but they do not have a choice of system, just as European peoples in the 3rd century AD had no choice but living in the Hellenistic world with all its institutions, technology and economic/social/political organization.

3. This thread is not about food security or food sovereignty, not even necessarily about food. It is about productivity in smallholder agriculture, and Bill's point when he started the discussion was that it involves also marketing. To which I agree, and I think nobody disagrees. My only contention is that a radical increase in farm productivity and a radical expansion of markets is not massively achievable for smallholders: a few of them may succeed in accumulating enough capital and skills to play a role in that game as competitive agricultural producers, but most wouldn't. History is on my side in that aspect. Unless one indulges in wishful thinking.

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Evodia Silva-Rivera

Universidad Veracruzana

I do not get the question as I consider it is not well formulated from the start.

On Hector's remarks,

1. I agree and understand that it is not about having sufficient food but to have access to it. I add that there has to be further thought on the quality of the food we buy and consume and the lifestyle choices that we make. There is a difference between a person that systematically feeds on cheap industrialised products as opposed to someone that makes conscious decisions and knows where their food comes from.

2. Yes, inevitably the world is embedded in the capitalist system, a system that continues to operate and establish the conditions for natural resources' exhaustion and the perpetuation of inequality. How much economies should grow? Are we still expecting that one day the majority of the world population will be able to lead the same lifestyle as first world citizens? How much is enough?

3. The food industry is linked to one of the current economic drivers, production in agriculture. I also agree with you on the fact that a radical expansion of markets is not massively achievable for smallholders, hence my argument in favour of a radical change in our consumer thinking. I have worked several years in rural areas, looking at how other (non Western) socio-ecological systems operate, and I have seen that life quality does not necessarily improve with capitalism. Yes, poverty exists, however I do not consider that accepting de facto the capitalist system is the answer either.

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Bill R. Miller

University of Georgia

I concede that the original question was not well formulated. Thus, I attempted to adjust the question to a smaller scale by adding "A surplus of food produced on small farms will not be efficiently used by a society that does not have a developing market infrastructure. See millerbillr.com " . The smaller scale is not unimportant as billions of dollars have been spent on a agricultural missionary model on steroids that invests development dollars in on-farm technology for small landholders without considering market development.

If in fact everyone agrees with me as suggested by Hector then I am pleased. I have not, however, seen such results in practice.

But Evoda, I suggest you are creating a straw man and shooting him down when you say that a massive development of markets for a massive number of small holders is not reasonable. Of course you are right, but do not ignore the dynamics of development. There must be a starting point; and no one can deny that the world has millions of small land holders who are served by inefficient and failed markets.

Some farms may be expected to grow as a result of development; some will fail and farmers will migrate to other industry. These results are to be expected and certainly have been observed; but how to start the process? I think the multifaceted approach that I describe in millerbillr.com has shown good results.

I don't have an answer to the general question of success or failure of mass marketing as it exists on a global scale, but I do believe that improving markets for small holders is a step in the development process that has long been ignored.

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1 Recommendation

Prakash Shankar Kamble

Shivaji University, Kolhapur

No doubt, it will help definitely.

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Bill R. Miller

University of Georgia

Dear Prakash Kamble,

Thanks for your comment. There are more than a billion people in the world living on less than two dollars per day. These people will never be fed by global commercial agriculture as we know it, but with the right infrastructure of market access for small landholders they can feed themselves and begin the road out of poverty. This is not a simple concept of "value chain" improvement, but a complex problem that will require development of institutions to support market access for small landholders. Such a process requires a broad base of support for at least 10 years, but it can be done. We did it in Armenia and although the process will different in other countries. It can be done. Do see millerbillr.com

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Afonso Chibalo

Royal Agricultural University

In my view I think yes it is. 1- Hunger is the most cause of social problems 2- If all people can have access to quality and quantity food = Food security. The social problems will be solved. As you know in Africa the main problems of Government is to ensure food security amongst small farmers. If they can produce enough to feed them selves. Government could apply money to Infrastructures such as schools, hospitals and so on, but because of situation of hunger, government has to deal with issues of food for everyone what is complicated matter. Even with food aid, the situation continue to be more problematic and the only solution if intensify sustainable food production by agro-ecological approach to ensure both ecological and economical viability and mitigate climate change as the main causes of the hunger through rain shortage and floods and droughts. In Africa access to improved inputs is another problems.

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C. A. Zúniga-González

National Autonomous University of Nicaragua, León

We could add the problems of climate change

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Victor Udemezue Onyebueke

University of Nigeria

I sure agree with Hector Maletta on the truth of the macroeconomic logic that unless the productivity of small-holder farmers are increased in tandem with marketing infrastructure (and I must add, transport infrastructure as well), we will be inviting a disastrous outcome of post-harvest wastage. Sad, isn't it? Coming from Nigeria, Africa’s most populous country, this fact is not in any way lost on us and our government. But should we as it is often said ‘throw away the baby with the bath water’? Daan Toerien made a very valid and important point ─ ‘better differentiation potentials’ and improved collective organisation of small farmers. Such measure appears to be the backbone of China’s agriculture and economic policy reforms (see Boreham 1995). [Boreham GF 1995. Modern Paths to Development: The Chinese Experience. South African Journal of Economics 63: 59–73.]. I believe that with good planning and organisation, especially in an era where the value placed on organically-produced food is on the increase, small can still be beautiful again!

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5 Recommendations

Bill R. Miller

University of Georgia

I am copying Alphonso's answer because he is so right, although I do add that many social problems will be solved, certainly not all. Says Alphonso:

"In my view I think yes it is. 1- Hunger is the most cause of social problems 2- If all people can have access to quality and quantity food = Food security. The social problems will be solved"

The problem Alphonso is that the self-sufficient farm with surplus left over for the market just does not work. the market is not a natural thing. It is built my man and it must be so simultaneously with development of small farm production. This was my thesis is posing the original question for this discussion. Thus I am pleased that Hector M. agrees with me and I hope Victor O. (Who I also agree with) will read more about how to do it in the case study contained in millerbillr.com

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Daan Francois Toerien

University of the Free State

Perhaps an aside comment. Has anybody read Jared Diamond's books Collapse and The World Until Yesterday? Important points from that is that (i) the modern world is but a very short period in man's total existence, and (ii) farmers in the inland areas of New Guinea produced sufficient food to feed themselves for thousands of years. And they developed markets in the process. Perhaps there are historic lessons for dealing with Bill's questions.

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2 Recommendations

David Satterthwaite

International Institute for Environment and Development

I edited a book with Jorge Hardoy on small and intermediate urban centres published in 1986 that brought together the findings from research teams in five regions. One of the chapters was on a small fertile region in Argentina where agricultural prosperity (and shifts to higher value crops) went hand in hand with local prosperous urbanization. one key reason being that land ownership was not too skewed so there were lots of relatively small farmers making good incomes that brought demand for producer and consumer goods and services... It was by Cesar Vapnarsky and Mabel Manzanal. I have some copies of the book if anyone is interested (they are free!). the other chapters (two studies in India, one in Sudan, one in Nigeria) do point to where there are many lnks between prosperous agriculture and booming local towns even if these were the unusual cases

best wishes

david satterthwaite

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C. A. Zúniga-González

National Autonomous University of Nicaragua, León

Dear here you can to find some paper about the productivity http://ageconsearch.umn.edu/simple-search?sort=date&query=%28%28keyword%3Aproductivity%29%29&from_advanced=true&query2=&field1=keyword&conjunction2=AND&query1=productivity&field2=keyword&query3=&conjunction1=AND&field3=ANY&SortDirection=descending

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Neela Chipalkatty

New York University

I was working on a paper about the plight of pastoral Ethiopian farmers whose land is taken away from them so that mag- farmers can use the modern farming techniques to produce mass food products.

Instead of investing in the small farmers the government thinks mass food production would stave away hunger.

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Bill R. Miller

University of Georgia

Dean Toerien

Is right. There is plenty of history that debunks the myth of large farm superiority. See the case of present day Poland. But note, the small farms only survive because there is a well established market infrastructure for their product. To paraphrase Bill Clinton---

Its the market stupid.

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C. A. Zúniga-González

National Autonomous University of Nicaragua, León

Well, Tim Coelli, and other authors show that the productivity is related both to efficiency and tecnology. The problem is the partial approach. So the modern techniques use the DEA approach.

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Kim s Cannon

University of Hawaiʻi at Mānoa

Aloha Bill,

To answer the question "Does increasing productivity of agriculture result in more prosperous societies or is it merely humanitarian aid for small farmers? Maybe think about this question, as if the society was an island nation. For example, 'Who benefits from growing 'terminator' seeds on an island (regardless of crop productivity)?'

Good critical question to be asking.

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C. A. Zúniga-González

National Autonomous University of Nicaragua, León

Well, it is important to include in your opinion the real indictor. I think that the DEA approach, the Productivity Analysis. The productivity imply the efficiency for labor and the tecnology as seed.

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Bill R. Miller

University of Georgia

By DEA analysis I believe you mean Data Envelope Analysis? If so, yes I am very high on this approach. Although somewhat difficult to use it is an excellent approach to finding the frontiers of productivity. If available you might look at

Van Zyl, Johan & Miller, Bill R. & Parker, Andrew, 1996. "Agrarian structure in Poland : the myth of large-farm superiority," Policy Research Working Paper ...

ideas.repec.org/f/pmi310.html - 8k - Cached - Similar pages

by BR Miller - Cited by 2 - Related articles - All 2 versions[PDF

Terminator seed? I suppose you reference M.Santo? I don't know the answer, but yes, a very good question.

And yes, DEA analysis will show that economic efficiency in production is a function of price and technical efficiencies. And yes, as economists we know that efficiency is good, however, this is not the final answer to starting economic development. Make small holder farms as economically efficient in productivity as you can and you will not start economic development unless you simultaneously start market development for products of small farms. I say again as Bill Clinton would say "Its the market stupid". Do see millerbillr.com If we did it there you can do it anywhere. (and I am not talking about New York)

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C. A. Zúniga-González

National Autonomous University of Nicaragua, León

Well, the other theme that I would like consider on this topic is the Bio Economy. The small farmer use Bio Technology on the production system. The problem is aggregate value on the fragmentes market in rural areas.

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Gilbert Chilinde

Malawi University of Business and Applied Sciences

The agricultural production system in Malawi is actually based on small scale farmers who produce both for household consumption with surplus for the market. What is more critical for small scale farmers for the case of Malawi is the cost of production. If the small scale farmers have adequate access to farm inputs especially seeds and fertilizer, they usually produce adequate food supplies such that between 2005 to 2011, the previously hunger stricken Malawi, was exporting food to other countries. The reason being farmers were given subsidies for the key inputs and the Farm Input Subsidy Programme (FISP) was implemented with minimal planning bottlenecks and better informed political will. So the bottom line for successful small farm production is access to critical farm inputs and political will and no corruption in the governance system among others.

While big farm production is good, in Malawi it worked for commercial crops especially Tobacco, Coffee, and Tea. It registered successes especially in the 1980s in the tobacco sector but over the years production has been decreasing evidence being many idle estates across the country some of which have since been redistributed to resettled small scale farmers for food and cash crops production under the Community Based Rural Land Development Programme which was financed by the World Bank and implemented between 2002 and 2010.

While Malawi is pondering on increasing agricultural production under the Green Belt Initiative, in many corners of the country, it cannot easily do away with the small scale farm production due to the customary land tenure system which is based on small farm-family land production. Proposed reforms on customary land tenure system are received with negative connotations by society gate keepers that the proposed laws are trying to short change the social system of Chieftaincy on which land administration at the community level in Malawi has been tied to for a long time.

(For Prof. David Satterthwaite, I can appreciate to receive the book you edited).

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3 Recommendations

David Stadelmann

University of Bayreuth

I think it is very clear that increasing agricultural productivity leads to "more prosperous societies". The question is how to increase agricultural productivity. Many papers would argue that better institutions (in particular less collectivization) leads to increased returns. See, for example, Lin, J. Y. (1992), 'Rural Reforms and Agricultural Growth in China', American Economic Review 82(1), 34-51.

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Martha Marijke Bakker

Wageningen University & Research

Increasing productivity only adds to farmers' welfare if the demand for their produce also increases. And, given the income-inelasticity of food, this is generally not the case (when people start earning more, they spend their money on other things than food). The only way farmers can, in such a case, benefit from increasing productivity, is by upscaling their farms. In fact, they have to do this, because when supply increases prices will go down. This upscaling can work out well, but it does mean that a lot of farmers will have to seek an income elsewhere. In Europe, we've seen that this is often difficult: Many family farms keep on teetering on the brink of extinction, simply because their options of finding a living in the city are so limited. And by holding on to their land, they also prevent other farms from upscaling. So, my answer would be that increased productivity does benefit the society as a whole, but the farmers (especially the small-scale) farmers will get the worst of it.

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C. A. Zúniga-González

National Autonomous University of Nicaragua, León

I think that we must to consider the DEA approach if you want to measure the productivity for maker polices. They are who take decision on the prices polices and other scenary.

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Bill R. Miller

University of Georgia

This question is a little off-track. The original context was whether increasing productivity of small farmers would be the way to "kick-start" a process of economic development or would such effort to increase productivity of small farmers become a humanitarian effort, and though a worthy effort, not a long-run solution. I believe that billions of dollars in such efforts have not resulted in development. In the Malawi case cited above I believe that input subsidies to small farmers will only further distort the price discovery process and do more harm than good for progress in development.

This question becomes a conundrum for many researcher and policy makers as it is of course obvious that a productive and prosperous agriculture is necessary in a developed country.

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C. A. Zúniga-González

National Autonomous University of Nicaragua, León

In a developed country the question is very complex, because we mus to think on the contex that confront the small farmer as price or vulnerability price, environmental risk. The intervention project only give welfare for few time, so the proposal must worked in function of the productivity where the tecnology and efficiency thecnicall are considered. The population is growing rapidily, so the tecnology and the efficiency change inteannual must refered so the grow.

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Bill R. Miller

University of Georgia

Technical efficiency is a necessary condition for economic development, but it is not sufficient. M. Farrell, Royal Stat. Society, wrote a brilliant article in the early fifties showing that economic efficiency is the product of technical and price efficiency. For development we must have economic efficiency. Market failure to find the right prices at the farm level, especially for small farm holdings, is rampant throughout the world, thus you will understand why USDA MARKET ASSISTANCE PROJECT (MAP) in Armenia insisted on market development parallel with improving technical efficiency at the farm level as an absolute requirement for development assistance. You will find the proof of this logic in millerbillr.com

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K. M. Singh

Dr Rajendra Prasad Central Agricultural University Pusa

My experience with increasing productivity is that yes, it does ensure fodd security at small farmers household level, but at the same time markets do not behave in a rational manner. Any marketable surplus with farmers fetches lesser overall return if the overall production has increased due to increase in productivity in a particular year. Unless the farmers have assured irrigation, quality seeds and above all a good monsoon, the production remains almost at the same level as previous years with just a marginal increase and overall erratic production scenario.

The large farmers however are likely to gain because of their lower cost of production due to economies of scale in their favor.

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Bill R. Miller

University of Georgia

Dear K. Singh Your obvious experience with the problems of small farms and your conclusions are no doubt exactly right. One; Increasing productivity on small farms ensures food security. So yes, increasing productivity of small farms is a great and much to be applauded means of humanitarian aid. Two: -- (but) production remains almost at the same level as previous years. That is to say there is no real impetus here for development., and if this is your point then I completely agree. You say that at the same time markets do not behave in a rational manner. Is this not just another way of saying that there is market failure for the products of small farms? I believe it is and that is a major concern for development policy, because market infrastructure can be addressed at the same time that productivity policy is addressed for small farms. Sad to say this rarely happens.

Your concluding comments indicate that large farms may gain (from new productivity policy ?) because of economies of scale. I say one should proceed carefully here. Economies of scale will require that all inputs to production (land, labor, capital and management) will be increased in the same proportions. In fact, such a case has never been observed in the real world. Economies to scale exist only as a definition in the field of mathematics and miss-specification in the field of econometrics.

What is observed in the world of economic reality may be rightly called economies of size in which one usually sees capital substituted for labor. In no way does such a case exhibit economies of scale. Economics of size is an extremely important subject, but I will leave it by asking if one can reasonably substitute capital for labor when capital is expensive and the price of labor is near zero?

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