Agricultural economics

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Agricultural economics originally applied the principles of economics to the production of crops and livestock — a discipline known as agronomics. Agronomics was a branch of economics that specifically dealt with land usage. It focused on maximizing the crop yield while maintaining a good soil ecosystem. Throughout the 20th century the discipline expanded and the current scope of the discipline is much broader. Agricultural economics today includes a variety of applied areas, having considerable overlap with conventional economics.[1][2][3]


Economics is the study of resource allocation under scarcity. Agronomics, or the application of economic methods to optimizing the decisions made by agricultural producers, grew to prominence around the turn of the 20th century. The field of agricultural economics can be traced out to works on land economics. Henry Charles Taylor was the greatest contributor with the establishment of the Department of Agricultural Economics at Wisconsin in 1909. [4]

Another contributor, 1979 Nobel Economics Prize winner Theodore Schultz was among the first to examine development economics as a problem related directly to agriculture.[5] Schultz was also instrumental in establishing econometrics as a tool for use in analyzing agricultural economics empirically; he noted in his landmark 1956 article that agricultural supply analysis is rooted in "shifting sand," implying that it was and is simply not being done correctly.[6]


One scholar summarizes the development of agricultural economics as follows:

"Agricultural economics arose in the late 19th century, combined the theory of the firm with marketing and organization theory, and developed throughout the 20th century largely as an empirical branch of general economics. The discipline was closely linked to empirical applications of mathematical statistics and made early and significant contributions to econometric methods. In the 1960s and afterwards, as agricultural sectors in the OECD countries contracted, agricultural economists were drawn to the development problems of poor countries, to the trade and macroeconomic policy implications of agriculture in rich countries, and to a variety of production, consumption, and environmental and resource problems."[7]

Agricultural economists have made many well-known contributions to the economics field with such models as the cobweb model,[8] hedonic regression pricing models,[9] new technology and diffusion models (Zvi Griliches),[10] multifactor productivity and efficiency theory and measurement,[11][12] and the random coefficients regression.[13] The farm sector is frequently cited as a prime example of the perfect competition economic paradigm.

Since the 1970s, agricultural economics has primarily focused on seven main topics, according to a scholar in the field: agricultural environment and resources; risk and uncertainty; consumption and food supply chains; prices and incomes; market structures; trade and development; and technical change and human capital; .[14]

In Asia, agricultural economics was offered first by the University of the Philippines Los Baños Department of Agricultural Economics in 1919. Today, the field of agricultural economics has transformed into a more integrative discipline which covers farm management and production economics, rural finance and institutions, agricultural marketing and prices, agricultural policy and development, food and nutrition economics, and environmental and natural resource economics.

In terms of technical change, there have been increasingly rapid developments and innovations in the equipment designed for agricultural research. This equipment includes instruments for plant physiology research, and monitoring soil conditions and atmospheres.

Areas of concentration[edit]

Agricultural economics tends to be more microeconomic oriented. Many undergraduate Agricultural Economics degrees given by US land-grant universities tend to be more like a traditional business degree rather than a traditional economics degree. In the Philippines, the field of agricultural economics, offered by the University of the Philippines Department of Agricultural Economics focuses on analyzing social problems which confront the agriculture and natural resource sectors, and recommending strategic directions, founded on social, environmental, and economic sustainability. At the graduate level, many agricultural economics programs focus on a wide variety of applied micro- and macro-economic topics. Their demand is driven by their pragmatism, optimization and decision making skills, and their skills in statistical modelling.[citation needed] Graduates from Agricultural Economics departments across America find jobs in diversified sectors of the economy:

  • Accounting
  • Agriculture
  • Breweries, distilleries, bottling plants
  • Cigarette manufacturing
  • Food processing - e.g. flour mill
  • Food manufacture - e.g. cake factory
  • Furniture manufacturing; production of linens, drapes, carpet
  • Government & NGOs
  • Information technology
  • Leather tanning, footwear manufacturing, handbag production
  • Logistics & supply chains
  • Pulp and paper
  • Sawmills, lumber mills, wood products
  • Textiles processing and garment manufacturing


Evenson, Robert E. and Prabhu Pingali (eds.) (2007). Handbook of Agricultural Economics. Amsterdam, NL: Elsevier.

See also[edit]


  1. ^ Karl A. Fox (1987). "agricultural economics," The New Palgrave: A Dictionary of Economics, v. 1, pp. 55–62.
  2. ^ B.L. Gardner (2001), "Agriculture, Economics of," International Encyclopedia of the Social & Behavioral Sciences, v. 1, pp. 337-344. Abstract & outline.
  3. ^ C. Ford Runge (2008). "agricultural economics," The New Palgrave Dictionary of Economics, 2nd Ed., Abstract.
  4. ^ Shaars, Marvin A. (1972). "The Story of The Department of Agricultural Economics: 1909-1972" (PDF). Retrieved 2009-09-17. 
  5. ^ Schultz, Theodore (1968). Economic Growth and Agriculture. New York: MacGraw-Hill. 
  6. ^ Schultz, Theodore W. (1956). "Reflections on Agricultural Production, Output and Supply". Journal of Farm Economics 38 (3): 748–762. JSTOR 1234459. 
  7. ^ Ford Runge, "Agricultural Economics: A Brief Intellectual History," page 1 (abstract), University of Minnesota Working Paper WP06-1, June 2006,
  8. ^ Ezekial, M. (1938). "The Cobweb Theorem". Quarterly Journal of Economics 52 (2): 255–80. doi:10.2307/1881734. JSTOR 1881734. 
  9. ^ Waugh, F. (1928). "Quality Factors Influencing Vegetable Prices". Journal of Farm Economics 10 (2): 185–196. doi:10.2307/1230278. JSTOR 1230278. 
  10. ^ Griliches, Zvi (1957). "Hybrid Corn: An Exploration in the Economics of Technical Change". Econometrica 25 (4): 501–522. doi:10.2307/1905380. JSTOR 1905380. 
  11. ^ Farrell, M.J., "The Measurement of Productive Efficiency," Journal of the Royal Statistical Society Series A, General 125 Part 2(1957): 252-267. Farrell's frequently cited application involved an empirical application of state level agricultural data
  12. ^ Vernon Wesley Ruttan, "Technological Progress in the Meatpacking Industry, 1919-47," USDA Marketing Research Report No. 59, 1954.
  13. ^ Hildreth, H.; Houck, J. (1968). "Some Estimators for a Linear Model with Random Coefficients". Journal of the American Statistical Association 63 (322): 584–595. doi:10.2307/2284029. JSTOR 2284029. 
  14. ^ Ford Runge, "Agricultural Economics: A Brief Intellectual History," pp. 15-16, University of Minnesota Working Paper WP06-1, June 2006,

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