ECON 280 Paper for Thursday

http://home.wlu.edu/~caseyj/jpke.pdf

 

 

Comments

[Lizzie Weston]

I think that from this paper and our class so far, we know that impoverished people, where they live, and the amount of education they have are very linked and connected. These factors often depend on each other and can help improve the others. I thought this paper was very interesting and backs up the idea that poor people can not afford to take a risk—even one that will probably benefit them in the long run—without access to credit and insurance. Adapting agroforestry would benefit farmers hugely by keeping more nutrients in the area and maintaining biodiversity for possible increased crop yields. It also helps the environment and allows for less land to be used in some cases. These are all very attractive benefits, and most farmers would be willing to adapt this agriculture. However, they can’t.
I also thought it was very interesting how important adult education and farmers teaching other farmers were very important factors in helping agroforestry come about. We have talked a lot about the importance of education in this class to help lift families out of poverty. However, many farmers have been working on the fields without high levels of education. After reading this paper, I think that education programs, even if they were only daily seminars every once in a while, aimed at adults could very much increase understanding of better farming techniques and give the farmers more confidence to undergo a change. This would be a way for governments of NGOs to spend very little money and time to improve a community a lot. Once some farmers in a community are educated about new ideas and implement them, other farmers can continue to learn from them and hopefully see the benefits that the original agroforesty farmers see on their farms. Therefore, starting with small amounts of adult education in a farming community could lead to very beneficial results to farming families and the land that they live on.

[Nick Z.]

I agree with Lizzie. Education and human capital development go hand in hand. To increase human capital accumulation is to increase the productivity of the labor force or an individual. When productivity increases, the economy grows, resulting in a more efficient output generating society.

While I was reading this article I kept thinking about another piece that explored education and incentives in relation to farming techniques. The researchers provided a very poor village in Africa with education on the uses of fertilizer and farming in general. After using the fertilizer, resulting in higher crop yield, the villagers reverted to their previous ways after the researchers were gone. I would say that most people are risk averse when they are unknowledgeable of a certain action. The lack of confidence in change divert utility maximizing decision making.

I was surprised about the results on the relationship between income and adoption of agroforestry. People who are generally more educated (independent variable) have higher incomes (dependent variable). It may be possible that there is not a causal link between income (independent variable) and education (dependent variable). It is certainly possible that a person may be uneducated yet have a high income.

[Olivia Davis]

The conclusions reached in this article further emphasize the importance of investment in human capital and education. I’m particularly intrigued by the proposal that farmers already practicing agroforestry should be an instrumental tool in spreading the technique.

In my opinion, it would make sense for farmers not using agroforestry to view the “adopters” as a reliable source of information about farming techniques. Unlike an outside organization coming in to promote agroforestry, adopters are a part of the local farming community; they are the peers of the other farmers. In other words, adopters were once in the exact same position as the non-adopters. The adopters empathize with non-adopters about the local farming conditions on a personal level. The adopters’ ability to directly relate to the non-adopters makes them advocates for agroforestry that are most likely to resonate with non-adopters.

The article also indirectly provides additional evidence supporting the benefits of adopters as advocates. In the conclusion, the article cites three primary variables that were found to increase the likelihood of a farmer adopting the technique: informal on-the-job training, formal training, and formal education. Therefore, it can be assumed that farmers currently using agroforestry possess at least one of these variables. Additionally, this allows for the adopters to further relate to non-adopters. The two groups of farmers likely received the same type of training and education because, as previously mentioned, they are from the same local community.

If agroforestry is to continue to grow, then it is essential for farmers who have already started using agroforestry to communicate its benefits with their fellow farmers. When it comes to farming techniques, they are able to send a message that will resonate with non-adopters better than most other sources of information.

[Chase Douglas]

I also agree with Lizzie that impoverishment, education, and location are all intertwined factors. As an environmental studies major I found this article very interesting, especially in regards to the fact that it revolves around how the poor manage their natural resources. I think that a premium should be put on guiding the developing world to develop in a sustainable fashion, so as to conserve the resources that have helped them develop and will continue to in the future.

As seen here in this article, I think that concept of the poverty trap also pertains to how the natural world is treated. These poor farmers cannot risk implementing more sustainable practices in their farmer methods, but at the same time are undermining the resource base and ecological services they are absolutely dependent on. Again it seems that the poor are acting irrational, but they are simply acting out fear of the unknown and their in ability to cope with that unknown. I completely agree that some sort of education system needs to provided to these peoples, and should probably be subsidized by the government. In the future the only thing worse than an impoverished community with limited resources would be one with none because they were all eroded away by poor management

[Greta Witter]

Historically, discussions of economic development seem to ignore environmental impacts. Policy has been more focused on increasing production levels than on the environmental sustainability of doing so. As Prof Casey has said multiple times in class, developing nations often solve one problem simply by creating another. And yet, the secondary (often environmental) issue’s negative externalities and social costs seem to be undervalued.
Understanding and thinking more deeply about what goes into poor families’ decision making has been a clear theme of this course – Prof Casey’s piece analyzes the impact of uncertainty/confidence on decisions to undertake agroforestry. Even though we understand agroforestry to be a socially and environmentally beneficial practice with many positive spillovers, we fail to see sufficient levels of implementation. Like many of the papers we have read, I was interested in the importance of adult education in the Keynesian sense of ‘weight’. Casey’s regression model shows that improving not only individuals’ ability to interpret presented information, but also confidence in skills and experiences do have significant impacts on the likelihood of adopting agroforestry.
To a subsistence farmer, failure could potentially be associated with death, as the poor lack any sort of Plan B or social safety net. These farmers understand the precariousness of their lives and are unwilling to take the risks that are sufficient levels of investment. I would be interested to analyze the impacts of the introduction of access to capital or insurance on these same farmers’ decisions. Would they be more willing to take the risk, regardless of the information level/confidence/weight, remedying the market inefficiency?

[Jspencer]

Echoing what others have pointed out, this study illustrates the significance of developing human capital and its effects on economic development. In this case, the study reveals how the level of human capital development in Southeastern Mexico affects farmers’ decisions on whether or not to employ agroforestry as their means of economic production.

Agroforestry, a hybridization of forestry and traditional agriculture, is a sustainable (both economically and ecologically) agricultural practice that typically consists of native tree species interspersed amongst annual crops such as soybeans and corn. Trees are the base of the nutrient cycle in tropical ecosystem, and by maintaining them, agroforestry vastly increases the “productivity lifetime” of the soil. These trees also serve to stabilize the soil, reducing erosion and thus benefitting adjacent cropland.

Like many of the issues we have talked about in the development of poor communities, the level of development of human capital proved to be the deciding factor in this study as to whether or not the farmer was interested and willing to employ agroforestry on his/her land. Specifically, education, informal (on-the-job) training, and formal training all showed a positive relationship with likelihood of participation in agroforestry. This seems pretty intuitive: the higher one’s education, the better he or she can grasp new concepts; if the farmer can understand how planting a variety of trees and crops can benefit him and his family, he is much more likely to adopt this practice. Moreover, training, both informal and formal, increases the confidence one has in his/her abilities. If the farmer is confident that he or she can successfully grow trees based on past experience, he is certainly more inclined to adopt agroforestry.

I agree with Olivia et al. that the best way to successfully promote agroforestry is through programs that enlist farmers who have already established the practice on their farm to A) convince others that it is actually feasible and B) how to successfully use the practice on their farm.

[Daniel Molon]

This article investigates the adoption of agroforestry techniques. The adoption among farmers of improved farming techniques is influenced more by the education of the farmers than by their profit expectations. This fits into Keynes’ model for investment, as he believed that in people’s investment decision-making model people’s profit expectations is based off of imperfect information. This uncertainty in profit expectations makes it a poor basis for deciding to invest and adopt new farming techniques. Poor farmers are more likely to be risk averse, because their level of risk is great. What makes their risk so large is that if they adopt agroforestry because of imperfect information, and it proves to be a bad investment, their family may starve, and they do not have enough savings to offset the loss of potential income. So, the potential profitability of changing farming methods does little to persuade farmers, because of their certainty that doing what they know will at least provide enough for them to survive.

So, in order to convince poor farmers to adopt agroforestry, their uncertainty in their decision-making model must be lessened. One way to do this is to improve their human capital by educating them on different farming techniques. Another possible tactic to get farmers to switch farming methods would be through word of mouth with other local farmers who have switched, as they may believe other people in their same situation better than they would outside academics. The introduction of credit would also improve alternative farming techniques, as this would reduce the risk for farmers. This example shows how their can be increasing returns to human capital, as educating one farmer in a community can help improve the agricultural practices of others in the community, and thereby improve their productivity and living standards.

[Bayan Misaghi]

The use of the Keynes “weight” model in understanding decision-making is critical to combatting the notion of the impoverished displaying “irrational” behavior. On Tuesday, the class talked about the reasons why farmers often opt for lower-quality or lower income-yielding crop in exchange for a higher probability that a sufficient quantity of that crop may be harvested. Impoverished farmers are naturally risk-averse because they neither have rainy-day savings nor access to formal insurance; thus, they are less willing to trade a less rewarding and less risky for a chance at a higher return.

This paper alludes to how a lack of human capital can discourage farmers from making an investment because it effectively increases the risk of that investment. If a farmer does not know how to plant or take care of trees, the probability of the investment actually helping the farmer decreases; on the other hand, those farmers with more education and expertise will have greater chances to reap the benefits of agroforestry. This may be the reason why so many uneducated farmers choose not to participate in agroforestry—they calculate the probability of failing and compare this to the net present value to see if it’s worth the risk. The data in this paper clearly shows that those farmers who have developed their human capital through education and experience are the ones more likely to take part in agroforestry.

Clearly, human capital deepening is important not only for service or industrial jobs, but also for more productive agriculture. The idea that a farmer would not take advantage of a practice in agroforestry with a positive net present value seems irrational at first glance, but when one considers the skills needed to implement that practice we are able to gain greater insights to the complexity of issues in the developing world.

[ShelbyLFlores]

Like others have already mentioned above, this article only emphasizes the importance of human capital development, especially compared to capital deepening. The more education and training farmers received, the more likely they were to adopt agroforestry. Since this concept has already been thoroughly discussed above, I would like to focus on a different aspect of the paper I found interesting.

Casey mentions that “traditional economic theory predicts that per capita income will play a positive role in the adoption of new technologies” (515). However, the empirical evidence shows that this is not the case. Just because farmers may have more capital to “gamble” with, they still act risk-averse in adopting the new techniques. I think the confidence of the poor is a big factor here. This article is able to take into account a small aspect of this variable: “The investment in agroforestry is, at least, partially explained by the confidence farmers have in the available evidence” (518). However, I don’t believe economics can completely measure variables like confidence. Naturally, the poor are probably less confident in all aspects of their life, thus they are less likely to take a risk to invest in new agroforestry techniques. How do you make the poor more confident? Like with many other problems we have analyzed this term, I think this problem could be tackled through human capital development. It makes me believe that human capital development is almost the cure-all solution to development problems as we have not seen an instance where it has failed to improve the lives of the poor and general society.

[Vincent Kim]

Understanding how educated farmers can increase the human capital of their neighbors by teaching better farming practices is a hopeful prospect in helping jumpstart development. The paper details how increasing human capital makes farmers place more weight on agroforestry methods which are more sustainable than the traditional slash-and-burn method. Professor Casey specifies three key investments that influence farmers to adopt/invest in agroforestry: informal specific on-the-job training, formal training, and formal education.

The model of adopting agroforestry used on page 512 (Empirical procedures, model specification, equation 6) uses the dichotomy of 0 and 1 to measure agroforestry adoption, and the right side of the equation includes variable rates and constants related to how human capital investment influences the decision to adopt. This reminds me of the Ising model of ferromagnetism used in statistical mechanics, which explains the orientation of magnetic dipole moments of atomic spins (which can kind of be thought of as small bar magnets that have a positive and negative pole). There are two allowed values of spin which can be called -1 or +1, but the model can incorporate two states being named 0 and 1 like in the paper. Furthermore, the model can be used in cases where neighbors influence the state of an individual, such as the spread of disease (0 is not sick, 1 is sick) or even voting (0 is voting for once party, 1 is voting for another party). I would imagine this model could be used to statistically predict how farmers would adopt agroforestry.

While the paper focuses on formal education and informal/formal training of specific skills, the Ising model might be able to add to the model used in this paper by explaining the informal influence neighbors have on each other. This informal influence may not just be the informal training of specific skills, but also the effects of seeing the success from neighbors implementing agroforestry. They may give more weight to relevant information if their neighbors have done the same or have adopted agroforestry. Neighbors could be defined by various factors such as geographical proximity or extended family member relations. People see others on adjacent farms adopt agroforestry or hear how they weigh information or people hear about them from extended family members, some of whom could have adopted agroforestry.

If incorporated, the Ising model may predict the evolution of adoption in a population overtime based on the initial conditions (who has adopted agroforestry vs. who has not). Different initial conditions lead to difference evolutions; our understanding of the model could allow us to choose critical areas in which to invest human capital such that the population would evolve most rapidly (agroforestry would be adopted throughout the population more quickly). That would help resources be used efficiently in development efforts.

[Margaret Klein]

Casey evaluates how uncertainty affects the adoption rate of agroforestry in Central American and how the differences in weight of this information based on a farmer’s situation can affect decision-making and adoption of the practice. While the data shows that the innovative practice can increase financial and nonfinancial benefits for farmers, some are still reluctant to adopt based on future and predicted income rather than immediate benefits. Because of the subsistence aspect in the industry, it is hard for farmers to give up their old, less productive practices because they know it will produce enough food for survival. In turn while the new practice may be more profitable in the future, the risk of starvation limits poor farmers who lack confidence in the information and the stock of human capital relative to other farmers in the area.

The decision-making process that occurs for farmers and agroforestry is similar to that of parents deciding between sending a child to school or to work. While the long-term costs of child labor are evident, it is much easier to understand the short-term benefits of the extra wages for the family. The problem of uncertainty shows the lack of infrastructure and lack of access to credit and insurance in these areas. Because uncertainty and risk is a foreign topic to the farmers due to lack of access, they put less weight on the information of future potential profits and have little confidence in the new technology. Farmers with increased human capital on the other hand, were more likely to adopt the practice due to increased weight put on the new information. This point was very interesting to me as it drew together many of the other topics that we have discussed with human capital and its importance to economic development. The farmers were less likely to adopt the practice of agroforestry even though it could increase potential profits, and lack of human capital played some, if not a large, role in this decision process

[Mac Keers]

I agree with Lizzie. Education and human capital development go hand in hand. To increase human capital accumulation is to increase the productivity of the labor force or an individual. When productivity increases, the economy grows, resulting in a more efficient output generating society.

While I was reading this article I kept thinking about another piece that explored education and incentives in relation to farming techniques. The researchers provided a very poor village in Africa with education on the uses of fertilizer and farming in general. After using the fertilizer, resulting in higher crop yield, the villagers reverted to their previous ways after the researchers were gone. I would say that most people are risk averse when they are unknowledgeable of a certain action. The lack of confidence in change divert utility maximizing decision making.

I was surprised about the results on the relationship between income and adoption of agroforestry. People who are generally more educated (independent variable) have higher incomes (dependent variable). It may be possible that there is not a causal link between income (independent variable) and education (dependent variable). It is certainly possible that a person may be uneducated yet have a high income.

[Mac Keers]

The concept of lowering uncertainty to increase productivity and improve long-run decision-making is not new, but applying it to poor farmers is certainly a nice twist. It seems like an obvious group to target considering the tremendous uncertainty that they face everyday. They are confronted with completely uncontrollable volatility like the weather. Unstable governments and the lack of property rights also prevent progress. They key though is that sometimes these poor farmers are given a chance to make better choices in the long term, whether it be investment in their farms or education for their children. Unfortunately, under the weight of the tremendous uncertainty, they are forced to continue ignoring these opportunities for fear of dying. If we can reduce uncertainty in any way, it would be a worthwhile endeavor. After all, we’ve learned that many people who are impoverished are not only intelligent, but also highly motivated and entrepreneurial. If the stakes for taking risks were lowered at all, it is possible we could see significant improvements in things like education and output.
We also need to consider the need to frontload some education so that farmers can properly utilize opportunities. Using insurance to efficiently hedge risk, or using new farming techniques and how they improve output could have a huge effect. The value in all of this comes from the effect that we have seen time and time again where “the big push” actually works. Once the technology ball starts to roll it tends to sustain itself after a country or region gets past the most basic things like inability to feed its people. If we can more effectively get regions out of their subsistence phase then we may be able to speed up development around the world.

[Peter Partee]

Peter Partee
Econ 280 – Development Econ.
Professor Casey

“Agroforestry adoption in Mexico: using Keynes to better understand farmer decision-making”

Professor Casey’s research question addresses an aspect of farmer behavior that does not, at first glance, seem rational. Empirical evidence suggests that agroforestry, or the practice of “planting trees on farms,” is both financially beneficial to farmers and environmentally favorable. However, existing data also points towards farmers overwhelming decision to not engage in agroforestry. Why do Mexican farmers in the early 1990’s not pursue agroforestry opportunities?

Investor confidence is low regarding such practices. Even if information is readily available and logically sound, the receiving party must have faith that it is so. The irony is that a decision to begin agroforestry diversifies outputs, which reduces uncertainty about draughts. A particularly revealing citation in the piece is from an economist named Ellis who states: “skepticism about innovation is through to be largely related to imperfect knowledge about innovations and agronomic practices appropriate to them.” In particular, this quotation rang true to human decision making to me. When someone is inundated with new or different information, despite the greater community’s certainty about it validity, one might decline to pursue its merits based on its foreign nature. We discussed this phenomenon during class concerning immigration.

Prof. Casey stipulates that increases to the human capital of decision-makers will increase their propensity to engage in agroforestry practices. According to Schultz (1964), farmers with higher levels of human capital are able to better utilize new technology. Human capital is being used as a proxy for uncertainty. In other words, acceptance of factual information pertaining to agroforestry can be measured by how educated someone that farmer is.

The results yield all the expected variables expect the one pertaining to income. This variable’s sign can be interpreted the following way: that farmers interested in agroforestry have lower incomes. I found this to be puzzling as I am sure the author did. Finally, results supported the initial hypothesis of the research, namely that increases to human capital increase decision makers propensity to engage in agroforestry.

[Minh Ton]

This paper once again reinforces what we have discussed so far this term, the significant link between investment in education and human capital and economic development. According to Keynes, uncertainty and expected profit play a big role in the decision making process and these factors are largely affected by the knowledge of the decision makers about the market. In the case described in this article, education, even informal one, could result in lower uncertainty among farmers, subsequently leading to increased productivity and long-run output. Thus, I agree that government policies should target access to education, exposure to information about agroforestry from other farmers, and the careful implementation of initial rural development programs.

[Gyung Jeong]

I decided to write a comment after the class since this paper was written by Prof. Casey and I wanted to learn more before I wrote a comment.
As the professor mentioned today in class, most farmers are utility maximizers, rather than profit maximizers. Since their farming depends on utility, they might not be happy with someone else telling them what to do with their farms or their techniques. That’s why the professor said we should suggest it to them instead of just telling them what to do. It is also possible that, as the results of this research show, these farmers are already the experts at farming in their towns/areas so that they already make high returns from farming which could lead to their reluctance in changing their ways.
On the other hand, not all farmers felt this way. In fact, most farmers did change to the agroforestry technique in hopes of higher income and output. Unfortunately, the average income for the farmers who actually adopted the new technique was lower than those of the farmers who did not.
However, there may be other factors that contributed to this result. For instance, total of 175 data points might not be enough to determine the effect of changing to agroforestry. Or another thing to consider is that the weather could have been different in each town or farm.
Despite my speculations, we see that the results of the regression are about 82% correct/accurate. This means although there might be other possibilities of uncertainties, the results are highly accurate.
This reminds me of the time when I did a research project for my econometrics class, The Effect of Early Childhood Education on Future Academic Success, we had problems with such a small amount of data.

[Carson Coffman]

What made the information in this paper ring true for me was the ability to hear the author himself speak on the findings and the method in which he came to these conclusions. I found it very interesting when Professor Casey interjected personal anecdotes about his research process and his interactions with the people of the villages to which they traveled. It was also beneficial to have him explain the data outlined in the tables and how it was all organized--with the variables of interest (income, education, farm size, informal/formal training, forest amount, etc.) listed first. It was interesting to note that the people with higher incomes might not necessarily choose to participate in the experiment, as they have most likely already done the research and are happy in the position in which they are in. Although this is not always the case. The final conclusion that Professor Casey (as well as our class today) drew was that farmers with more access to human capital will be more inclined to choose and invest in adopting the agroforestry tactics. The most important thing to do when conducting research such as this is to listen to the farmers. They know more than anyone, and have been there done that to a variety of situations and tactics.

[Cirimu]

One of the key lessons I have learned from this class is about the importance of understanding the behavior of the poor before making any kind of conclusions about its rationality. It is often the case that in the surface the choices of the poor seem irrational, but if one looks deeper they are quite rational. This article on agroforestry is one of many examples from class that reminds us about the significance of understanding the poor. It provides a hypothesis for why farmers in Mexico have low adoption rates of agroforestry, which is an agricultural technique that has been proved to increase productivity. While at first one might think that a farmer will adopt a more productive technique for the sake of maximizing profits, this is not the case. There is other element such as the degree of certainty that the farmer has on the technique which affects the utility of the farmer (in class we talked farmers as utility maximizers and not profit maximizers). I found really interesting that the article used human capital as a proxy to measure certainty and explore the relationship between it and the adoption of agroforestry.
One of the biggest challenges of reducing or eliminating poverty is understating this phenomenon in itself. Articles like the one on “Agroforestry Adoption in Mexico” provide us with the kind of information that is needed before going into policy implementation. Very often policymakers come with a solution for poverty without actually understanding the poor. In my opinion, this lack of understanding is one of the main reasons we continue to struggle with poverty.