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Flat Earth Economics: The Far-reaching Consequences of Flat Payoff Functions in Economic Decision Making

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  • David J. Pannell

Abstract

Economists tend to emphasize the optimum, but in many cases, even large deviations from optimal decisions make little difference to the payoff. This has far-reaching implications that are under-recognized, including: (a) decision makers often have a wide margin for error in their production planning decisions, and flexibility to pursue factors not considered in the calculation of payoffs; (b) optimizing techniques are sometimes of limited practical relevance for decision support; (c) the value of information used to refine management decisions is often low; and (d) the benefits of using “precision farming” technologies to adjust production input levels are often low. Copyright 2006, Oxford University Press.

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Bibliographic Info

Article provided by Agricultural and Applied Economics Association in its journal Review of Agricultural Economics.

Volume (Year): 28 (2006)
Issue (Month): 4 ()
Pages: 553-566

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Handle: RePEc:oup:revage:v:28:y:2006:i:4:p:553-566

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Cited by:
  1. Zulfiqar, Farhad, 2010. "Estimation of Wheat Yield Response under different Economic, Location and Climatic Conditions in Punjab," MPRA Paper 26503, University Library of Munich, Germany.
  2. Hutchings, Timothy R., 2009. "A financial analysis of the effect of the mix of crop and sheep enterprises on the risk profile of dryland farms in south-eastern Australia – Part 1," AFBM Journal, Australasian Farm Business Management Network, vol. 6(1).
  3. Roeder, Norbert & Lederbogen, Dirk & Trautner, Juergen & Bergamini, Ariel & Stofer, Silvia & Scheidegger, Christoph, 2009. "The impact of changing agricultural policies on jointly used rough pastures in the Bavarian Pre-Alps - an economic and ecological scenario approach," 83rd Annual Conference, March 30-April 1, 2009, Dublin, Ireland 51070, Agricultural Economics Society.
  4. Bathgate, A. & Revell, C. & Kingwell, R., 2009. "Identifying the value of pasture improvement using wholefarm modelling," Agricultural Systems, Elsevier, vol. 102(1-3), pages 48-57, October.
  5. Kingwell, Ross & Fuchsbichler, Amy, 2011. "The whole-farm benefits of controlled traffic farming: An Australian appraisal," Agricultural Systems, Elsevier, vol. 104(7), pages 513-521, September.
  6. Parsons, Oliver, 2012. "Community Governance: An Alternative Approach to Regulation and Market Mechanisms for Management of Nitrogen Loss," 2012 Conference, August 31, 2012, Nelson, New Zealand 136053, New Zealand Agricultural and Resource Economics Society.
  7. Meyer-Aurich, Andreas & Gandorfer, Markus & Weersink, Alfons & Wagner, Peter, 2008. "Economic analysis of site-specific wheat management with respect to grain quality and separation of the different quality fractions," 2008 International Congress, August 26-29, 2008, Ghent, Belgium 43649, European Association of Agricultural Economists.
  8. Pannell, David J., 2013. "Value for Money in Environmental Policy and Environmental Economics," Working Papers 146501, University of Western Australia, School of Agricultural and Resource Economics.
  9. Crosthwaite, Jim & Moll, Jim & Dorrough, Josh & Malcolm, Bill, 2009. "Re-organising farm businesses to improve environmental outcomes," Australasian Agribusiness Review, University of Melbourne, Melbourne School of Land and Environment, vol. 17.
  10. Hutchings, Timothy R. & Nordblom, Thomas L., 2011. "A financial analysis of the effect of the mix of crop and sheep enterprises on the risk profile of dryland farms in south-eastern Australia," AFBM Journal, Australasian Farm Business Management Network, vol. 8(1).
  11. Doole, Graeme J. & Weetman, Ellen, 2009. "Tactical management of pasture fallows in Western Australian cropping systems," Agricultural Systems, Elsevier, vol. 102(1-3), pages 24-32, October.
  12. Asci, Serhat & Borisova, Tatiana & VanSickle, John J. & Zotarelli, Lincoln, 2012. "Risk and Nitrogen Application Decisions in Florida Potato Production," 2012 Annual Meeting, February 4-7, 2012, Birmingham, Alabama 119797, Southern Agricultural Economics Association.
  13. Roeder, Norbert & Lederbogen, Dirk & Trautner, Juergen & Bergamini, Ariel & Stofer, Silvia & Scheidegger, Christoph, 2010. "The impact of changing agricultural policies on jointly used rough pastures in the Bavarian Pre-Alps: An economic and ecological scenario approach," Ecological Economics, Elsevier, vol. 69(12), pages 2435-2447, October.
  14. Pannell, David J. & Hailu, Getu & Weersink, Alfons & Burt, Amanda, 2007. "More Reasons Why Farmers Have So Little Interest in Futures Markets," Working Papers 9232, University of Western Australia, School of Agricultural and Resource Economics.
  15. Kragt, Marit Ellen & Pannell, David J. & Robertson, Michael J., 2011. "Easy winnings? The economics of carbon sequestration in agricultural soils," 2011 Conference (55th), February 8-11, 2011, Melbourne, Australia 100575, Australian Agricultural and Resource Economics Society.
  16. Lien, Gudbrand & Hardaker, J. Brian & Asseldonk, Marcel A.P.M. van & Richardson, James W., 2009. "Risk programming and sparse data: how to get more reliable results," Agricultural Systems, Elsevier, vol. 101(1-2), pages 42-48, June.
  17. Byrne, F. & Robertson, M.J. & Bathgate, A. & Hoque, Z., 2010. "Factors influencing potential scale of adoption of a perennial pasture in a mixed crop-livestock farming system," Agricultural Systems, Elsevier, vol. 103(7), pages 453-462, September.
  18. Meyer-Aurich, Andreas & Weersink, Alfons & Gandorfer, Markus & Wagner, Peter, 2010. "Optimal site-specific fertilization and harvesting strategies with respect to crop yield and quality response to nitrogen," Agricultural Systems, Elsevier, vol. 103(7), pages 478-485, September.
  19. repec:ags:jlaare:168264 is not listed on IDEAS
  20. Wei, Yongping & Chen, Deli & Hu, Kelin & Willett, Ian R. & Langford, John, 2009. "Policy incentives for reducing nitrate leaching from intensive agriculture in desert oases of Alxa, Inner Mongolia, China," Agricultural Water Management, Elsevier, vol. 96(7), pages 1114-1119, July.

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