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Disentangling the Social and Economic Dimensions of Agricultural Behaviour: What Role for Institutions and Social Capital?

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  • Kostov, Philip
  • Lingard, John

Abstract

Agricultural production is increasingly combined with other economic and noneconomic activities. This leads to complex interactions taking place within rural systems. The recent policy shift towards a more holistic approach in terms of integrated and sustainable models of rural development emphasises these developments. In this context the role of 'noneconomic' determinants of behaviour is placed to the fore. The orthodox economic approach stresses (almost) instantaneous adjustments to prices and other 'economic' factors. This is at odds with idealised images of the 'efficient' market, which is characterised by a great deal of uncertainty. In such a volatile environment, routines-based behaviour, such as following institutional rules and/or socially acceptable types of behaviour, usually described in term of 'social capital', is advantageous and creates a more stable environment. The stable environment is a pre-requisite for workability of the purely 'economic' arrangements. This intuitive argument is developed using a simple mathematical model, incorporating 'social' and 'economic' factors. The social dimension enhances the impact of economic factors, slowing the speed of adjustment to the equilibrium state. Some conditions under which the social and institutional infrastructure are beneficial or detrimental for economic development are outlined. An important by-product of our model is the conclusion that social and economic factors are closely entangled and their separate influences are purely analytical devices. Ignoring this entanglement may lead to serious biases in quantitative analysis. Some examples of these potential pitfalls are presented.

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Bibliographic Info

Paper provided by European Association of Agricultural Economists in its series 94th Seminar, April 9-10, 2005, Ashford, UK with number 24436.

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Date of creation: 2005
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Handle: RePEc:ags:eaae94:24436

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Keywords: Agribusiness;

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  1. Schlicht, Ekkehart, 1981. "Reference Group Behaviour and Economic Incentives: A Further Remark," Munich Reprints in Economics 3353, University of Munich, Department of Economics.
  2. Schlicht, Ekkehart, 1981. "Reference Group Behaviour and Economic Incentives: A Remark," Munich Reprints in Economics 4183, University of Munich, Department of Economics.
  3. Samuel Bowles, 1998. "Endogenous Preferences: The Cultural Consequences of Markets and Other Economic Institutions," Journal of Economic Literature, American Economic Association, vol. 36(1), pages 75-111, March.
  4. Philip Kostov & John Lingard, 2004. "Subsistence Agriculture in Transition Economies: Its Roles and Determinants," Journal of Agricultural Economics, Wiley Blackwell, vol. 55(3), pages 565-579.
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