Agricultural policies and the reduction of uncertainties in promoting diversification of agricultural productions. Insights from Europe

Even though product diversification is expected to contribute to a more sustainable development of agriculture, farm specialization remains a dominant trend in many European areas. In this chapter, we explore some economic mechanisms explaining this situation, with a focus on the effects of uncertainty. We present alternative views on these mechanisms, derived from two different types of economic analysis. Microeconomic analysis of diversification, embedded in standard economic theory, puts an emphasis on measuring the costs and benefits of diversification. Current development in this field highlights the difficulties to assess the diversity of farmers' behavior regarding risks and uncertainty of diversification adoption. Mesoeconomics analysis of diversification, embedded in institutional economics, puts an emphasis on the collective dimension of knowledge production on specialization versus diversification. Current development in this field highlights the difficulties to set up governance models to support effective production of knowledge on diversification. A key idea of the chapter is to show that alternative (or even competing) economic theories might be associated with policy instruments that may be complementary in practice. This is illustrated by a presentation of diverse instruments of the Common Agricultural Policy of the European Union.