IDEAS home Printed from https://ideas.repec.org/a/eee/agisys/v103y2010i6p345-350.html
   My bibliography  Save this article

Probabilities for decision analysis in agriculture and rural resource economics: The need for a paradigm change

Author

Listed:
  • Hardaker, J. Brian
  • Lien, Gudbrand

Abstract

The notion that we can rationalize risky choice in terms of expected utility appears to be widely if not universally accepted in the agricultural and resource economics profession. While there have been many attempts to assess the risk preferences of farmers, there are few studies of their beliefs about uncertain events encoded as probabilities. We may attribute this neglect to scepticism in the profession about the concept of subjective probability. The general unwillingness to embrace this theory and its associated methods has all too often caused researchers to focus on problems for which frequency data are available, rather than on problems that are more important where data are generally sparse or lacking. In response, we provide a brief reminder of the merits of the subjectivist approach and extract some priorities for future research should there be a change of heart among at least some of the profession.

Suggested Citation

  • Hardaker, J. Brian & Lien, Gudbrand, 2010. "Probabilities for decision analysis in agriculture and rural resource economics: The need for a paradigm change," Agricultural Systems, Elsevier, vol. 103(6), pages 345-350, July.
  • Handle: RePEc:eee:agisys:v:103:y:2010:i:6:p:345-350
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0308-521X(10)00002-8
    Download Restriction: Full text for ScienceDirect subscribers only

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Moawia Alghalith, 2006. "Hedging under price and output uncertainty: revisited," Applied Financial Economics Letters, Taylor and Francis Journals, vol. 2(4), pages 243-245, July.
    2. Alfons Oude Lansink, 1999. "Area Allocation Under Price Uncertainty on Dutch Arable Farms," Journal of Agricultural Economics, Wiley Blackwell, vol. 50(1), pages 93-105.
    3. Roberts, Roland K. & English, Burton C. & Gao, Qi & Larson, James A., 2006. "Simultaneous Adoption of Herbicide-Resistant and Conservation-Tillage Cotton Technologies," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 38(03), pages 629-643, December.
    4. C. J. O'Donnell & W. E. Griffiths, 2006. "Estimating State-Contingent Production Frontiers," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 88(1), pages 249-266.
    5. Rulon D. Pope, 2003. "Agricultural Risk Analysis: Adequacy of Models, Data, and Issues," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 85(5), pages 1249-1256.
    6. Zellner, Arnold, 2007. "Philosophy and objectives of econometrics," Journal of Econometrics, Elsevier, vol. 136(2), pages 331-339, February.
    7. Robert K. Lindner & Melissa Gibbs, 1990. "A Test Of Bayesian Learning From Farmer Trials Of New Wheat Varieties," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 34(1), pages 21-38, April.
    8. James E. Matheson & Robert L. Winkler, 1976. "Scoring Rules for Continuous Probability Distributions," Management Science, INFORMS, vol. 22(10), pages 1087-1096, June.
    9. Marra, Michele & Pannell, David J. & Abadi Ghadim, Amir, 2003. "The economics of risk, uncertainty and learning in the adoption of new agricultural technologies: where are we on the learning curve?," Agricultural Systems, Elsevier, vol. 75(2-3), pages 215-234.
    10. Just, Richard E., 2003. "Risk research in agricultural economics: opportunities and challenges for the next twenty-five years," Agricultural Systems, Elsevier, vol. 75(2-3), pages 123-159.
    11. Lindner, Robert K. & Gibbs, Melissa, 1990. "A Test Of Bayesian Learning From Farmer Trials Of New Wheat Varieties," Australian Journal of Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 34(01), April.
    12. Norris, Patricia E. & Kramer, Randall A., 1990. "The Elicitation of Subjective Probabilities with Applications in Agricultural Economics," Review of Marketing and Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 58, December.
    13. Joshua D. Woodard & Philip Garcia, 2008. "Basis risk and weather hedging effectiveness," Agricultural Finance Review, Emerald Group Publishing, vol. 68(1), pages 99-117, May.
    14. Lence, Sergio H., 2000. "Using Consumption and Asset Return Data to Estimate Farmersï¾’ Time Preferences and Risk Attitudes," Staff General Research Papers Archive 1930, Iowa State University, Department of Economics.
    15. Lien, Gudbrand, 2002. "Non-parametric estimation of decision makers' risk aversion," Agricultural Economics, Blackwell, vol. 27(1), pages 75-83, May.
    16. Patrick, George F. & Peiter, Amy J. & Knight, Thomas O. & Coble, Keith H. & Baquet, Alan E., 2007. "Hog Producers' Risk Management Attitudes and Desire for Additional Risk Management Education," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 39(03), pages 671-687, December.
    17. Gudbrand Lien & Ola Flaten & Anne Moxnes Jervell & Martha Ebbesvik & Matthias Koesling & Paul Steinar Valle, 2006. "Management and Risk Characteristics of Part-Time and Full-Time Farmers in Norway," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 28(1), pages 111-131.
    18. Salvatore Di Falco & Jean-Paul Chavas, 2006. "Crop genetic diversity, farm productivity and the management of environmental risk in rainfed agriculture," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 33(3), pages 289-314, September.
    19. Musshoff, Oliver & Hirschauer, Norbert, 2007. "What benefits are to be derived from improved farm program planning approaches? - The role of time series models and stochastic optimization," Agricultural Systems, Elsevier, vol. 95(1-3), pages 11-27, December.
    20. Jean-Paul Chavas, 2008. "A Cost Approach to Economic Analysis Under State-Contingent Production Uncertainty," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 90(2), pages 435-466.
    21. Hardaker, J. Brian & Lien, Gudbrand D., 2005. "Towards some principles of good practice for decision analysis in agriculture," 2005 Conference (49th), February 9-11, 2005, Coff's Harbour, Australia 137925, Australian Agricultural and Resource Economics Society.
    22. Chambers,Robert G. & Quiggin,John, 2000. "Uncertainty, Production, Choice, and Agency," Cambridge Books, Cambridge University Press, number 9780521622448, April.
    23. Greiner, Romy & Patterson, Louisa & Miller, Owen, 2009. "Motivations, risk perceptions and adoption of conservation practices by farmers," Agricultural Systems, Elsevier, vol. 99(2-3), pages 86-104, February.
    24. Subal C. Kumbhakar, 2002. "Specification and Estimation of Production Risk, Risk Preferences and Technical Efficiency," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 84(1), pages 8-22.
    25. Hansen, J. W. & Jones, J. W., 2000. "Scaling-up crop models for climate variability applications," Agricultural Systems, Elsevier, vol. 65(1), pages 43-72, July.
    26. Olivier Mahul, 2001. "Optimal Insurance Against Climatic Experience," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 83(3), pages 593-604.
    27. Matthew Rabin & Richard H. Thaler, 2001. "Anomalies: Risk Aversion," Journal of Economic Perspectives, American Economic Association, vol. 15(1), pages 219-232, Winter.
    28. Lien, Gudbrand D. & Hardaker, J. Brian & Richardson, James W., 2006. "Simulating Multivariate Distributions with Sparse Data: A Kernal Density Smoothing Procedure," 2006 Annual Meeting, August 12-18, 2006, Queensland, Australia 25449, International Association of Agricultural Economists.
    29. Sergio H. Lence, 2000. "Using Consumption and Asset Return Data to Estimate Farmers' Time Preferences and Risk Attitudes," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 82(4), pages 934-947.
    30. Bruce A. McCarl & Xavier Villavicencio & Ximing Wu, 2008. "Climate Change and Future Analysis: Is Stationarity Dying?," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 90(5), pages 1241-1247.
    31. Lien, Gudbrand D., 2002. "Non-parametric estimation of decision makers' risk aversion," Agricultural Economics of Agricultural Economists, International Association of Agricultural Economists, vol. 27(1), May.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Monjardino, Marta & McBeath, T. & Brennan, Lisa E. & Llewellyn, Rick S., 2012. "Are farmers in low-rainfall cropping regions under-fertilizing? An Australian case-study," 2012 Conference, August 18-24, 2012, Foz do Iguacu, Brazil 124976, International Association of Agricultural Economists.
    2. Kandulu, John M. & Bryan, Brett A. & King, Darran & Connor, Jeffery D., 2012. "Mitigating economic risk from climate variability in rain-fed agriculture through enterprise mix diversification," Ecological Economics, Elsevier, vol. 79(C), pages 105-112.
    3. Monjardino, Marta & McBeath, T. & Brennan, Lisa E. & Llewellyn, Rick S., 2012. "Revisiting N fertilisation rates in low-rainfall grain cropping regions of Australia: A risk analysis," 2012 Conference (56th), February 7-10, 2012, Freemantle, Australia 124339, Australian Agricultural and Resource Economics Society.
    4. van Winsen, Frankwin & de Mey, Yann & Lauwers, Ludwig & Van Passel, Steven & Vancauteren, Mark & Wauters, Erwin, 2013. "Cognitive mapping: A method to elucidate and present farmers’ risk perception," Agricultural Systems, Elsevier, vol. 122(C), pages 42-52.
    5. Kandulu, John M., 2013. "Quantifying the extent to which enterprise mix diversification can mitigate economic risk in rainfed agriculture," Australasian Agribusiness Review, University of Melbourne, Melbourne School of Land and Environment, vol. 21.
    6. Kandulu, John, 2011. "Assessing the potential for beneficial diversification in rain-fed agricultural enterprises," 2011 Conference (55th), February 8-11, 2011, Melbourne, Australia 100568, Australian Agricultural and Resource Economics Society.
    7. J. B. Hardaker & Gudbrand Lien, 2010. "Stochastic efficiency analysis with risk aversion bounds: a comment," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 54(3), pages 379-383, July.
    8. Caroline Roussy & Aude Ridier & Karim Chaïb, 2014. "Adoption d’innovations par les agriculteurs : rôle des perceptions et des préférences," Post-Print hal-01123427, HAL.
    9. Hardaker, J.B. & Lien, Gudbrand D., 2010. "Stochastic efficiency analysis with risk aversion bounds: a comment," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 54(3), September.
    10. de Mey, Yann & Wauters, Erwin & van Winsen, Frankwin & Vancauteren, Mark & Van Passel, Steven & Lauwers, Ludwig H., 2012. "From total farm to household risk: implication for risk management," 123rd Seminar, February 23-24, 2012, Dublin, Ireland 122470, European Association of Agricultural Economists.
    11. Soraya Tanure & Carlos Nabinger & João Luiz Becker, 2015. "Bioeconomic Model of Decision Support System for Farm Management: Proposal of a Mathematical Model," Systems Research and Behavioral Science, Wiley Blackwell, vol. 32(6), pages 658-671, November.
    12. Tanure, Soraya & Nabinger, Carlos & Becker, João Luiz, 2013. "Bioeconomic model of decision support system for farm management. Part I: Systemic conceptual modeling," Agricultural Systems, Elsevier, vol. 115(C), pages 104-116.
    13. repec:zbw:espost:171321 is not listed on IDEAS

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:agisys:v:103:y:2010:i:6:p:345-350. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu). General contact details of provider: http://www.elsevier.com/locate/agsy .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.