Glossary
AGree Initiative |
AGree is a private sector initiative that receives input from 44 different agri-businesses, farmers, non-profit organizations, volunteer groups, university professors and charitable foundations. AGree’s stated goal is to spark beneficial change in the food and agriculture system by encouraging leaders to take action in national priorities associated with food and agriculture in the United States. The Meridian Institute is the organizational home of the AGree Initiative. |
AGree Initiative’s Four Challenges |
The AGree Initiative promotes a broad-based and systematic effort that can meet these four challenges:
Similar to the FSE and Global Panel, the AGree Initiative is an intentional effort to avoid policy conflict and encourage program coordination. |
Agricultural Act of 2014 (i.e., the 2014 Farm Bill) |
The official name for the 2014 Farm Bill. The Agricultural Act of 2014 has twelve different titles (Commodities, Conservation, Trade, Nutrition, Credit, Rural Development, Research and Extension, Forestry, Energy, Horticulture, Crop Insurance and Miscellaneous). Compared to previous farm bills, the 2014 Farm Act transformed commodity programs, expanded multi-peril crop insurance, restructured conservation programs, adjusted the Supplemental Nutrition Assistance Program (SNAP), and reorganized programs for beginning farmers and ranchers, bioenergy, organic farmers, and specialty crops. |
Agricultural productivity growth factors |
Studies performed by the USDA’s Economic Research Service indicate that growth in US Total Factor Productivity (TFP) is associated with investments in the following factors: 1) Research and Development (R&D), 2) Education and Extension, 3) Infrastructure Development and 4) Properly-designed government policies and programs. |
Agricultural Resource Management Survey (ARMS) |
ARMS is USDA's primary source of information on the financial condition, production practices, and resource use of America's farm businesses and the economic well-being of America's farm households. https://www.ers.usda.gov/data-products/arms-farm-financial-and-crop-production-practices/ |
Agriculture in the Classroom (AITC) program |
USDA’s National Institute of Food and Agriculture (NIFA) cooperates with state governments to use the AITC program for incorporating agriculture-based curriculum into US primary and secondary school systems. AITC has rigorous academic foundations. AITC defines Agricultural Literacy as: “having the ability to understand and communicate the source and value of agriculture as it affects our quality of life.” |
Agriculture Risk Coverage (ARC) Program |
ARC is a counter-cyclical commodity program that provides protection from severe downturns in farm revenue (price multiplied by yield). ARC is attractive to producers seeking a safeguard against revenue falloffs associated with either price or yield reductions. |
Agriculture Risk Coverage – Individual Coverage (ARC-IC) Program |
The ARC-IC Program is an individual and self-contained whole-farm coverage commodity program protecting the producer from downside risk based on the sum of all farm-level program revenues. ARC-IC’s Program participation requirements are unique. Modernized farm operations that have extensive record-keeping systems are the most likely candidates who could benefit from ARC-IC participation. ARC-IC’s unique aspects have limited its popularity as a Title I commodity program choice. |
Agri-Food US Market Conditions compared to Perfectly Competitive Standards. |
US Agri-Food Markets have similarities to perfectly-competitive markets. But a set of actual market conditions differ from perfectly competitive standards, including:
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Agro-Environmental Policy Relationships: Conflict and Harmony Combined |
Tanentzap et al. (2015) use published research to estimate that 80-percent of global deforestation and 53-percent of the threatened extinction of earth’s terrestrial species are associated with the global agricultural land use expansion. |
Albert O. Hirschman’s Exit, Voice and Loyalty |
Albert O. Hirschman’s 1970 publication, Exit, Voice and Loyalty, offered a perspective on the capacity of systems to remain sustainable by responding to three factors:
In Hirschman’s scenario, if the Agri-Food System can win loyal participants, then it can listen to the “voices of change” and respond appropriately, while not losing members to exit. |
Analysis of Changing Market Equilibria |
In the S&D Model, we predict that shifts of either/both supply and/or demand alter the market’s equilibrium price and quantity position. Because non-price market determinants vary by the minute, or more rapidly, we observe frequent changes in real-world market equilibria. Managers who regularly check their smart-phones to see “how the markets are doing” are fully aware that market prices change quickly. |
Appreciation and Depreciation of the US Currency Exchange Rate |
In international currency exchange markets, the exchange rate determines value of one currency in terms of another. For example, when the US and the EU trade, the value of the US Dollar (USD) is determined by its equivalent value in Euros. |
Arrow’s Impossibility Theorem |
Nobel economist Ken Arrow studied the connections between individual preferences and collective decision-making, and concluded that no collective choice mechanism (including majority rule) can guarantee to produce logical, rational and efficient outcomes. |
Ashley and Maxwell's (2001) five principles to guide rural development policy |
Ashley and Maxwell (2001) derived five principles to guide rural development policy in ways that can alleviate poverty and improve the quality of life in rural areas:
Assist rural areas to advance the comparative advantages of their productive sectors in a manner that reduces poverty and encourages real GDP growth. |
Authoritative regulatory systems |
In the US, the establishment and enforcement of new regulations has been a commonly used policy technique for reducing the side effects of negative externalities. |
Barnard, Dr. Neal (Commentary on agricultural subsidies and nutritional health) |
Dr. Neal Barnard (M.D.) published a commentary in 2011 examining the connection between agricultural subsidies and nutritional health. Dr. Barnard proposes that US agricultural subsidies are partly responsible for some foods to be more plentiful and lower-priced, such as animal products, refined fats and corn-based sweeteners. In contrast, Barnard notes that other crops, such as fruits and vegetables, remain relatively unsubsidized. Barnard predicts that consumers reduce their purchases of the higher-priced scarce items and increase their use of the lower-price plentiful products. Barnard suggests that current US Agricultural Policy is partly responsible for the current US obesity crisis. Barnard urges reform of US agricultural policy to change or eliminate the farm subsidy system, such that the average consumer household will receive new price signals about what actually constitutes a healthy diet. |
Benefit-Cost (B/C) Ratio Method for Project Evaluation |
When we use the Benefit-Cost (B/C) Ratio to evaluate the economic viability of a project, the first step is to determine the present value of the project’s benefits and costs. Then the Benefit (B) and Cost (C) present values are respectively placed in the numerator and denominator of the B/C Ratio. A project judged as viable if the value of the B/C ratio exceeds one (B/C > 1). |
Binding Condition within a Trade Agreement |
Trade agreement participants promise not to unilaterally increase their tariffs above a negotiated maximum “bound” rate.
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Broad-based rural development programs |
Rural development today is not simply an extension of agricultural development. Rural vitality in the modern age requires that we institute multi-sector models to effectively combine public infrastructure investments with innovative private markets. |
Bureaucratic “Empire Building” |
Empire Building is the tendency of bureaucracies to expand their power and influence by inflating their agency budgets beyond the size where marginality would determine as optimal. |
Calculus of Consent |
James Buchanan and Gordon Tullock argue that the imperfections of collective decision making are substantial reasons for electorates to be vigilant in reviewing existing policies, cognizant of alternative competing policies, and active in replacing outdated policies. |
Catalysts for Future Change in the US Agri-Food System |
Chapter 14 identifies the following sources of change in the US Agri-Food System:
Additional sources of change may also include, but are not limited to, environmental sustainability and food safety. |
CBA |
CBA is Cost-Benefit Analysis. CBA is a logical set of techniques used to estimate or establish the net economic effects of a project or proposal. |
Causality Question in Rural Development |
Hodge and Midmore (2008) raise the question of “causality” as a methodological issue. How do we know whether observed changes in rural economic conditions are actually traceable to rural development efforts? Are there plausible and competing explanations of what is actually driving change in rural areas? We need methods that help us to validate what effects are truly linked to enacted rural policies. |
Centralized Model (CM) of Rural Development |
CM strategy institutes a set of nationwide policy incentives. Markets and/or individual producers rationally and voluntarily respond to the CM strategy through new investments, technology adoption, infrastructure improvements, etc. The CM model suggests that individual decision-makers willingly engage in development activity, given the correct incentive environment. |
CEO Council on Sustainability and Innovation, Recommendations of the |
The CEO Council includes top executives from: Kellogg, DuPont, Hormel, Elanco and Land O’Lakes. The CEO Council’s report highlights three recommendations:
Collaborative Decision Making – Coordinate agri-food choices |
Ceteris Paribus |
An important Latin phrase, interpreted as “other things being equal.” In economic analysis, when we invoke the “Ceteris Paribus” condition, we suspend the influence of all other factors, so that we focus our analysis on predicting the separate effect of a particular force or variable. |
A “Change in Demand” versus a “Change in Quantity Demanded” |
Non-price demand determinants are responsible for a “change in demand”. If non-price demand determinants vary, then the “demand curve shifts” to a new position, when displayed on a graph. “Changes in quantity-demanded” are the law of demand in action. These quantity changes are a response to the product’s own-price fluctuations. On a graph, “Changes in Quantity Demanded” are displayed as sliding-along the demand function’s negative slope. Non-price demand determinants include:
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A “Change in Supply” versus a “Change in Quantity Supplied” |
Non-price supply determinants are responsible for a “change in supply”. If non-price supply determinants vary, then the “supply curve shifts” to a new position, when displayed on a graph. “Changes in quantity-supplied” are the law of supply in action. These quantity changes area response to the product’s own-price fluctuations. On a graph, “Changes in Quantity Supplied” are displayed as sliding-along the supply function’s positive slope. Non-price supply determinants include:
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Choice |
Selecting one option causes other options to be given-up or foregone. |
Classified Pricing |
Classified pricing is a milk marketing order mechanism that allocates alternative uses for the available fluid milk supply. Class I – Consumer-Ready Beverage - Fluid Milk |
Climate change adaptation |
The Government Accountability Office (GAO), the US Congress’s primary auditing agency, classified climate change as one of federal government’s thirty-most significant risks. In November 2013, Executive Order 13653 instructed federal agencies to create concrete plans for climate change adaptation. |
Common Market |
MERCOSUR trading area in South America is an example of a common market. |
Community-Supported Agriculture (CSA) |
In Community-Supported Agriculture (CSA), groups of local residents agree to be shareholders or subscribers who financially support the production costs of a farm or community garden in exchange for receiving shares of the farm’s output during the growing season |
Congressional Budget Office (CBO) |
The Congressional Budget Office’s (CBO’s) primary role is to serve the US Congress with its substantial analytical resources. CBO provides objective estimates of legislative budgetary impacts. |
Conservation Easement |
A conservation easement is a landowner’s decision to legally and permanently pledge his/her valuable natural asset (such as land) to a single use (agriculture). |
Conservation program “additionality” |
The additionality concept emphasizes that we should estimate how much extra conservation happens when producers participate in subsidized programs, as compared to the amount of conservation effort that would have happened anyway, with no program in place. |
Conservation program “slippage” |
Lichtenberg (2014) observes that subsidies for conservation (such as CRP) not only create measurable gains in natural resource sustainability; the conservation subsidies supplement producer incomes, increase farm wealth and create financial capacity to convert natural habitat to farm enterprises. This unanticipated effect of conservation subsidies of increasing agricultural use at the expense of less natural habitat is called “slippage.” |
Conservation Reserve and Enhancement Program (CREP) |
The Conservation Reserve and Enhancement Program (CREP) is a team effort of both federal and state conservation programs; this program is focused on solving agriculturally-related environmental problems. |
Conservation Reserve Program (CRP) |
The Conservation Reserve Program (CRP) allows producers to voluntarily enroll up to 24 M-acres of authorized and qualified farmland; this program sets-up 10-or-15 year contracts to establish native prairie, pollinator-meadow acreages and/or wildlife habitat on lands that are highly-erodible, marginal pasture, or ecologically significant grasslands or wetlands. |
Conservation Stewardship Program (CSP) |
The Conservation Stewardship Program (CSP) is a Working Lands conservation program that encourages the continuation and improvement of producers’ existing conservation systems. A producer must “pre-qualify” to be a participant. |
Consumer Analysis of In-Kind Transfer Programs: Infra-marginal, Extra-marginal and Empirical Outcomes |
Use the consumer optimum model to predict effect of the SNAP in-kind transfer program. Scenario: Assume household qualifies, and receives a SNAP payment on an EBT card.
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Consumer Optimum |
The rational consumer household reaches optimum satisfaction by attaining the highest indifference level while staying within a limited budget. The Indifference Curves (IC’s) tell us what consumers most prefer, and Budget Constraints (BC’s)tells us what the consumer can afford. |
Consumer Price Index (CPI) |
The Consumer Price Index (CPI) is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services.* |
Consumer Surplus (CS) |
Consumer Surplus (CS) measures the economic value enjoyed by consumers when they purchase a product in a competitive market at a single equilibrium product price ($Peq) and quantity (Qeq). Why does consumer surplus exist? Answer: When the consumer buys entire equilibrium quantity at the agreed-upon price, they do not pay higher prices for the initial quantities, even though they value the first few units more. The “consumer surplus” is the positive difference between the higher prices that consumer are willing to pay for the initial quantities, and the actual quantities purchased at the lower agreed-upon equilibrium price. |
Cooperative Pooling |
Agricultural Cooperatives originated the practice of price pooling in dairy markets. A cooperative combines the milk from many producers; each producer who contributes to the pool earns a milk price associated with their participation in the pool. Membership within a cooperative pool is a means of diversifying and reducing the price volatility faced by any one producer. |
Cooperative Research and Development Agreements (CRADA’s) |
A CRADA is a written agreement between a government agency and a private company or university. The CRADA identifies collaborative guidelines to help the entities achieve effective results by jointly engaging in research and development projects or programs. |
Core Food Security Module (CFSM) |
The CFSM is a common measurement instrument that allows for a comparison of food security classifications across different nations. The CFSM uses an 18-question survey to make food security determinations for households. |
Cost Incidence Analysis |
An analysis of Cost Incidence provides evidence of how the cost of a change in market conditions is shared. For example, if implementation of the FSMA increases regulatory costs on the market’s supply side, then a cost incidence analysis will examine the resulting change in the market’s equilibrium product price to determine how the extra regulatory cost is shared by buyers and sellers. |
Costs of Taxation in a CBA |
When a project is supported by sales or income taxes, then there will be deadweight economic efficiency losses caused by these funding sources. There are also the administrative costs of collecting and monitoring taxation systems. |
Counter-cyclical farm programs |
Counter-cyclical refers to taking actions that counter (go against) the trend of a market cycle. For example, when farm markets are in a downward phase of the cycle, counter-cyclical activity would attempt to reverse or soften the effect of the cyclical trend. For example, if a farm program helps to stabilize producer income in a period of low prices, then that program is considered to be counter-cyclical. |
Counter-cyclical Macroeconomic Policy |
Using monetary and fiscal policy instruments to moderate the most severe effects of the business cycle. The Fed and/or the government’s fiscal budget create a change in aggregate demand that is “counter” to the phase of the cycle. An example is the Fed reducing interest rates to encourage additional aggregate spending during a recession. |
Crop Insurance Act of 1980 |
The Crop Insurance Act of 1980 established Federal Crop Insurance as a permanent program. This 1980 Act approved subsidizing 30% of producer premiums, empowered private insurers to actively sell policies, and authorized the USDA to act as a reinsurer for the private firms. |
Cross Compliance |
Cross Compliance is the name given to the conservation requirement that is connected to receiving financial benefits from other farm programs. |
Cross-Compliance and the Mixed Incentives for Conservation Enforcement |
The Congressional Research Service (CRS) notes that conservation compliance by producer participants in farm subsidy programs follows the normal rule of law. Alleged violators of conservation requirements are presumed innocent until proven otherwise. |
Cross Compliance and Subsidized Crop Insurance in the 2014 Farm Bill |
Premium subsidies for Federal Crop Insurance (FCI) are substantial (as high as 65% of the true cost). Additional producers will participate in FCI because the subsidies substantially cheapen producers’ premium payment costs. The 2014 Farm Bill explicitly conditions eligibility for these sizeable subsidies based on compliance with conservation requirements. In 2014, federally subsidized crop insurance provided coverage for 294 million acres of crops in production. To provide a perspective, the Congressional Research Service (CRS) reports that 83% of US crop acreage was insured in 2014. The large acreage size of subsidized FCI is a reason to consider the conservation effects of requiring producer compliance as a condition of receiving a 65% reduction in the cost of FCI insurance premiums. |
Cross-Price Elasticity of Demand (ƐX) |
Ceteris Paribus, the Cross-Price Elasticity of Demand (ƐX) gauges the proportional response of quantity demanded for one product (Product ‘a’) in relation to a proportional price change for a second product (Product ‘b’). In mathematical notation, we display ƐX as: ƐX = (ΔQD,a /QD,a) ÷ (ΔPb /Pb) Where: ƐX = Cross-Price Elasticity of Demand Using ƐX values, we can classify consumer-driven relationships between pairs of products:
If ƐX ≈ 0, then products ‘a’ and ‘b’ are unrelated |
Currency Exchange Rate in Relation to Exports and Imports |
As a nation’s equilibrium currency value fluctuates, the net cost of imports and exports changes for foreign and domestic consumers. Example: when the equilibrium USD value “strengthens” (increases) relative to the Yen (¥), then Japanese consumers experience an increased cost of importing American-made products. Simultaneously, a strong USD causes Japanese imports to be cheaper for American consumers to purchase. Ceteris paribus, an appreciating USD (relative to the ¥) encourages US imports and discourages US exports. |
Customs Union |
Members of a customs union abolish trade restrictions among each other, and set-up common tariffs against non-members. |
Dairy Indemnity Payment Program (DIPP) |
DIPP, as reauthorized in the 2014 Farm Bill, offers financial assistance to dairy producers when pesticides or other residues contaminate the dairy farm’s production, and a government agency compels the producer to remove his/her milk from the commercial market. |
Dairy Product Donation Program (DPDP) |
DPDP is a counter-cyclical dairy program included in the 2014 Farm Bill. DPDP is triggered by extreme market conditions that reduce the dairy margin below the $4.00/cwt threshold for two consecutive months. |
Demographic Aging of US Farming |
The average age of principal US farm operators was 58.3 years in 2012, compared to an average of 50.5 years in 1982. |
Differential incentives for disciplinary and interdisciplinary research in agri-food systems |
Disciplinary research creates new knowledge within a particular sphere of the agri-food system. Research institutions highly reward the production of disciplinary scholarly work. Challenges arise from insufficient incentives for interdisciplinary research. Many agri-system problems require an interdisciplinary approach to achieve real solutions. |
Diminishing Marginal Rate of Substitution (MRS) |
The Principle of Diversity in Consumption, suggests that consumers enjoy a variety in the amounts of different types of goods that they purchase. The diversity principle is demonstrated as a convex, negatively-sloped indifference curve. Consumer trade-offs along a single indifference curve are described as a diminishing Marginal Rate Of Substitution (MRS). The Consumer MRS diminishes (the trade-off rate decreases), as a consumer “slides down the indifference curve” from top to bottom. While the consumer remains indifferent and the trade-off rate diminishes, the consumer’s distribution of product choices becomes more balanced or diversified. |
Direct Payment Program (DPP) |
Congress introduced the DPP as a financial transition program to help farm producers adjust to new market-based policies introduced in the 1996 Farm Bill. Under the 1996 policy conditions, farm operators had greater exposure to price volatility in commodity markets. Qualified farm participants in selected USDA commodity programs could receive steady DPP payments based on validated production history and a fixed per-bushel payment-rate. Before its elimination in the 2014 Farm Bill, the DPP was a steady source of revenue for participating US crop producers between the years 1996 and 2013. |
Distributional Market Effects of Taxes or Subsidies |
When a new tax or subsidy is introduced into a private market, the policy changes the market equilibrium price and quantity. Variations in the market equilibria alter the market’s consumer and producer surpluses. |
Diversification and the Market Structure of US farms |
Small farms supplement their income and control their risk by broadening their economic base and employing their resources in diverse alternative enterprises. |
Double-Counting Bias in CBA |
If a project creates direct net benefits such as increased business profit and an improved consumer surplus, then any gain in asset value associated with the extra income should not be counted. Such a practice is counting same benefit twice, and causes a biased CBA evaluation. |
Economic Union |
A supranational authority coordinates policies of the members. The EU is an example of an economic union. |
Economies-of-Scale |
When a firm is changing its scale of operation, all input hiring is variable. There are no fixed inputs. In the case of economies-of-scale, as a firm increases its percent usage of hired inputs, the resultant percent gain in productive output is greater than the proportional increase in the hired inputs. When economies-of-scale occur, a larger-scale farm operations gains a competitive advantage because it can produce additional output at a lower average total cost per unit output than can smaller-sized farms. Contrast this outcome with the situation known as Diseconomies of Scale. |
Elasticity Measurement in Economics |
An economic elasticity measurement is a ratio. An elasticity coefficient measures the proportional responsiveness of a dependent variable in relation to a proportional change in an independent variable. To consistently determine an elasticity ratio coefficient, the dependent variable is placed in the numerator of the ratio, and the independent variable is located in the denominator. |
Empirical Research |
Empirical research is based on observed and measured phenomena and derives knowledge from actual experience rather than from theory or belief.* |
Empirical research study of SNAP participation effects on household food security |
USDA FNS appointed the independent firm Mathematica Policy Research to perform an empirical study of SNAP participation effects on household food security. |
Environmental Quality Incentives Program (EQIP) |
The Environmental Quality Incentives Program (EQIP) is a national USDA Working Lands conservation program that offers cost sharing opportunities to producers for conservation practices tailored to county-level or regional resource projects. |
The Equi-Marginal Principle and Optimization |
Rationality predicts that decision-makers expand an activity while marginal benefit exceeds marginal cost, and diminish an activity if the marginal cost is greater than the marginal benefit. We achieve an optimum activity level when the marginal cost of the last unit just equals its marginal benefit. |
Estimating Labor’s Opportunity Cost in a CBA |
If a proposed government project causes labor to migrate from private to public employment, then the private sector wage rate is a reasonable estimate of project opportunity cost. |
Equitable Outcome |
A result perceived as being impartial or fair. |
Even-Handed Trade-Dispute Resolution Process |
WTO members agree to resolve disputes with each other while being supervised by a neutral third party; the process includes a formalized complaint procedure and a conciliation panel who conducts a fair and balanced hearing of trade grievances. |
Externalities (spillover effects) |
Extra effects of an economic activity that are either beneficial or costly, and create real third-party impacts that are outside of private market valuation. |
Fallacy of Composition |
The fallacy of composition refers to the idea that “what is true for the individual is not necessarily true for the group.” |
Farm Bill Political-Economic Environment |
The political realities of attracting a voting majority to approve a viable farm bill involve intense special-interest lobbying, legislative logrolling, strategic voting and sufficient economic support.
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Farm safety net |
The meaning of term “farm safety net” very closely parallels the definition of the “counter-cyclical farm program”. Basically, farm programs offer risk management tools to producers who operate in a very price-volatile market environment. |
Farmers’ Market Promotion Program (FMPP) |
The Farmers’ Market Promotion Program (FMPP) is a 2014 Farm Bill competitive grant program that expands opportunities and increases funding for direct farm-to-consumer projects.
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FDA |
FDA is the US Food and Drug Administration. |
FDA Food Safety Modernization Act (FSMA) |
In an effort to lessen the frequency and severity of preventable public health threats, the US Congress passed the FDA Food Safety Modernization Act (FSMA) in 2010. When the FSMA was signed into law on January 4, 2011, the Congress set new goals to shift the paradigm from reaction to prevention. The FSMA dramatically increased the US Food and Drug Administration’s (FDA’s) authorities to create and enforce new food safety standards. |
Feed the Future initiative |
The US Feed the Future initiative offers financial support and coordinates the efforts of eleven different US federal agencies to engage in a multi-national program that aims to increase household food security worldwide. |
Fiscal and Monetary Macroeconomic Policies |
Fiscal Policy makes changes in government spending and taxes to trigger shifts of national aggregate demand. Monetary Policy alters aggregate demand through the actions of the US Federal Reserve Bank (“the Fed”). The Fed’s “tools” for managing monetary policy are: 1) changing the money supply, 2) determining the base interest rate level, and 3) managing the US exchange rate with other nations’ currencies. |
Food Desert |
The problem of a limited food access was addressed in the 2008 Farm Bill, where the term “food desert” is formally defined: “A food desert is an area in the United States with limited access to affordable and nutritious food, particularly such an area composed of predominantly lower income neighborhoods and communities” (Title VI, Sec. 7527). |
Food Hubs |
A Food Hub is a cooperative system for aggregating locally-produced foods. Regional food hubs emerged as a way to distribute foods to wholesale, retail, institutional and individual buyers. The number of food hubs increased 288% during 2006-2014. |
Food Insecurity and Hunger |
Household food insecurity is a socio-economic condition that limits or prevents household members’ access to healthy nutritional dietary choices. Hunger is a physiological sensation associated with personal pain, discomfort and sometimes illness. |
Food Safety Net |
The combined impact of all US federal nutrition programs is a large-scale food safety net. To be participants in these programs, household applicants must meet eligibility tests that include limits on gross income, net income and personal liquid assets. |
Food Security and the Environment (FSE), Center on |
The FSE at Stanford University is dedicated to generating new knowledge and policy solutions through integrated research on improving agri-food systems, mitigating hunger, enhancing the environment, and encouraging interdisciplinary inquiry. Similar to the AGree Initiative and the Global Panel, the FSE is an intentional effort to avoid policy conflict and encourage program coordination. |
Food Security Definition |
Naylor (2014) offers this basic definition of food security: “Food Security means having adequate supplies of affordable food throughout the year to ensure a healthy and productive life.” |
Food Stamp Act of 1977 |
The Food Stamp Act of 1977 was a major reform of USDA’s Food Stamp program. The 1977 law eliminated the purchase requirement and focused on simplified organization, increased accuracy and improved capacity to match program benefits with household need. |
Food Stamp Plan in the 1930’s |
The 1930’s Food Stamp Plan allowed citizens use $1 in cash to buy a $1 orange food stamp that could purchase nearly any food product; in addition, citizens also received a $0.50 blue food stamp to exclusively purchase low-priced surplus foods. The Food Stamp Plan helped needy households increase their food budget during the Great Depression. |
Four Dimensions of Food Security |
Headey and Ecker (2013) and Naylor (2014) recommend four dimensions to assess food secure or food insecure conditions:
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Four-Stage Food-Security Scale |
The four-stage food-security scale categorizes levels of food security and insecurity. The scale can be displayed as follows:
Very Low Food Security – deficient household income or resources interrupts normal eating patterns and reduces food consumption. |
Free Rider |
With non-exclusionary public goods, if some consumers pay to receive the public good’s services, then others can “free-ride” by enjoying the public good’s benefits without the need to pay for access. A free rider also refers to an individual refrains from taking an active role, and seeks to reap benefits that may emerge as a result of the efforts of a few dedicated volunteers. |
Free Trade Agreements (Free Trade Areas) |
When two or more nations sign a Free Trade Agreement, they negotiate the reduction or removal of all tariffs and trade barriers among themselves. Simultaneously, each member nation of a free trade agreement has the independence and flexibility to continue to enforce its own trade restraints on other nations who are not part of the agreement. |
Free Trade Area |
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GATT (General Agreement on Tariffs and Trade) |
The GATT was a multinational initiative to actively pursue trade liberalization via negotiations to reduce trade barriers for all GATT participants. Originally signed by 23 nations in October 1947, the GATT eventually attracted 123 nations by 1994. During the final round of GATT negotiations, the member nations agreed to establish the World Trade Organization (WTO) on 1/1/1995. Today, the WTO ensures adherence to the GATT accords for 164 member nations; the WTO also has a larger span of trade responsibilities that extend beyond the GATT’s original purposes. |
GDP Relationship to Imports |
In macroeconomics, we predict a positively-sloped relationship between import purchases and Gross Domestic Product (GDP). As GDP increases, we predict a resultant increase in imports. |
Genetically-Engineered (GE) varieties |
US soybean, corn and cotton producers have adopted Genetically-Engineered (GE) varieties because of increased yields, reduced pesticide applications and costs, and improved time management. |
Global Food Security Act (GFSA) of 2016 |
The GFSA of 2016 creates statutory authority that supports the Feed the Future Program. The law approves nearly $7 billion in additional funding. Under this legislation, Feed the Future is a more sustainable food security policy. The GFSA aims to break the harmful cycle of poverty and malnutrition that prevents households from achieving upward economic mobility. Proper alignment of agricultural and food policies can promote the right combination of investment and development conditions to produce a more food secure and sustainable global economy. |
Global Panel on Agriculture and Food Systems for Nutrition (“the Global Panel”) |
The Global Panel proposes an organized approach among “four domains” of food systems to achieve desired nutritional outcomes:
Similar to the FSE and AGree Initiative, the Global Panel is an intentional effort to avoid policy conflict and encourage program coordination. |
Globalization |
The worldwide movement toward economic, financial, trade, and communications integration.* |
Government Failure |
Government failure occurs when public sector efforts or policies are not successful in creating the intended improvements in economic efficiency or welfare. |
Hicks-Kaldor Distributional Equity Criterion |
The Hicks-Kaldor (H-K) Criterion suggests that that if a project’s CBA yields a positive NPV, then we need not concern ourselves with any adverse distributional consequences. H-K asserts that it would be possible for the “winners” from the project to use some of their gains to compensate the “losers”. Not all economists agree with the Hicks-Kaldor definition of distributional equity. Some argue that we should examine the distributional consequences for what they really are, rather than what they could be. |
Household Consumer Linear Budget Constraint |
A Household Consumer Linear Budget Constraint is a model demonstrating how consumers divide their purchases between two scarce products on a finite budget. Graphically, the model is displayed as a negatively-sloped straight-line budget constraint. Changes in household income create a parallel shifts of the budget line. A change in price of either consumer product choice causes budget line to pivot to a different slope. |
Household Consumer Utility Function |
When analyzing food budget choices, we employ a household consumer utility function. The utility function gauges whether consumer satisfaction is increasing, decreasing or indifferent. The household utility function includes two normal microeconomic assumptions: (1) diminishing marginal utility for any one item, and (2) a convex indifference curve indicating a preference for variety in consumption. Similarly, If a consumer shifts to a lower indifference curve (shifting down and to the left on a graph), then the consumer achieves decreased total satisfaction while consuming less of both products |
Industrial concepts of “quality assurance” and “continuous improvement”
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To guide change using quality assurance and continuous improvement methods, then:
Application of these industrial concepts provide a mechanism for the marginal approach achieve meaningful long-term change. |
Integrated Rural Development Model (IRPM) |
In theory, IRPM’s planning authorities could tap into the comparative advantages of the different ministries by collaborating on improving health care, roads, irrigation, agricultural credit and technology adoption. When the World Bank attempted to put the theory into practice, IRPM could not reach its promised potential. Lines of communication across agencies never really formed because the decision-makers within agencies had powerful economic incentives to maintain spheres of influence within their own areas of authority and expertise. In 1988, the World Bank abandoned IRPM as a development model. |
Internal Rate of Return (IRR) Method for Project Evaluation |
The Internal Rate of Return (IRR) ρ-value is the discount rate that equates the present value of a project’s benefits and costs. Use the following IRR formula to solve for ρ: 0 = ∑ iT [(Bi −Ci) / (1 + ρ) i] The IRR ρ-value is a rate-of-return measurement directly comparable to the market’s interest rate (r) cost of capital. When the IRR criteria is applied, a project is judged as economically viable if [ρ > (r)]. |
International Food Security Assessment (IFSA) |
The IFSA is an economic modeling technique used to make 10-year projections about future trends in food security conditions worldwide. In the IFSA, 2016-2026, the ERS projects that 10-year market growth patterns will produce a combination of lower food prices and rising household incomes. As a result of this encouraging forecast, the IFSA predicts that the share of food insecure households in 76 developing nations will decrease from 17% in 2016 to 6% in 2026. |
“Internet of Things” and the Empowerment of Mancur Olson’s Latent Groups |
The instantaneous communication patterns (e.g., social media groups) that we accept today as “21st-Century standard operating procedures” can change the cost calculus for large latent groups to organize themselves in opposition to unique rent-oriented policy proposals of smaller “privileged groups.” |
Intertemporal Household Budget Line |
The Intertemporal Household Budget Line is an economic model to determine a household's options to lend and borrow at a market-determined equilibrium interest rate. |
Intertemporal Production Function |
The Intertemporal Production Function is an economic model of the household decision to sacrifice current output to create an opportunity to invest in and enhance future output. |
Intertemporal Utility Function |
An Intertemporal Utility Function is an economic model to predict how a household's satisfaction levels change as the household makes tradeoffs between saving and current consumption. |
Irreversible change in land use |
An irreversible change in land use is a scenario where prime farmland is reallocated to build an industrial park or housing complex, and it cannot return to agricultural use. |
L’Aquila Joint Statement on Food Security |
The United Nations (UN), the G8 and G20 Alliances, the US Agency for International Development (USAID) and the USDA have reached a near-consensus around this single policy theme: “Coordinating local, regional and global policies to create a world where every household is food secure.” |
Latent groups (as defined by Mancur Olson) |
Latent Groups are often comprised of consumers and taxpayers who find it costly and difficult to organize themselves to jointly lobby for their common interests. Also, when we examine the dynamics of large-numbered groups, we observe that the rational calculus for individual participation is not promising. |
Law of Comparative Advantage and the Terms of Trade |
Originally developed by economist David Ricardo in the early 1800’s, the Law of Comparative Advantage predicts that two trading partners reach a mutually-advantageous transaction when each specializes in producing and selling the product for which it has a respective lower opportunity cost, and then trades for other products. Reduced to common sense, the comparative advantage principle says that if a nation can acquire a product more cheaply via trade, then it is rational to trade for it, as compared to incurring the extra expense of producing it locally. The Terms-of-Trade: Ricardo also determined the conditions for achieving the promised mutual net gains when comparative advantage guides trade between nations. He calculated that mutually-acceptable “terms-of-trade” are a trading ratio that lies within the upper and lower boundaries of opportunity costs for the two respective trading partners. |
Law of Demand |
Ceteris Paribus, the law of demand predicts that buyers increase the quantity demanded for a product in response to a decrease in the product’s market price; Conversely, ceteris paribus, buyers react to a decreased market price by increasing their quantity demanded. |
Law of Diminishing Returns |
When increasing output production in the short run, where at least one resource (such as land) is constant or fixed, then the hiring of additional units of a variable input (such as labor) eventually causes the gain in extra output to rise at a slower and slower (diminishing) rate of increase. |
The Law of Increasing Opportunity Cost |
Along an economy’s Production Possibilities Curve (PPC), when resources and technologies are fully-employed, the marginal cost of producing additional units of the same product is predicted to eventually increase. Why does this law exist? Because not all resources are equally adapted to alternative uses. Eventually, increased production of the same product will draw upon resources that are less-well-adapted to that type of production. As more and more resources are applied to produce additional output units of the same product, the opportunity cost of the marginal product increases. |
Law of Supply |
Ceteris Paribus, the law of supply predicts that sellers increase a product’s quantity supplied in response to an increase in the product’s market price; Conversely, ceteris paribus, sellers react to a decreased market product price by reducing their quantity supplied of that product. |
Local Food Market Definition |
Section 6015 of the 2008 Farm Bill offers the following definition of “local”: “products transported less than 400 miles or within the state in which they are produced.” This definition partially determines a producer’s eligibility to participate in USDA’s Business and Industry loan program. |
Local Food Marketing Promotion Program (LFPP) |
The Local Food Marketing Promotion Program (LFPP) is a 2014 Farm Bill competitive grant program that opens-up USDA support for intermediary supply chain enterprises who coordinate a distribution network to deliver local or regional foods. |
Local Food Markets |
There is a rising 21st-Century trend towards linking US consumers with locally-produced foods. Total US annual local food sales were $4.8 billion in 2008, and $6.1 billion in 2012, a 6.2% annual growth rate. Approximately 164,000 farmers (8% of all US farms) marketed local foods to account for 1.5% of total US agricultural sales in 2012. |
Logic of Collective Action – Mancur Olson’s main premise |
Groups whose members share common interests do not always act in unison to consistently achieve their collective purposes. |
Long-term exodus of US labor resource from rural-to-urban areas |
The 20th-Century adoption of new agricultural technologies necessitated on-farm resource reallocations. Market economics meant that rational profit-oriented farm owners increased their use of productive technologies and capital investments while reducing their demand for human labor and animal inputs. Rural areas experienced a long-term labor exodus to urban centers. |
Low-Cost, Moderate-Cost and Liberal Food Plans |
Relative to the Thrifty Food Plan, the Low-Cost, Moderate-Cost and Liberal Food Plans are increasingly more expensive food budgets. USDA’s Center for Nutrition Policy and Promotion (CNPP) ensures that each of the four food plans meet current scientifically-based nutrition standards. The Low-Cost Food Plan is cited in bankruptcy courts to define the percentage of a bankrupt person’s income that constitutes his/her food budget. Divorce courts match appropriate USDA food plans to specific cases when determining more accurate alimony payments. US Defense Department uses the Liberal Food Plan to set Basic Allowance for Subsistence Rates for all service-members. Courts and other agencies uses the USDA Food Plans to establish household food values because all of the plans employ the same objective and consistent estimation methodology. |
Malthusian Calculus (Thomas Malthus’ sustainability prediction) |
The Malthusian Calculus is a grim global prediction of malnutrition, famine and social unrest because gains in agricultural output fail to keep pace with an exponential expansion of human food demands. |
Marginal Analysis |
Marginal analysis is a logical, step-by-step (incremental) process. Decisions made “at the margin” compare extra benefit to extra cost. Rationality predicts that we expand an activity while the marginal benefit exceeds the marginal cost. We lessen an activity at the margin if the extra cost of expansion is greater than the extra benefit. |
Market Equilibrium Analysis |
When a market reaches an equilibrium price, then buyers and sellers agree on the same quantity to transact. A market equilibrium occurs when: Current Market Price ($P) = Equilibrium Price ($Peq), The absence of surpluses and shortages means that market participants are not motivated to create auctions or sales. Neither buyers nor sellers exert any price pressure, so the market price and quantity stabilize. Because a market equilibrium position is relatively steady, we use an equilibrium as a reference point for analyzing future market changes. |
Market Failure |
Market failure occurs when a free market does not achieve social-efficiency because specific market conditions prevent decision-makers from regulating their choices according to their true opportunity-costs. An externality creates market failure when the side-effect of an economic activity creates either a real cost or benefit not measured or accounted-for in the free market. |
Market Shortage Analysis |
Shortages are temporary in the Supply & Demand (S&D) Model of a market. A market shortage occurs when: Current Market Price ($P) < Equilibrium Price ($Peq), Because buyers cannot obtain the entire quantity-demanded at the current price, a shortage triggers an auction. The auction increases the market price. The rising price eliminates the shortage. When the shortage = 0, then the auction is over, and the market reaches a new equilibrium price and quantity. The shortage has been cleared. |
Market Surplus Analysis |
Surpluses are temporary in the S&D Model. A market surplus occurs when: Current Market Price ($P) > Equilibrium Price ($Peq), Because suppliers cannot sell the entire quantity-supplied at the current price, a surplus triggers a sale. The seller-driven sale decreases the price until the surplus = 0 at the equilibrium price. The sale ceases. Because sales instantly arise when surpluses occur, the S&D Model predicts that surpluses are temporary. |
Markets for Environmental Services |
Establishing market instruments such as trading- and auction-markets to measure the value of environmental services that can be derived from agriculture. The goal is to use the forces of supply and demand to allocate environmental services efficiently. |
Maslow’s Hierarchy of Needs |
Maslow’s Hierarchy of Needs is a psychological theory. Maslow predicts that people naturally transition their desires from meeting basic needs to satisfying higher-level needs, as the typical consumer household progresses to a higher living standard. Prosperous consumers connect their food choices with the human needs for esteem and self-actualization, rather than just meeting the basic drives of hunger or safety. Psychologically, more affluent consumer households integrate their food choices with personal goals for sustainability, optimal nutrition and convenience. |
Masters, Dr. Will (recommended alignment of US food and agricultural policy) |
Dr. Will Masters, Tufts University’s Nutrition Science and Policy specialist, argues for the following alignment of agricultural and nutrition policy goals: 1) tailoring programs to efficiently utilize agricultural-nutrition linkages to attain measurable outcomes for specific consumer groups with real dietary needs; and (2) diversifying diets, markets, programs and products in the agricultural-nutrition supply chain to anticipate nutritional requirements, and achieve nutritionally healthy outcomes. |
MERCOSUR (Mercado Común del Sur) |
MERCOSUR roughly translates as the “Southern Common Market.” Argentina, Brazil, Paraguay and Uruguay established this trade agreement in 1991. |
Mickey Leland Memorial Domestic Hunger Relief Act of 1990 |
The Mickey Leland Memorial Domestic Hunger Relief Act included many provisions aimed at improving the effectiveness of the Food Stamp program, including language to help establish Electronic Benefit Transfer (EBT) as an alternative to food stamps. |
Microeconomic Perspective on Rural Development |
Microeconomic theory directs us to consider how development activities influence opportunities for profit maximization (and long-term wealth maximization) in farm and non-farm rural businesses. Blank (2008) also reminds us that rural area markets are a two-way street; not just comprised of businesses, but also utility-maximizing households. |
Milk Marketing Order |
A milk marketing order is a binding set of government-enforced regulations that structure and monitor the market relationship between milk handlers and milk producers. A milk marketing order is similar to a licensing system. Milk handlers are certified to operate as part of a marketing order by agreeing to applicable regulations within a specific geographic marketing area. Handlers process milk into a variety of consumer products. Milk marketing orders ensure that handlers monitor the milk and its many by-products for quality, weight, and related consumer-oriented concerns for safety and satisfaction. |
Minorities Changing Role in US Agriculture |
The number of minority farm operators in US agriculture by an average of 15 percent between the between 2007 Ag Census and 2012 Ag Census. The largest percent changes occurred within the Asian and Hispanic categories. |
Monetary Union |
Highest form of integration, and most complete form of Economic Union |
My-Pyramid, My-Plate and My-Wins |
In 1992, USDA aimed to create an easy-to-understand communication format to relay information contained in the more-technical USDA Food Plans (such as the Thrifty Food Plan). The first communication campaign employed the “My-Pyramid” format. The pyramid graphic intended to help households design daily diets based on the principles of variety, moderation, and sensible proportion. In 2011, consumer confusion over how to convert the food pyramid into everyday life convinced the USDA to change its visual illustration. USDA introduced the “My-Plate” campaign. My-Plate is a plate-shaped display with four colorful “pie-type slices” (representing vegetables, fruits, grains and protein), and a “glass” (symbolizing dairy products). USDA recently introduced a second program – known as My-Wins – encouraging consumers to make incremental and easy-to-accomplish improvements in both diet and bodily activity. USDA promotes My-Plate and My-Wins as a joint package to offer consumers opportunities to pursue healthier lifestyles. |
National Agricultural Literacy Outcomes (NALO’s) |
NALO’s determine benchmarks for progress in agricultural literacy throughout all K-12 educational levels. NALO’s are broken down into major areas of academic achievement:
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National Association of Agricultural Educators (NAAE) |
NAAE is a voluntary federation of state agricultural educators associations with more than 7,800 members. NAAE is involved in school-based agricultural education at all levels, from middle school through postsecondary, and state and national agricultural education leaders. |
National Organic Program (NOP) |
The National Organic Program (NOP) is a verifiable national system for organic certification. The NOP establishes a set of both prohibited and permitted substances associated with organic production and handling operations. |
National Research Council (NRC) |
The National Research Council (NRC) is a nonprofit, non-governmental organization. The NRC is a branch of the National Academies of Sciences, Engineering, and Medicine. |
National Treatment Principle of Trade |
WTO members agree to apply internal regulations and taxes equally to both domestically- and foreign-produced goods. |
Net Exports |
Net Exports = Exports – Imports |
Net Present Value (NPV) |
Net Present Value (NPV) is a criterion to determine the economic viability or a proposed project or rule. If NPV > 0, then the project is viable, and if the NPV £ 0, then reject the project as uneconomical. Determine NPV with this formula: NPV = PV (Benefit) – PV (Cost) Where: PV(X) = Present Value of Variable X |
Normative economics |
When normative economics is applied, the goal is to design, recommend and implement better policies. Evaluation of the “goodness” of a policy is judged with criteria such as fairness, equality, and transparency. Normative economics also involves the judgment that policy outcomes cause the welfare of economic participants to be better off, worse off or indifferent. |
North American Free Trade Agreement (NAFTA) |
NAFTA is an integrated set of three bilateral trade agreements between the US and Canada, the US and Mexico, and Canada and Mexico. The three NAFTA agreements were negotiated separately, but they all have similar provisions. The US, Canada and Mexico each retain sovereign control over their own domestic ag/food policies; Each country has government programs and/or agencies that protect/support their own producers rather than act to create a complete and true “free trade environment.” |
Obesity and Food Insecurity |
An increased frequency of obesity occurs as food insecurity worsens, especially in the US, Europe and Australia.* The link between food insecurity and obesity arises from combined factors, including:
*http://secure.secondbite.org/sites/default/files/A_review_of_the_literature_describing_the_link |
OECD’s New Rural Policy Paradigm |
Changing socio-economic circumstances motivated the international Organization for Economic Cooperation and Development (OECD) to create a new paradigm rural policy, consisting of:
Invite private businesses, non-government organizations (NGO’s), local and state government agencies, as well as national (federal) government support, to coordinate and organize rural development projects and programs. |
Off-Farm Income in US farming, Role of |
Small farm operators typically earn significant off-farm income. A USDA-sponsored farm bill forum noted that off-farm income accounts for 85-95 percent of farm household income. 2 2 USDA Farm Bill Forum Comment, Summary and Background. Farm Family Income. 2004. www.usda.gov/documents/FARM_FAMILY_INCOME.doc |
Office of Outreach and Advocacy (OOA) |
The US Congress established the OOA in the 2008 Farm Bill. |
Omnibus Trade and Competitiveness Act (OTCA) of 1988 (P.L. 100-418) |
President H.W. Bush signed OTCA to create “Trade Promotion Authority (TPA)” to accelerate US participation in trade negotiations. OTCA continued under President Clinton. OTCA was the “vehicle” that allowed the US to participate in the Uruguay Round of the GATT negotiations that eventually established the WTO. OTCA also provided the trading environment that led to the North American Free Trade Agreement (NAFTA). |
Opportunity Cost |
When a choice occurs, the opportunity cost of that decision is the highest-valued alternative that is given-up or foregone. |
Option Demand |
John Krutilla describes Option Demand as a situation where consumers are “willing and able to pay” to protect wildlife habitat, or save endangered species, or safeguard prime agricultural land for future generations to experience and enjoy. |
Ordinary Least Squares (OLS) straight-line of regression |
Ordinary least squares (OLS) regression is a statistical method of analysis that estimates the relationship between one or more independent variables and a dependent variable; the method estimates the relationship by minimizing the sum of the squares in the difference between the observed and predicted values of the dependent variable configured as a straight line.* |
Organic Production and Local Food Systems |
The 2007 Agricultural Resource Management Survey (ARMS) data on 21,669 surveyed organic farms determined that 45.7% (9,896) were engaged in direct marketing of their products to consumers. In 1997, direct-to-consumer markets and natural foods stores were typical organic outlets. By 2008, nearly half of all organic foods were distributed by traditional retail market intermediaries (supermarkets, big-box stores, etc.). |
Organizational Change, Types of |
In organizational change theory, further refinement of incremental and transitional changes identifies these specific objectives:
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Outreach and Assistance to Socially Disadvantaged Farmers and Ranchers (OASDFR) Program [the “2501 Program”] |
The 2501 Program (OASDFR) requires the USDA to actively engage in outreach activities and technical assistance that facilitate the entry of these disadvantaged groups into farm markets as viable businesses. The program is implemented via grants managed by land grant universities, tribal governments, Latino-serving institutions, veterans groups, state-controlled institutions, community-based organizations and nonprofits. |
A Pareto-Better Trade, Activity or Policy |
A Pareto-Better trade, economic activity or policy occurs when at least one person is better off, and no others are worse-off, as a result of the trade. |
Pareto Efficiency |
A situation where there are no wasted resources; any attempt to reallocate resources to make one party better-off will cause another party to be worse-off. This condition is sometimes called “economic efficiency” or “allocative efficiency.” |
Parity Prices for US Commodities |
The years 1910-1914 were a period of exceptionally high US agricultural exports, strong commodity prices and above-normal profits (adjusted for price inflation) for US farmers. The unique conditions of that time period triggered the belief that farm prices and profits could or should return to those parity levels. |
Permanent farm bill legislation |
Before the next farm bill comes under full consideration, the US Congress must suspend the law’s permanent sections that were established in 1949. These permanent “farm titles” are commodity programs. If the permanent legislation is not suspended, then the provisions revert back to original1949 (and 1938) formats. The suspension requirement is a motive for Congress to “do something” when one farm bill expires and the next one is in line to take its place. |
Policy |
A definite course or method of action selected from among alternatives; a policy is intended to take into account current conditions, and serve as a guide to determine present and future decisions. http://www.merriam-webster.com/dictionary/policy |
Policy-Induced Deadweight Losses in Market Efficiency |
Introductions of new taxes or subsidies into private markets change market equilibria. Variations in the market equilibria alter the market’s consumer and producer surpluses. |
Policy-Induced in Market Distortions |
Introductions of new taxes or subsidies into private markets change market equilibria. The true cost or the true market demand for products are artificially changed by policy choices. The new market equilibrium price and quantity are a “distortion” of how resources would be allocated if the market had been left alone to determine an equilibrium outcome based on pure market forces. |
Positive economics |
When positive economics is employed, policy analysis methods must be scrutinized for their scientific validity, reliability, and consistency. The goal is to gain accurate and objective observations of cause and effect. |
Precision Agriculture Technology |
The use of satellite imagery and Geographical Information Systems (GIS) to improve farm input and output management by accurately measuring key aspects of field variability (such as soil type, fertility, soil moisture, land contours and crop conditions). Proper application of Precision Agriculture Technology can increase a farm’s Total Factor Productivity. |
Present Value of a Future Benefit or Cost |
Present Value theory argues that the promise of receiving a future dollar is worth less than having the same dollar amount in the present. A dollar now can be invested at the current interest rate and produce principal plus interest in the future. The formula used to determine the present value of a future benefit or cost is: Where: PV = Present Value |
Price Elasticity of Demand (ƐD) |
Ceteris Paribus, the Price Elasticity of Demand (ƐD) gauges the proportional response of quantity demanded for a product in relation to a proportional price change of the product. In mathematical notation, we display ƐD as: ƐD = (ΔQD/QD) ÷ (ΔP/P) Where: ƐD = Price Elasticity of Demand |
Price Elasticity of Demand and the Cost-Price Squeeze. |
The perfectly-competitive market model approximates a farm operator’s situation as an agricultural product supplier. Each farm-firm is a price-taker in the product market, and therefore the farm’s individual price-elasticity of demand is “perfectly elastic”. Price-inelastic factor demand functions are common in agricultural production. Farm businesses require specialized technological inputs (planters, harvesters, tractors, etc.) that have few substitutes. When farm input prices rise, price-inelastic factor demand means the producers cannot easily reduce their quantity-demanded for these resources, and their total cost expenditures increase. At the same moment, farm-level price-elastic product demand means that farm producers have no individual power to pass along cost increases to their consumers. Costs rise, and revenues do not. A cost-price squeeze thins farm profit margins and creates financial challenges for producers. |
Price Elasticity of Demand and Revenue Volatility |
As the│ƐD│coefficient value decreases (falls below +1.0), the price-demand relationship becomes more price-inelastic. When│ƐD│is highly price-inelastic (closer to 0.0), then net changes in total revenue associated with price variations become more volatile (change by a greater proportion). The│ƐD│coefficient for specific food items is typically very inelastic. Total farm revenues can swing rapidly from substantial net increases to large net decreases. A price-inelastic market demand is a major contributing factor intensifying total revenue volatility for farm operations. |
Price Elasticity of Supply (ƐS) |
Ceteris Paribus, the Price Elasticity of Supply (ƐS) gauges the proportional response of quantity supplied for a product in relation to a proportional price change of the product. In mathematical notation, we display ƐS as: ƐS = (ΔQS/QS) ÷ (ΔP/P) Where: ƐS = Price Elasticity of Supply |
Price Inelastic Supply (0 < ƐS < +1.0) in Food and Agriculture Markets |
ƐS for food and agriculture is price-inelastic. Factors creating this price response include:
Both (ƐS) and (ƐD) in agricultural markets are price-inelastic. The combined impact of these inelastic relationships creates markets that can experience highly volatile equilibrium price movements. |
Price Loss Coverage (PLC) Program |
Price Loss Coverage (PLC) is one of the commodity programs offered to producers in the 2014 Farm Bill. |
Privileged groups (as defined by Mancur Olson) |
Privileged groups are typically smaller in size and can readily assess that lobbying efforts return handsome rents (above-normal returns) for themselves. Privileged groups, recognizing their interest, tend to work relentlessly to secure their net gains. |
Probabilistic Equi-marginal Principle in FSMA Evaluation |
When seeking an economically optimal enforcement of an FSMA Rule, reduce the probability of foodborne outbreak up to the point where the extra benefit just equals the extra cost. In most cases, the equi-marginal principle will not recommend reducing the probability of an adverse event to 0%. The equi-marginal principle balances the marginal benefit and marginal cost of additional FSMA regulatory effort. |
Producer Surplus (PS) |
Producer Surplus (PS) measures the economic value realized by sellers when they supply a product in a competitive market at a single equilibrium product price ($Peq) and quantity (Qeq). Why does producer surplus exist? Answer: When the producer sells the entire equilibrium quantity at the agreed-upon price ($Peq), producers receive higher prices for the initial quantities, even though their marginal cost for the first few units is less. The “producer surplus” is the positive difference between the higher equilibrium price that producers receive for the initial quantities, and the actual lower marginal cost for supplying these initial product-output units. |
Public Choice Theory |
Economists use Public Choice Theory to make predictions about collective decision-making after carefully analyzing individual citizens’ incentives and behaviors. |
Pure Public Good |
A pure public good is a product exhibiting two consumption-based characteristics: (1) Non-rival and (2) Non-exclusion. Non-rival: One person’s satisfaction from consuming a non-rival public good does not reduce the good’s value to other users. Non-exclusion: A non-exclusionary public good offers unconditional consumer access to the good’s benefits. Non-exclusion means that consumer use of a public good does not depend on payment for it. |
Customs Union
High Food Security
Low Food Security