Subsistence Agriculture in Transition Economies: its Roles and Determinants

In line with recent suggestions about the potential positive effects of subsistence agriculture in fragile economies, this paper discusses and explains the effects of subsistence agriculture with emphasis on transition countries. Some micro-economic models of subsistence agriculture are reviewed and a two-stage decision model, combining risk aversion and transaction costs explanations for subsistence is put forward. The role of subsistence agriculture is addressed in terms of a static comparison to a commercial only agriculture. It is shown that, under some conditions, subsistence can play a stabilising role and have positive impacts on total agriculture. Employing the concept of a subsistence level of consumption, the paper demonstrates that these static effects can be valid in a dynamic perspective, provided additional conditions are met. Policy recommendations and a future research agenda with regard to possible agricultural commercialisation are drawn from the analysis.

Risk Management – Managing Risks, not Calculating Them

The expected utility approach to decision making advocates a probability vision of the world and labels any deviation from it ‘irrational’. This paper reconsiders the rationality argument and argues that calculating risks is not a viable strategy in an uncertain world. Alternative strategies not only can save considerable cognitive and computational resources, but are more ‘rational’ with view to the restricted definition of rationality applied by expected utility theorists. The alternative decision making model of risk management is presented and explained.

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

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.Agribusiness,

Institutional foundations of subsistence agriculture in transition economies

The paper considers the problem of subsistence and semi-subsistence farming in Central and Easter Europe. The latter is analysed in terms of the institutional characteristics of the transition process. The concepts of institutions and institutional change are clarified and subsistence agriculture is derived as a natural consequence from the process of economic transition. The process of shortening which gives rise to subsistence agriculture is described. It is demonstrated to have economy-wide effects, and in the domain of agriculture these effects lead the emergence of subsistence behavioural patterns. The policy implications of the proposed view of subsistence agriculture are briefly reviewed and some policy recommendations derived.