Agricultural Economics

Agricultural Economics

Hegde, S Aaron

Agricultural Economics by H. Evan Drummond and John W. Goodwin, Prentice Half, 2001, 436 pages, hardbound, $100.00 “The [stated] objective of this text is to cover many topics lightly rather than any one or two topics in depth” (p. ix). The authors successfully accomplish this objective and manage to do so in a ‘light’ manner as well. The material in this textbook is presented in a non-threatening manner. Often introductory economics texts are inundated with graphs and formulae that intimidate students. Drummond and Goodwin write in a style that is both enjoyable and enlightening. One particularly appealing aspect of the book is the length of each chapter. At first glance, with 22 chapters, the table of contents looks quite imposing. But a closer examination of the text reveals that the chapter divisions as present, make the concepts contained within much more manageable for students.

Chapter 1 provides a good overview of some major economic concepts such as opportunity cost, marginality, and diminishing returns. The Appendix to this chapter contains mathematical background relating to slope calculations and reading graphs. Chapter 2 is an Introduction to Market Price Determination, which introduces the basics of supply and demand, along with changes in both (shift versus movement), as well as a brief look at elasticity. This turns out to be a good juncture at which to introduce elasticity as it affords the student the opportunity to see the ‘big picture’.

Chapter 3: Financial Markets is generally never found in an introductory economics text. Given the broad nature of agricultural economics, this is a very appropriate and definitely required topic at this level. It covers stock markets, bond markets and mutual funds. With chapter 4 the text starts coverage of macroeconomics, and is a good segue from financial markets. The transition from micro to macroeconomics is not often as smooth. This chapter covers money and banking, including a section on equilibrium and failure. The banking sector is a huge part of agriculture and its importance is stressed effectively in this chapter.

Chapters 5 through 7 cover monetary policy, fiscal policy and the circular flow of income, including the distinction between real and nominal income. Chapter 8: International Trade contains many important concepts. Given the global nature of today’s agribusiness this is a vital topic. An example of the importance of trade, as demonstrated in the chapter using agricultural commodities, is particularly welcome. There is also a discussion on the foreign exchange market.

Chapter 9, yet another chapter not found in other texts, addresses Agricultural Policy. In addition to containing pertinent information, this chapter is a good application of price controls. Chapters 10 and 11 deal with production and profit maximization, while chapter 12 addresses market supply. Chapters 14 and 15 are concerned with demand and related aspects such as elasticity (price, income, cross-price), utility maximization, various market structures and a brief section on game theory. It would be valuable if the authors saw fit to perhaps include an appendix further discussing game theory. Game theory is a valuable tool to analyze the agribusiness. Students also seem to enjoy its many applications.

With the exception of chapter 20: Environmental policy and Market Failure, the remainder of the text contains chapters not normally found in introductory texts. All of the chapters are very relevant to agribusiness. Topics such as Food Marketing (chapter 16), Futures Markets (chapter 17), Crop Insurance and Credit Markets (chapter 18), Investment Analysis (chapter 19), Malthusian Dilemma (chapter 21), and Economic Development and Food (chapter 22) are an integral part of Agricultural Economics, yet are not found in introductory texts. Most introductory agricultural economics courses use “principles textbooks,” which are geared toward general economics rather than agricultural economics.

The Drummond and Goodwin text is an appropriate text for a course in introductory agricultural economics, as it “…takes a thorough look at agricultural economics from the broad perspective of the food system that emphasizes the linkages between and among financial institutions, the macro economy, world markets, governmental programs, farms, agribusiness, food marketing, and the environment” (back cover). In addition to recommending this text for an agricultural economics course, I think it would be a valuable addition to the reading list of an introductory economics survey course. My only complaint would be that the text could use more exercises at the end of chapters. Overall, it is a well-written book that serves its stated objective of covering many topics lightly in a pleasant non-threatening, yet informative manner.

S. Aaron Hegde

The Pennsylvania State University

Copyright North American Colleges and Teachers of Agriculture Sep 2003

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