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Misconceptions, Untruths and Misinformation. Harwood D. Schaffer University of Tennessee Agricultural Policy Analysis Center. Dakar Agricole 2011 Dakar, Senegal April 18, 2011. What’s the Big Deal. With assessment tools? Why do we care whether they are accurate or not?

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Misconceptions, Untruths and Misinformation


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    1. Misconceptions, Untruths and Misinformation Harwood D. Schaffer University of Tennessee Agricultural Policy Analysis Center Dakar Agricole 2011 Dakar, Senegal April 18, 2011

    2. What’s the Big Deal • With assessment tools? • Why do we care whether they are accurate or not? • Because they have an outsized impact on the policies that affect the poorest of the poor • 800 million to 1.4 billion human beings • Despite five decades of economic modeling, they remain socially and economically excluded • For them it is a life or death matter—a permanent loss of human capability

    3. Declaration of Dakar 2003 • Developed by farmer organizations as they examined the impact of trade policies on their lives • Three points that focus our discussion of trade and price models • WTO vision: The world upside down • For agricultural policies founded on rights • For mutually supportive international trade

    4. WTO Vision:The World Upside Down - I • I want to give voice to those farmers who gather here 8 years ago • Commercial agriculture and WTO-style trade will work for 5% of the farmers • The numbers are the same in the US • I want to speak for the other 95% of the farmers who comprise 2/3 of those suffering from chronic hunger in many countries – the other third are displaced rural poor living in urban settings

    5. WTO Vision:The World Upside Down - II • Despite what we know about: • The low elasticity of supply, • The low elasticity of demand, • The fixity of resources • That we depend on markets NOT clearing—we need a carryover • There is no such thing as a demand for stocks—they are the RESIDUAL • We treat ag commodities in the same way that we treat cars and computers

    6. Ag Policies Founded on Human Rights • Food is like any other product • No, Food is Different • While food is a market good it is not a “free market” good • The aggregate food market is a coercive market because of the nature of the product in the transaction rather than the actors in the transaction • People need to eat every day • They cannot wait for prices to drop before reentering the market—this is where we ration supplies with price • Food is a human right that governments and international governmental organizations have the responsibility to Respect, Protect, and Fulfill • Gender

    7. Ag Policies Founded on Human Rights • The role of food production • As Milton Friedman noted (though he did not say it this way), self-production is the only tool people have when alternate employment is not available • The growth of an underclass in major cities around the world are a direct reflection of the failure of ag policies in the rural areas • PUSH(displaced rural poverty) vs.PULL(opportunity) • The responsibility to Respect, Protect, and Fulfill has been abrogated when 1.4 billion people face chronic hunger

    8. For Mutually Supportive Trade • The world market is not a dumping ground where you solve your overproduction problems • Agricultural trade is not a Human or even a Commercial Right • Agricultural trade is a tool: • That can be used to ensure the achievement of human capacity and the fulfillment of the Right to Food

    9. A Word on Volatility • Volatility in agricultural commodity prices is the consequence of bad policies that • Do not take into account the unique nature of the agricultural sector • We need real stocks, both strategic and operational – local, national, international • CEOs in other sectors engage in management • Ignore the needs of the poorest of the poor who are excluded from the market

    10. Some Words on Modeling • Model are a reflection of reality - I • Abstraction of a complex system using an extremely limited number of variables • Fallacy of Misplaced Concreteness • Numbers like 144 million lifted out of poverty and $500 billion in added global income seem more real than they are • Numbers are very sensitive to assumptions in the model • Other modelers had widely different numbers for the impact of the same policy set

    11. Some Words on Modeling • Model are a reflection of reality - II • They look at production and GDP and don’t account well for worker displacement • They can’t model what they do not have numbers for: • Production for self-consumption – a large number of producers in developing countries • Those whose income is so low they do not have the price of entry into food markets (ineffective demand)

    12. Some Words on Modeling • Model are a reflection of reality - III • Can’t model the qualitative • Human Rights – an evolving concept • Values – solid and yet ever changing • Can’t model the unpredictable • Human agency • Black swans – a 9.0 earthquake off Japan • The current economic crisis

    13. Where Do We Go From Here? • Continue to make improvements in modeling • Be clear about limits and biases of models • Use social scientists (sociologists, anthropologists, political scientists, political economists) in defining problem and interpretation of results • Offer the results with GREAT HUMILITY not a meat cleaver

    14. Let’s Keep Our Eye on the Ball • The poorest of the poor • Reserves are crucial to protect the most vulnerable • Declaration of Dakar 2003 • Trade policies must reflect the nature of agriculture and benefit the weakest • Ag policies must be based on human rights • Mutually supportive international trade

    15. Thank You

    16. Weekly Policy Column To receive an electronic version of our weekly ag policy column send an email to: dray@utk.edu requesting to be added to APAC’s Policy Pennings listserv

    17. WTO Vision:The World Upside Down - II • The agricultural sector is like any other economic sector- I • Crop marketing is not like what is taught in Economics 101 • Lack of a timely price response on the consumer side • With low prices, people do not go to 5 meals a day • At high prices, they may change to a cheaper mix of products, but they will buy something; they will do without other things and pay what is needed • Unless they can’t afford to be in the market

    18. Second Misconception • The agricultural sector is like any other economic sector - II • Crop marketing is not like what is taught in Economics 101 • Lack of a timely price response on the producer side – low prices • With low prices, farmers do not leave a significant amount of land idle • With low prices. instead of reducing supply, they over invest, politically and economically, in consumer demand enhancement efforts like ethanol

    19. Second Misconception • The agricultural sector is like any other economic sector - III • Crop marketing is not like what is taught in Economics 101 • Lack of a timely price response on the producer side—high prices • With high prices, farmers convert land to crop production and plant every slough, windy knob, and inconvenient corner • This increased acreage wrings out very slowly in response to low prices as more bushels help

    20. Second Misconception • The agricultural sector is like any other economic sector - IV • Crop marketing is not like what is taught in Economics 101 • Fixity of resources • Few alternate uses of land during times of low prices • Once removed from production, it is hard to bring it back into production • It is geographically locked – one can move industrial factories, but not land

    21. Second Misconception • The agricultural sector is like any other economic sector -V • Crop marketing is not like what is taught in Economics 101 • Production controls are different from those in industry • Farmers determine land allocation • Weather is often major factor in determining production • Production decisions are made annually not on a daily basis, they are made well ahead of known demand

    22. Second Misconception • The agricultural sector is like any other economic sector -V • Crop marketing is not like what is taught in Economics 101 • We don’t want markets to “clear” • As the Momagri Model reflects DInvt + Invi cannot be negative • There is a need for national/international reserves to protect availability in times of stress • As we have seen, the markets have no incentive in providing reserves to protect people