2_41_Institutional_Theory_of_Agricultural.pptx -...

Institutional Theory of
Agriculture
Development and
Agricultural Economics
Tsegabirhan W.Giorgis, AAU, CBE, DoE, December 2019
11/15/2019 1

Introduction
•
Institutional economics remains today an influential field in economics,
despite the prevalence of orthodox neoclassical economics in most
economics departments and policy-making institutions . The interest in
this field has increased in the last fifteen years . (Parada Jairo, 2002)
•
From a review of ‘Development Economics’ one remembers a number of
long-run (root) causes of development/underdevelopment/, explaining
comparative development performance. This include: geography
(climate, malaria, landlocked countries, etc.), Institutions , history
(colonial, independence, nature of political regimes), Sustained peace
(but Israel) etc. Remember, Ethiopia & Afghanistan, two un colonized
countries remain underdeveloped, while Thailand, Turkey remain in the
middle income and Japan is one of the DCs. Moreover, indeed sustained
peace and predictable stability are preconditions for development, yet
we witness Israel has managed to develop despite the hostile Middle
East political environment. (Todaro P. Michael and Smith C. Stephen;
11
th
edition, 2012; pp: 91-93)
•
So at least institutions come as one of the root causes that explain
comparative development performance.
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Introduction
•
If from our review of trade theories, we appreciate the importance of productivity
and innovation, if economics is all about productivity, what explains the relative
performance of economies and firms in terms of productivity and innovation?
Indeed, productivity and innovation differentials are explained by institutions .
•
The debate over public versus private ownership and planning versus market serves
little more than a packaging of ideological positions of the left, center or right.
•
There is a continuing tendency to devote insufficient academic effort and resources
to the development of reconsideration of once philosophies, new theories,
strategies, solutions to obvious economic problems like unemployment, poverty,
inequity, environmental degradation, food insecurity, etc. The failure of every type of
development strategy in the last 70-80 years or the entire 20
th
century should be
sufficient motivation to examine, re-examine every philosophy, theory, strategy
towards transforming the agricultural and rural societies of LDCs.
•
There is a consensus that “institutions do matter”. Even mainstream neoclassical
economics has recently incorporated the study of institutions based on the
assumptions of this paradigm, modifying its former habit of ignoring institutions, or
by taking them as given . (Parada Jairo, 2002)
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Introduction
1. No consensus on the very definition of
institutions. Reason: Primarily institutions
are complex. Secondly, neoclassical
economics has been largely dismissive of
them[Institutions ].