2_41_Institutional_Theory_of_Agricultural.pptx - Institutional Theory of Agriculture Development and Agricultural Economics Tsegabirhan W.Giorgis AAU

2_41_Institutional_Theory_of_Agricultural.pptx -...

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Institutional Theory of Agriculture Development and Agricultural Economics Tsegabirhan W.Giorgis, AAU, CBE, DoE, December 2019 11/15/2019 1
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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. 11/15/2019 2
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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) 11/15/2019 3
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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 ].
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