Political Economy of Agricultural Commodity Market Intervention

Commodity markets are characterized by trade in standardized, undifferentiated commodities and numerous traders. Consequently, such markets are highly competitive and trade is carried out in concentrated, low transaction cost exchanges. In this sense, commodity markets are the closest approximations to ideal neoclassical competitive markets. As commodity markets area also free of externalities, the resulting market equilibria are economically efficient. Nevertheless, owing to imperfect foresight and random shocks, the dynamic performance of commodity markets, may be suboptimal. Also, commodity markets\u27 actual performance as exchange institutions may at times fall short of the theoretical ideal. Hence, some room ordinarily exists for efficiency enhancing intervention in the form of setting commodity quality standards, disseminating relevant trade information and establishing appropriate transaction procedures. In addition, commodity markets\u27 stabilization programs offer a wide scope for improving the dynamic market performance; indeed, market stabilization objectives are often invoked as political justification of redistributive policies

Political-Econometrics: The Quantitative Investigation of a Political Economy

In an earlier work [Zusman and Rausser (1990a)], we expounded a descriptive integrated theory of a political-economy. As is generally the case, the motivations for developing the theory were: (a) to provide a general explanation of the working of a political-economy and (b) to provide a mechanism for predicting the values assumed by the endogenous economic variables and the policy instruments for given environments. The two objectives are, in fact, related in several ways. Evidently, explication and prediction alike must derive from a valid theory. As an introduction to the rest of this paper, we now consider the theory validation problem and the role of theory in prediction as applied to our political-economic theory

Endogenous Policy Theory: The Political Structure and Policy Formation

Models of economic systems involving government intervention by definition include some policy variables, or policy instruments, through which the policy in implemented. In general, economists have tended to view these variables as exogenously given. While convenient in dealing with some analytical problems, this attitude is not always adequate, as it abstracts from the realities of political-economic life. Evidently, economic policy is not independent of the economic structure, and policy variables are codetermined with endogenous economic variables within an integrated political-economic structure

Prescription: Political Preference Functions Versus Social Welfare Functions

Available evidence taken from the experience of many countries strongly suggests that bad governments and institutions have been serious, if not the most serious, obstacle to economic growth; and all public sectors pursue a mix of both predatory and productive activities—bad governments emphasizing the former, and good governments finding a way of promoting the latter. Depending on your perspective, unfortunately or fortunately, participants in the public-sector policy process generally pay little attention to the advice and counsel of the economics profession. This, in part, is explained by the confusion that emerges from our profession over the role of the public sector. Some would have us believe that the government, or the public sector, is nothing more than a clearing house while still others advance frameworks that treat the public sector as a benign pursuer of the public interest

ntraorganizational Influence Relations and the Optimality of Collective Action

Collective action, although often superior to anarchy, tends to be socially suboptimal even when the proclivity of free riders to defect is fully controlled and an organization for collective action is set up. An effective organization for collective action involving many participants will likely feature a coordinating center and peripheral participants. Even if all the overall group objective is fully internalized by the center, the organizational equilibrium is suboptimal as it reflects the influence of narrowly rational peripheral participants. The efficiency loss is particularly evident on collective action over time, where group choices even within a single generation are likely to be myopic—a propensity further exacerbated by the center\u27s short planning horizon

Political Economy of Agricultural Commodity Market Intervention

Commodity markets are characterized by trade in standardized, undifferentiated commodities and numerous traders. Consequently, such markets are highly competitive and trade is carried out in concentrated, low transaction cost exchanges. In this sense, commodity markets are the closest approximations to ideal neoclassical competitive markets. As commodity markets area also free of externalities, the resulting market equilibria are economically efficient. Nevertheless, owing to imperfect foresight and random shocks, the dynamic performance of commodity markets, may be suboptimal. Also, commodity markets' actual performance as exchange institutions may at times fall short of the theoretical ideal. Hence, some room ordinarily exists for efficiency enhancing intervention in the form of setting commodity quality standards, disseminating relevant trade information and establishing appropriate transaction procedures. In addition, commodity markets' stabilization programs offer a wide scope for improving the dynamic market performance; indeed, market stabilization objectives are often invoked as political justification of redistributive policies.</p