OLD SCC76: Economics and Management of Risk in Agriculture and Natural Resources
(Multistate Research Coordinating Committee and Information Exchange Group)
Status: Inactive/Terminating
OLD SCC76: Economics and Management of Risk in Agriculture and Natural Resources
Duration: 10/01/2004 to 09/30/2009
Administrative Advisor(s):
NIFA Reps:
Non-Technical Summary
Statement of Issues and Justification
Project's Primary Website is at http://www.auburn.edu/academic/agriculture/agrisk(direct link can be found under LINKS)
Risk and uncertainty are pervasive in agriculture and other natural resource industries. Decisions are constrained by limited and uncertain knowledge. The unpredictability of future weather, vagaries of government policies affecting resource values and commodity prices, and the growing importance of environmental considerations in policy-making add to the uncertainty surrounding decision analysis. Although these uncertainties are widespread, their nature and impact vary across firms, regions, and government agencies. Much progress has been made in understanding decision-making under uncertainty, but the knowledge base is incomplete. There is a continuing need to examine both short- and long-term affects of risk in agriculture and other natural resource based industries. Better understanding of how risk management practices affect the economic and natural environment, influence the adoption of new technology, and interact with public policies will improve firm-level decision-making and aid policy-makers in addressing important policy issues related to risk. One of the strengths of the predecessor regional projects has been the national scope of the institutions represented by the participants. Although some risk problems and research opportunities may be primarily of local interest, the earlier projects have demonstrated that the analytical procedures developed and presented by project participants can often be successfully applied to understanding and addressing a variety of local risk problems. Hence, the information exchanged among project participants generates local benefits for the institutions represented. In addition, the information exchange format creates opportunities for researchers to interact on issues of mutual interest, sometimes fostering extramural grant-writing efforts. The renewal of IEG-76 would continue an almost 30-year tradition of bringing together researchers from around the country to strengthen and coordinate research and policy efforts related to risk analysis. Research conducted and presented within the predecessor regional projects focused on characterizing producer attitudes toward risk, deriving distributional aspects of commodity prices and yields, and developing improved decision models for considering risk from the perspective of the individual decision-maker. Due largely to the efforts of participants in those earlier projects, consideration of risk is now widespread in applied agricultural economics research. Many of the methods developed under previous projects and presented at annual meetings are now widely utilized by agricultural and natural resource economists who have themselves never been formally affiliated with these projects. Over the years, participants have thought it important to broaden the scope of the project beyond just farm-level decision-making to include broader agricultural and natural resource risk issues. This has proven quite beneficial in that it has attracted researchers with broader interests, while still maintaining a core group with interests in farm-level decision-making. Synergies have resulted as participants share cutting-edge approaches to risk analysis as practiced in specific sub-disciplinary areas. Bridging these sub-disciplinary boundaries allows participants to consider alternative approaches that may benefit their specific risk research programs. The continued participation of individuals from government entities suggests that research presented at the annual meetings has important public policy implications.
Objectives
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The IEG will provide a scientific/professional forum to facilitate the exchange of theoretical and methodological approaches to risk analysis, and to nurture the development of original concepts and preliminary research efforts related to agriculture and natural resources. Specific focus issues will include: a) micro-level modeling of how risk affects a number of important natural resource and environmental risk issues, including forest, wildlife, and range management, ground- and surface-water pollution, the environmental sustainability of agricultural production systems, and conflicts in resource demands between agricultural and competing users; b) firm-level analysis of production, financial, marketing, and environmental risks including analysis of how these risks impact (and are impacted by) technology adoption and access to information; c) firm-level analysis of various risk management strategies such as forward pricing, insurance purchasing, and diversification and how government policies affect optimal risk management strategies; d) economic theory and the behavioral foundations of decision-making under uncertainty, including extensions of expected utility theory, challenges to expected utility theory, behavioral impacts of asymmetrically distributed information, and understanding decision-maker risk attitudes within a portfolio context; e) the impact of public policy on the risk environment of individuals, firms, and sectors within the economy, including exogenous trade shocks, food safety regulations, commodity income support programs, changes in financial and agricultural insurance institutions, and resource pricing policies.
Procedures and Activities
Expected Outcomes and Impacts
- The IEG will provide a forum for exchange of research ideas, evidence, methods, progress, and results among economists working on the economics of risk.
- The IEG will provide a focal point for the development of innovative concepts and approaches to improve the quality and applicability of research on risk management.
- The IEG will promote and foster new research efforts on the economics of risk management.
- The IEG will provide a forum for discussion of the application of research on the economics of risk management to policy issues and alternatives.
Projected Participation
View Appendix E: ParticipationEducational Plan
Annual meetings will continue to be held to allow for the exchange of information on risk and uncertainty. Advertisement of the meetings will be designed to reach a large number of potential participants, such as announcements placed in the bimonthly newsletter of the American Agricultural Economics Association. Program schedules will be distributed prior to the meeting to attract additional participation. Predecessor projects have had organized paper sessions and organized symposia at various agricultural economics professional meetings. Under the project that is now expiring, participants published a set of proceedings papers as a special issue of the journal Agricultural Systems. Another set of proceedings papers were published in an edited book published by Kluwer Academic Publishers. It is anticipated that when opportunities arise, the group will continue to present research findings through appropriate outlets. The primary participants in the IEG will include agricultural economists from state experiment stations who conduct research in the area of risk and uncertainty. Continued participation is also expected from extension economists, university research economists not affiliated with an experiment station, USDA employees from various agencies, private consultants, and employees of various private-sector entities interested in agricultural and natural resource risk issues.
Organization/Governance
Administrative issues will be addressed during the business meeting held in conjunction with the annual meeting. During the business meeting, elections will be conducted to fill the position of program chair. The program chair coordinates the program for the next annual meeting. The out-going program chair becomes the project chair and is responsible for conducting the business meeting, submitting an annual report on project activities, and maintaining communication with the administrative advisor and the Southern Association of Agricultural Experiment Station Directors.