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Department of Agricultural Economics, Extension and Rural Development

Agricultural Economics and the role of the Agricultural Economist

From undergraduate studies through to postdoctoral research, the Department of Agricultural Economics, Extension and Rural Development contributes to the international practice, analysis and understanding of the complex agricultural industry and rural environment. We take pride in our accomplishments and those of our students.

The Department is one of the leading research departments at the University of Pretoria. Our research focus areas create a lot of energy and activity with regard to the drivers of the separate programmes. Even though the different focus areas overlap considerably, the advantage of this categorisation is that our comparative advantage can be exploited to the full. This enables us to develop centres of excellence in each of the focus areas.

Agricultural economics and the role of the Agricultural Economist

The subject matter of agricultural economics has both broadened and deepened in recent years. The field originated early in the 20th century with a focus on farm management and commodity markets, but has since moved far into analysis of issues on food, resources, international trade, and linkages between agriculture and the rest of the economy. In the process, agricultural economists have been pioneering users of developments in economic theory and econometrics. Moreover, in the process of intense focus on problems of economic science that are central to agriculture – market expectations behaviour under uncertainty, multimarket relationships for both products and factors, the economics of research and technology adoption, and public goods and property issues associated with issues like non-point pollution and innovations in biotechnology – agricultural economists have developed methods of empirical investigation that have been taken up in other fields.

The application of economics to agriculture in a complex market company such as that of South Africa has a long and rich history. We can summarise the activity by discussing the activities of agricultural economists at micro- and macroeconomic level.

Role at microeconomic level

Agricultural economists at the micro level are concerned with issues related to resource use in the production, processing, distribution, and consumption of products originating in agriculture. Production economists examine resource demand by businesses and their supply response. Market economists focus on the flow of food and fibre through market channels to its final destination and the determination of prices at each stage. Financial economists are concerned with issues related to the financing of businesses and the supply of capital to these firms. Resource economists focus on the use and preservation of the nation's natural resources. Other economists are interested in the formation of government programmes for specific commodities that will support the incomes of farmers and provide food and fibre products to low-income consumers.

Role at macroeconomic level

Agricultural economists involved at the macro level are interested in how agriculture and agribusinesses affect domestic and world economies, and how the events taking place in other sectors affect these firms, and vice versa. For example, agricultural economists employed by the Central Banks must evaluate how changes in monetary policy affect the price of food. Macroeconomists with a research interest may use computer-based models to analyse the direct and indirect effects that specific monetary or fiscal policy proposals would have on this sector. Those employed by multinational food companies examine foreign trade relationships for food and fibre products. Others address issues in the area of international development.

Marginal analysis

Economists are frequently concerned with what happens at the margin. A microeconomist may focus on how the addition of another input by a business, or the purchase of another product by a consumer, will change the economic well-being of the business and the consumer. A macroeconomist, on the other hand, may focus on how a change in the tax rate on personal income may change the nation's output, interest rates, inflation, and the federal budget deficit. The key work in this example is change, or more specifically how a change in price, quantity, etc will affect other prices and quantities in the economy, and how this might change the economic well-being of consumers, businesses, and the economy as a whole.



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