Volume 22, Issue 1, July 1997

July, 1997

By: Ayer, Harry W.
Agroenvironmental problems (e.g., contamination of ground- and surface water, feed lot odors, endangered species) often involve goods and activities with public goods attributes. Grass roots collective action- in contrast to top-down governmental collective actions of taxing, subsidizing, and regulating- provides one alternative means of helping resolve these problems. Here I suggest that agroenvironmental policy, research, and extension should consider the often forgotten grass roots collective action alternative. I also discuss how expected private benefits, communication and information, joint products, group size and heterogeneity, transaction costs, and rules and enforcement determine the success or failure of grass roots collective action.

July, 1997

By: Gardner, B. Delworth
Federal ownership and management of the public lands have created a rent-seeking frenzy, inflated rhetoric, wasted resources, and squandered investment opportunities. The primary commodity user groups, grazers and timber harvesters, have declined in importance whereas conservationists and recreationists have gained. Still, historical use preferences and continued rent seeking have produced use entitlements that seem impervious to changing costs and demands and thus result in large wealth losses to consumers and taxpayers. Privatization of the public lands is probably politically infeasible, but simulated market processes can be used to replace political allocations and improve efficiency.

July, 1997

By: Koontz, Stephen R.; Garcia, Philip
The exercise of market power across multiple geographic fed cattle markets is measured with an econometric model which links behavior of the margin between boxed beef and regional fed cattle prices to an oligopsony model of multiple-market conduct. The game theoretic economic model suggests that for market power to be exercised in a single market a discontinuous pricing strategy must be followed. Total market power is enhance if meat-packers coordinate this pricing strategy across geographic markets. Tests reject independence of pricing conduct across geographic markets which suggests multiple-market power is present. The extent of the market power also is consistent with the economic model. More market power is exercised across regions with the same meat-packing firms. However, the magnitude of the market power is small and decreased between the early and late 1980s.

July, 1997

By: Kinnucan, Henry W.; Christian, Jason E.
A formula is derived to indicate the marginal returns to nonprice promotion for a competitive industry that promotes in both the domestic and the export market and receives a subsidy for export promotion. Private returns to export promotion are an increasing function of the export promotion elasticity, the export share, and the promotion subsidy and a decreasing function of the domestic supply elasticity, the absolute values of the domestic and export demand elasticities, and opportunity cost. Applying the formula to almond promotion and using previously estimated elasticities, no firm conclusions can be made regarding the effectiveness of export promotion, chiefly because the estimated promotion elasticities are unstable. Assuming that the domestic promotion elasticity is robust, it appears that domestic market promotion is underfunded from a producer-welfare perspective unless the marginal rate of return on alternative uses of promotion funds is high, on the order of 115%.

July, 1997

By: Wilson, Paul N.
Ex post evaluation of economic projections validates our shared understanding of economic methodology and methods. The recent economic history of Central Arizona Project (CAP) agriculture reveals the predictive power of economic reasoning and its policy impotence within a political environment intent on obtaining its share of federally allocated water. The financial inability and unwillingness of large irrigation districts to pay for CAP water under existing federal rules produced an urban tax- and rate-payer controlled CAP decades earlier than planned. Yet irrigation districts remain a large residual buyer of CAP water under new pricing and allocation rules. Unfortunately, water markets remain an underutilized and distrusted tool in the water development game.