Perverse supply response in agriculture: the importance of produced means of production and uncertainty

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Avebury, 1992 - Business & Economics - 175 pages
The Law of Supply is one of the simplest and most powerful predictions of neo-classical economic theory. However, like all theories, it is based upon a number of assumptions, departure from which may jeopardize its predictions. This book investigates such departures and the possibility that they may result in 'perverse' supply response in agriculture. Two areas in particular are examined, concerning uncertainty and Sraffian produced means of production. Insufficient evidence is found to support the argument that uncertainty and risk aversion lead to perversity, at least in U.S. agriculture; while, although an apparently perverse aggregate supply response is identified in U.K. agriculture, this arises from failure to take account of produced inputs. Thus, the overall conclusion drawn from this work is that farmers, at least in developed countries, do respond normally to price incentives.

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Produced inputs aggregation and perversity

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