Nature and Scope of Agricultural Economics

Nature and Scope of Agricultural Economics
Agricultural Economics, as its title implies is the branch of economics

which deals with all aspects of problems related to agriculture. According
to Snodgrass and Wallace, “Agricultural economics is an applied phase of
the social science of economics in which attention is given to all aspects
of problems related to agriculture.”
Prof. Gray treats agricultural economics as a branch of the general subject
of economics. It is only one of the many branches of applied economics
such as Industrial Economics, Labour Economics, Monetary Economics,
Transport Economics, Public Economics, International Economics,
Household Economics, etc.
Thus according to Prof. Gray, agricultural economics is only a phase of an

immense field called economics in which primary attention is paid to the
analysis of the economic problems associated with agriculture, Prof. Gray
defines agricultural economics, “as the science in which the principles and
methods of economics are applied to the special conditions of agricultural
industry.”
Agricultural economics treats the selection of land, labour, and

equipment for a farm, the choice of crops to be grown, the selection of
livestock enterprises to be carried on and the whole question of the
proportions in which all these agencies should be combined. These
questions are treated primarily from the point of view of costs and prices.
As we know, economic activities are divided into production, exchange,
distribution and consumption, agricultural economics covers all of them-
what to produce, how to produce, how much to produce, what to sell,
where to sell and at what price to sell; what to distribute, among whom
to distribute and on what basis to distribute; and what to consume and
how much to consume.
Specifically, we can say agricultural economics includes the choice of

farming as an occupation, the choice between cultivator and animal
husbandry, machinery and labour; combination of various factors of
production, intensity of cultivation, irrigation, manure, marketing, soil
conservation, land revenues system, costs, prices, wages, profits, finance,
credit, employment, etc. In all these cases the fundamental problem
before the agricultural economist is to recommend the combination of
factors of production in ideal proportion under given conditions in the
economic interests of the agricultural community.
Agricultural economics is concerned with the allocation of resources in

the agricultural industry, with the alternatives in production, marketing or
public policy. Agricultural economists are concerned with the study of
efficiency in farm production, with the returns that will result from
employing various quantities and combinations of inputs in farming, and
with determining the best farm production alternatives under given
physical and economic conditions.
They are concerned with the economics of agricultural markets, with the
costs of marketing various farm products, and with the alternative steps
or changes that may be made in the marketing structure to serve the
objectives of society more efficiently.
They are interested in analysis of the alternatives in public policy and the
economic effects of carrying out a particular programme, such as price
support law or a soil conservation programme. Agricultural economists
make use of the tools of economic analysis in studying these situations.
Scope of Agricultural Economics

The above definitions indicate the scope of agricultural economics. A
common theme of scarcity of resources and multitude of uses runs
through almost all of these definitions. This way agricultural economics is
not that different from general economics.
All the tools of analysis used in general economics are employed in

agricultural economics as well. We have the same branches of agricultural
economics i.e. economics of production, consumption, distribution,
marketing, financing and planning and policy making as in the case of
general economics. A study at the micro and macro level for the
agricultural sector is also generally made. Static and dynamic analyses are
also relevant for the agricultural sector of the economy.
To be more specific, these definitions point out that agricultural

economics examines how a farmer chooses between various enterprises
e.g., production of crops or raising of cattle and how he chooses various
activities in the same enterprise e.g., which crop to grow and which crop
to drop; how the costs are to be minimized; what combination of inputs
for an activity are to be selected; what amount of each crop is to be
produced; what type of commercial relation the farmer have to have with
people from whom they purchase their input or to whom they sell their
product.
Agricultural economics does not only study the behaviour of a farmer at

the farm level. This is, in a way, the micro analysis. Agricultural problems
have a macro aspect as well. Instability of agriculture and agricultural
unemployment are the problems which have to be dealt with, mainly at
the macro level.
There are the general problems of agricultural growth and the problems
like those concerning tenure systems and tenure arrangements, research
and extension services which are predominantly macro in character. Such
problems their origin, their impact and their solutions are the subject
matter of agricultural economics.
The scope of agricultural economics is larger than ‘mere economizing of

resources’. Agriculture is, as we know an important sector, of the overall
economy. The mutual dependence of the various sectors of the economy
on each other is well established. Growth of one sector is necessary for
the growth of the other sectors.
As such, in agricultural economics, we study how development of

agriculture helps the development of the other sectors of the economy;
how can labour and capital flow into the non-agricultural sectors; how
agricultural development initiates and sustains the development of other
sectors of the economy.
This implies that agricultural economics is not only concerned with the
use of scarce resources in agriculture proper but also examines the
principles regarding the out flow of scare resources to other sectors of
the economy and about the flow of these resources from other sectors
into the agricultural sector itself.
Nature of Agricultural Economics

Agricultural economics makes use of the principles of general economics.
The first point to be noted with regard to the nature of agricultural
economics is that, in general, it borrows most of its principles from its
parent body of knowledge i.e., the general economics.
Even the main branches of agricultural economics are similar to those of

general economics. But then a question arises, if the principles of general
economics are not different from the principles of agricultural economics,
why is there a need for separate study of agricultural economics?
The answer lies in the fact that agricultural economics does not merely
imply a direct application of principles of economics to the field of
agriculture. The principles of economics are too general in nature and the
general theory of economics has been considered as an abstraction from
reality.
Before this theory is applied to agriculture which includes, besides crop

production, forestry and animal husbandry, for the purpose of economic
analysis its principles have to be modified so that their postulates totally
tally with the main features of the agricultural sector.
A few examples will make it clear. We study in economic theory, price

formation under various market structures e.g., monopoly, perfect
competition and oligopoly. So far as agriculture is concerned, it is
presumed that as the number of farms is very large and at the same time,
their size is relatively small and the crops produced are undifferentiated
(homogeneous), perfect competition is likely to prevail in the agricultural
produce market.
In other words, we shall almost be completely ignoring the study of price

formation of agricultural produce under condition of oligopoly or
monopolistic competition or monopoly. There is the system of tenancy or
crop sharing in agriculture – a problem particular to agriculture only.
Study of this problem will necessitate modification of the principle of
resource allocation as propounded in general economics.
The modification of the economic principles, required to be made before

being applied to agriculture are so large and varied that there is a
complete justification for studying agricultural economics as a separate
body of knowledge.

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Nature and Scope of Agricultural Economics

Agricultural Economics, as its title implies is the branch of economics

Thus according to Prof. Gray, agricultural economics is only a phase of an

Agricultural economics treats the selection of land, labour, and

Specifically, we can say agricultural economics includes the choice of

Agricultural economics is concerned with the allocation of resources in

Scope of Agricultural Economics

All the tools of analysis used in general economics are employed in

To be more specific, these definitions point out that agricultural

Agricultural economics does not only study the behaviour of a farmer at

The scope of agricultural economics is larger than ‘mere economizing of

As such, in agricultural economics, we study how development of

Nature of Agricultural Economics

Even the main branches of agricultural economics are similar to those of

Before this theory is applied to agriculture which includes, besides crop

A few examples will make it clear. We study in economic theory, price

In other words, we shall almost be completely ignoring the study of price

The modification of the economic principles, required to be made before

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