The Microeconomics of Coalition Alignments: Some Insights on Food Price Policy

III This paper concerns the objective alignment of individuals' material interests into groupings for collective action, and how these groupings vary with economic structure and in response to previous periods' policy choices. It establishes analytically the microeconomic basis for coalition alignments with respect to food price policy, then numerically simulates the comparative static effects of alternative food policies on coalition structure. A parsimonious household model applied to a heterogeneously endowed society demonstrates the inherent inextricability of price policy £TOlTI land, population, and technology policies in food agriculture. Moreover, coalition alignments on particular policy debates are path-dependent. THE MICROECONOMICS OF COALITION ALIGNMENTS: SOME INSIGHTS ON FOOD PRICE POLICY* This paper concerns the objective alignment of individuals , material interests into groupings for collective action, and how those groupings vary with economic structure and in response to previous periods' policy choices. It establishes analytically the microeconomic basis for coalition alignments with respect to food price policy, then numerically simulates the comparative static effects of alternative food policies on coalition structure. A parsimonious household model applied to a heterogeneously endowed society demonstrates the inherent inextricability of price policy from land, popUlation, and technology policies in food agriculture. I Moreover, coalition alignments on particular policy debates are path-dependent; i.e., they are in part the consequence of past choices on these same policies. This paper is explicitly descriptive and implicitly prescriptive. Its positive contribution is an improved understanding of why the political environment surrounding food price policy differs so markedly across time within a given country as well as cross-sectionally among countries at any given time. By returning political economy analysis to microfoundations, a normative dimension emerges as well. The two earlier-mentioned characteristics of the model resultsjointness and ·This paper has benefitted from conversations with Michael Carter Jean-Paul Chavas, Jay Coggins, Marcel Fafchamps and Peter Timmer, and from the comments of participants at seminars at Iowa State, Minnesota, Utah State, and Wisconsin. Remaining errors are mine entirely. IThese other three policy sets are treated as exogenous in this paper, but a particularly promising line of research allows for jointness in policy determination. The importance ofjointness in pricing and technology policies has been demonstrated by DeGorter, Nielson, and Rausser; DeJanvry, Sadoulet, and Fafchamps; Rausser (1982 and 1992), and most prominently in the theory of induced innovation (Binswanger and Ruttan). DeJanvry (1981) has developed the notion of jointness in pricing and land policies. 2 path-dependency suggest how different policy choices can lead to important differences in resulting coalition alignments, with potentially significant implications for the political sustainability of agricultural development strategies. Economic studies of government intervention in the production, marketing and pricing of agricultural commodities have flourished in recent years. This literature exhibits three distinct traditions, the first two of which are often labelled "political economy". The first, born of public choice theory (Buchanan and Tullock) and accelerated by pathbreakinR work on interest group and bureaucratic behavior (Olson 1965; Krueger 1974; Bhagwati), emphasizes the non-neutrality of government, its manipulability by special interests, and the government failures that may result. Interest groups generally enter such studies exogenously as analysts explore the consequences of self-interested behavior by bureaucrats, politicians, and pressure groups. 2 The second tradition descends from Pigouvian welfare economics and social choice theory, and manifests concern over the reconciliation of individual preferences in collective choice and resolution of market failures through government intervention (Arrow; Sen). In this genre, government, if modelled at all, tends to be a neutral medium, led by a benevolent social planner, and politics rarely appear per se. Despite considerable ideological and methodological differences, current practitioners from these 2 Swinnen and van der Zee survey this literature. 3 Implementation is an important, emerging variant of this tradition. Implementation theory uses players' strategic interests to overcome the problem of truthful revelation of preferences so as to render feasible social choice correspondences that would otherwise be impossible in a nondictatorial setting (Arrow; Gibbard; Satterthwaite). Moore and Palfrey provide good surveys, and Coggins an application. 3 two traditions both aim to explain government policies determination. That is, they look at how economic factors influence political equilibria. The third tradition draws on the normative classical and neoclassical literature to explore the economics of food price policies. These works build appealingly from microeconomic models of individual behavior. But because those are usually representative agent models, they generally ignore the conflicting preferences inherent to a heterogeneous society and the resulting contest between groups seeking to impose their preferred policy regime. The political feasibility of the resulting prescriptions is consequently indeterminate, a shortcoming vividly evident in the painful politics of structural adjustment in Africa and Latin America over the last fifteen years. A considerable gap exists between the economics of food price policy literature, which foreshadows but does not address the alignments of conflicting interests into political coalitions, and the political economy of food price traditions, which explore policy choices without providing a coherent theory to explain the underlying preferences which coalesce individuals in the debate. This paper helps to fill that void by breaking from those traditions in three significant ways. First, unlike the classical normative literature, it models a continuum of agents differentiated by endowments and considers explicitly the opposing, endogenous political support of distinct subpopulations for food price policies. Second, the paper goes only as far as modelling the material predisposition of 4 The classics here include: Preobrazhensky and the price-scissors debate centered around Soviet food policy; Lewis and the dual economy models that present agricultural prices as a lever for the transfer of surplus from a backward agricultural sector to a modern industrial sector; and Timmer, Falcon and Pearson, and Timmer, which returned economists' attention to more neoclassical, welfare-theoretic approaches.