Economic Policy Adjustments in Developing Countries: Discussion

I shall first discuss the paper by Weber et al. It is true, as the authors say, that policies designed to increase farm producer incentives through increased prices rely on the implicit, and often even unconscious, assumption that producers are net sellers. However, as the authors show, most of the farmers in the areas studied are net purchasers. Therefore, increasing prices provides an incentive to only a few while lowering the real income of most of the producers. In fact, the net effect of price increases could be to decrease production as resources are diverted to meet increased household consumption demands. This may be a reason for the otherwise peculiar finding of Scandizzo and Bruce, noted in the paper, that the price elasticity of supply was negative in 25% of the cases they surveyed. There are several practical principles of policy analysis that this case study illustrates. First, it is vital to question all the assumptions made in performing policy analysis. This is especially important where expatriate policy analysts work in developing countries. It is all too easy to assume that everybody does things just like we do at home in Two-Bit, Montana. For this reason it is absolutely necessary for expatriate policy analysts to work closely with local people who know the physical and social landscape. However, as this example shows, even knowledgeable local people can fall into the trap of implicit assumptions. In this case, senior agricultural officials also assumed that the producers were net sellers. Hence the need for good empirical research to test everyone's policy assumptions. Second, policy analysis relies on hundreds of facts, or implicit assumptions about facts, which may or may not be true. Norman Mailer has aptly described these unverified facts as "factoids." There never is sufficient time, resources, or data to test all the factoids. Part of th art of policy analysis is to identify the "strategic facts" in the analysis, the facts that will switch the conclusions from one direction to another and then concentrate empirical resources in testing these strategic facts. Certainly, whether most producers are net sellers or purchasers is a strategic fact in price policy, and the analysts very rightly concentrated their empirical work in this area. Third, I applaud the authors' emphasis on the need to attain a balanced approach among economic policies, human and natural resource development, and infrastructural facilities in development. Economic policy is only a part of the development process-not, by any means, all of the process. Indeed, economic policy is much like a string: it can hold devel pment back; but without the help of the o her factors, it cannot push development forward. For example, we know a priori that, in order to get high yields, it is necessary to have good water and fertilizer supplies. If these factors are ot available, policies will have very little effect on yields. One of the most important strategic facts about African agricultural development is that only about 5% of the arable area of Africa is irrigated. In Asia it is 50%. These simple facts explain a great deal of the difference in agricultural development between Africa and Asia. Four h, and last, I also applaud the authors' plea for an open mind in policy analysis and to av id ideological, dogmatic positions. Different policies work differently under different con itions, and it is absurd to think that there is one, universally applicable set of policy prescriptions. We must keep policy dialogue from degenerating into policy monologue. Turning now to the paper by Humphreys and Jaeger, I have mixed reactions. I strongly support the kind of work they are doing, which is empirically testing the impact of policies on economic performance. However, I have two problems with their analysis. David Seckler is Director, Food and Agricultural Policy, Winrock International, and a professor, Department of Agricultural and Resource Economics, Colorado State University.