In Defense of the Cookbook Approach to Econometrics

Cranking out LATEs with the best of them.
Cranking out LATEs with the best of them.

Dave Giles, whose Econometrics Beat is one of my favorite economics blogs, is not fond of what he calls the “cookbook” approach to econometrics:

I’ll lay it on the table – I am definitely not a fan of “Cookbook Econometrics.”

Here’s what I’m referring to.

It’s pointless, and frankly dangerous, to simply tell students what to do, without telling them why. And I know that this applies to more than just econometrics. When I’m explaining to students why we go through the proofs of important results, I usually make the following points.

First, depending on the nature and level of the course, I may or may not expect them to be able to reproduce the proof in a test or exam – usually, that’s the least of my concerns. Second, the real benefit in being led through the proof of a standard result in econometrics is that enables you to see exactly where (and how) any underlying assumptions are actually used.

When framed that way, it is certainly difficult to argue that students should be taught the cookbook approach to econometrics. But after teaching a half-semester “cookbook econometrics” course, I think it is considerably more nuanced than Dave explains it in the post quoted above (and in this other post of his). Continue reading

The Atlantic Wants You to Be Real Scared of Low Food Prices

Be afraid. Be VERY afraid.

From an article in The Atlantic:

The International Grains Council estimates that inventories of soy, wheat, barley, and corn are reaching their highest volume in 30 years. …

And what has caused this explosion in grain supplies? Prices. They’ve been unusually high in recent years and have encouraged farmers to pour money into boosting production. According to the Food and Agriculture Organization of the United Nations, from 2005 to 2013 the land used to cultivate wheat, soy, and corn grew by 11 percent globally. Never before has such a large swath of the earth been tilled.

Today’s lower prices could discourage investment and reduce future production, ushering in another period of higher prices. This cycle is nothing new, but in recent years it has been shaped by new drivers (climate change, demographic change, volatile global economic conditions) that make the swings more frequent and the range of variation more extreme.

The problem with these developments is that greater food-related volatility will bring about social and geopolitical instability.

That giant sucking sound you just heard was caused by the eyeballs of a thousand agricultural economists rolling backward into their skulls.

Three things: Continue reading

Does the International Trade of Food Rob Developing Countries of Their Food Security?

Does international trade make all parties better off? That question has preoccupied economists since well before David Ricardo published his Principles of Political Economy and Taxation in 1817, which outlined a theory of comparative advantage still taught to economics students the world over. According to that theory, trade leaves no country worse off if countries choose to specialize in producing and exporting the goods for which they have the lowest opportunity cost out of all the goods they can produce. In other words, trade is not a zero-sum game, and in most cases trade makes both countries better off.

Although the theory of comparative advantage concludes that trade leaves no country worse off in the aggregate, international trade can generate winners and losers within a given country. It is perhaps for this reason that many people question the theory of comparative advantage and believe that international trade makes certain countries worse off. That belief is especially prevalent when the trade being discussed is that between developing and developed countries, or when the goods being traded are food commodities. Opinions are even stronger when the subject is food exports from developing to developed countries, prompting arguments in favor of food sovereignty.

Indeed, the Declaration of Nyéléni, which was adopted at the 2007 Forum for Food Sovereignty, states that

Food sovereignty … puts those who produce, distribute and consume food at the heart of food systems and policies rather than the demands of markets and corporations. … It offers a strategy to resist and dismantle the current corporate trade and food regime, and directions for food, farming, pastoral and fisheries systems determined by local producers. … Food sovereignty promotes transparent trade that guarantees just income to all peoples and the rights of consumers to control their food and nutrition. It ensures that the rights to use and manage our lands, territories, waters, seeds, livestock and biodiversity are in the hands of those of us who produce food.

Food sovereignty advocates therefore argue that food security – adequate nutrition for individuals, no matter the provenance of the food commodities consumed – is not enough. Rather, one of their goals is a greater role for local foods, which necessarily means a smaller role for the international trade of food.

But does the international trade of food really threaten food security? The answer appears to “No,” according to my most recent paper, coauthored with Frank Asche, Cathy Roheim, Marty Smith, and Sigbjørn Tveteras, and which was accepted last week for publication in World Development. Continue reading

Why Do Members of Congress Vote for the Farm Bill?

My paper with my former colleague Nick Carnes on the political economy of agricultural protection, which looks at why members of Congress vote for or against the farm bill, has just been accepted by and is now forthcoming at Food Policy.

Nick and I have been working on this since early summer 2013. The idea came to us as we were having lunch and I asked him whether the data he’d assembled for his book White Collar Government included any information about whether members of Congress had worked as farmers. We began with an interest in knowing whether having worked as a farmer drove how members of Congress vote on farm bills, but we soon expanded our analysis to also include the proportion of farmers in a member of Congress’ district as well as the amount of money she had received from agricultural political action committees. This allows us to run a horse race between competing theories for what drives agricultural protection, i.e., subsidies to farmers along with the taxes and quotas imposed on agricultural imports.

After the paper was rejected twice at other journals (complete with a referee report that compared part of our paper to a high-school term paper, no less) we decided to send this to Food Policy in October 2013. Little did I know that I was going to become an associate editor of that same journal a month later!

Here is the abstract: Continue reading

Where Should the Empirical Research on Contract Farming Be Going?

I spent most of last week in Dar es Salaam at the POLICOFA – the acronym stands for “Potentials and Limitations of Contract Farming” — conference jointly organized by researchers from the University of Copenhagen and Mzumbe University. I was there because I had been asked by Niels Fold, one of the Danish researchers involved in POLICOFA, to give one of the two keynote addresses of the conference. The other one was given by Carlos Oya, from the School of Oriental and African Studies in London, who has published a really good review of the contract farming literature in 2012 in the Journal of Agrarian Change.

The title of my talk was “Empirical Research on Contract Farming: Quo Vadis?,” and it was a nice occasion for me to gather my thoughts as to where the research on contract farming should be going. If you have an interest in applied contract theory, agricultural development, agribusiness, and development, you can find my slides here.