The methodologies of the studies - Institutional Constraints to Small Farmer Development in Southern Africa - page 306

the General Equilibrium modelling process to be a dynamic modelling process (Hieller,
1973; Scarf and Shoven, 1984). The short comings of the General Equilibrium models are
its inadequacy to treat money and financial institutions. The General Equilibrium model
has great difficulty in allowing for unemployed resources and is unable to cope with large-
scale industrial enterprises that are capable of exerting significant influences on prices (Scarf
and Shoven, 1984).
The basic assumption of the Partial Equilibrium model in analysing trade policy issues
is that when one commodity is traded between two countries or markets they are
essentially similar to the rest of the world market (Söderstem and Reed, 1994). The Partial
Equilibrium framework uses the conventional supply and demand curves to depict the
price effects of policies and then the concept of consumer and producer surpluses. Revenue
collected and costs incurred are also determined and their impact on government annual
budget is assumed to determine the welfare and distributional effects of policies. This
methodology is used to analyse the effects of policy actions examined only in the markets
that are directly affected by the policy under consideration. The analytical structure makes
a distinction between the welfare of consumers who purchase a product and that of the
producers. Consumer welfare is measured using consumer surplus, while producer welfare
is measured using producer surplus. It is assumed that the revenue collected by government
is redistributed in the economy and is used up either on public goods or to raise economic
welfare (Söderstem and Reed, 1994; Reed, 2001).
A.4.1.2 Welfare effects of a tariff case of a small importing country
Welfare economics is concerned with comparing different economic situations in terms of
social welfare, including issues related to efficiency, equality and public economic policy ( Just
et al. , 1982). Welfare economics is the fundamental principle of using resources optimally so
as to achieve maximum well-being for all individuals in a society. One difficulty with welfare
economics assessment is the fact that welfare is not an observable variable ( Just et al. , 1982).
According to Fraser (1992), assessing the welfare effects of government policies has a long
history in agricultural economics. Traditional welfare assessment methodologies use concepts
like economic rent, producer and consumer surplus in identifying the transfer (or expected
transfer) between producers and consumers or taxpayers ( Just et al. , 1982; Fraser, 1992).
According to Just et al. (1982), welfare economics rests on the principle that social gains
are maximised at competitive markets and where non-competitive interferences exist, the
economist are justified to recommend policy measures that eliminate the distortions. In
recent years, numerous commercial policies affecting economic welfare have proliferated,
partly because of the many trade theory innovations and policy instruments that have
been introduced into the world market. These international theoretical developments have