The field of agricultural economics deals with resource allocation and utilization and income distribution and growth in land-intensive activities. Traditionally such activities were confined to crops and livestock production, which, accordingly, have been the accepted domain of agricultural economics. As the relative economic importance of agriculture declines (steeply in the case of the industrialized nations) and as natural resource depletion and degradation loom large, agricultural economics has come to be seen as inseparable from the economics of renewable resources and the environment.
Established areas of study in agricultural economics include farm-level decision making, production economics and resource use efficiency, household economics and consumer behavior, agricultural markets and market outcomes, food safety and variety, international trade in agricultural commodities, and nutrition. The contemporary field includes natural resource and environmental economics, agribusiness, forestry economics, and aspects of health economics, community and rural development, food security, and economic development (see, for example, Cramer, Jensen, and Southgate, 2001).
The affinity between traditional agricultural economics and environmental and resource economics is more than a matter of their common concerns with land, water, and other natural resources; it is also rooted in shared principles and methods of research. This accounts for the reincarnation of most academic departments of agricultural economics as departments of agricultural and resource economics since the early 1980s.
Agricultural economics is a branch of neoclassicism, the reigning paradigm in economics. Its origins are coterminous with the ascendancy of neoclassicism from the 1870s on. Indeed, agricultural economics has provided its parent with the archetype of the neoclassical textbook ideal: firms without market power (farms), workers without bosses (peasant families), and products without private identities (cereal commodities). This model remains the hobbyhorse not just of agricultural economists but of economists generally; ironically, though, agricultural markets have long ceased to be guided by the invisible hand, given ubiquitous state interventionism. Nonagricultural markets ruled by competition, on the other hand, have long been exceptions, not the rule.
Apart from supplying a deceptively persuasive model bolstering neoclassical preconceptions, the theoretical significance of agricultural economics consists in its unwavering adherence to these preconceptions. Agricultural economics has always been highly micro-oriented in both theoretical and empirical analyses, relying on the standard models of rational decision making by households (as both consumers and producers) and of profit-maximizing farms (see Norton 2004).
Claiming universal validity for this paradigm, Nobel prize winner Theodore Schultz famously described developing nations’ agriculture-dominated economies as "poor but efficient," a narrowly technical-economic conclusion that seemed incongruous with endemic resource under-utilization, including underemployment, egregious social structures of exploitation, and momentous instances of agrarian conflict and revolution (Rao 1986).
If agricultural economics deals with the narrowly technical issues of resource allocation and utilization that arise in our relation to nature and its cultivation, agrarian economics may be taken to deal with broader issues of social structure and regulation that arise in our relation to each other as we relate to nature. Advancing socially relevant knowledge in these twin fields is vital to our future. But this will depend on conscious efforts to integrate the twin fields rather than, as agricultural economics has done, ignoring the social dimension by hypostatizing itself.
