Opportunity cost is the cost of the next best alternative foregone when making a decision. Decision making in any sphere often posses an opportunity cost. In agriculture for example, a decision to plant coffee or cotton (cash crops) on a field means that maize or potatoes (food crops) cannot be grown. Farmers constantly face such enterprise choice decisions. However, farmers make decisions based on factors within their control, taking into account the factors out of their control. For example, enterprise choice may be based on soil type, input and labour availability, market accessibility, availability of credit, infrastructure, etc. These are further influenced by the wider macro environment including but not limited to legislation, taxes, tariffs, and polices.
At the national or policy making level, planning is about choices between focusing on large farms or small farms; investing in intensive or extensive agriculture; promoting food crops or cash crops; insisting on a free market or state intervention; creating self reliance or trade; e.t.c. Whatever strategy is chosen, there is a need for investment in stable markets, agricultural research, extension and credit services, and good infrastructure. Governments should create an enabling environment and increase its budget allocation to agriculture, given that agriculture is the backbone on many African countries.
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Hi!
ReplyDeleteInteresting post.
This thing with opportunity cost I see sometimes as difficult to grasp. In my mind "the cost of missed opportunities" describes it in best way.
It is very necesary for farmers to take the right decisions during vital seasons. Each farmer must choose the best plant for that season and must consider all other important factors like soil nutrients level, humus level etc he must also decide the vital fertilizers to be used. Most importantly the budget(opportunity cost) must be planned well before.
ReplyDeleteThat makes a lot od sense Albert. However "Missed opportunities" sounds like it was an oversight, or wrong decision by the farmer. Rather foregone opportunities. A farmers weighs the costs and benefits of his options, and takes on the most efficient. It may not be the most cost effective. All that depends on factors outside his control.
ReplyDeleteYes Gill, it is important that farmers make the right decisions. One may ask, what is the right decision? Is it the crop that is most marketable? Is it the one that grows best in the region? Often Rural farmers in Africa cannot afford fertilizers and have no knowledge of them. That is why it is important for government to invest in extension services and markets to enable farmers to make the right decisions in terms of soil properties and other environmental and economic factors.
Yes you have a valid point there. "The cost of forgone opportunities" would perhaps be the best way to describe it.
ReplyDeletegreat post
ReplyDeleteThis is true, farmers have had the same doubt for a long time, and doesn't matter if they have the space necessary to plant, they just have to select one way, an is unjust.
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