Decision Making as Output and Bounded Rationality

  The classical economics theories proceed on the assumption of rational agents. Rationality implies the economic agents undertake actions or exercise choices based on the cost-benefit analysis they undertake. The assumption further posits that there exists no information asymmetry and thus the agent is aware of all the costs and benefits associated with the choice he or she has exercised. The behavioral school contested the decision stating the decisions in practice are often irrational. Implied there is a continuous departure from rationality. Rationality in the views of the behavioral school is more an exception to the norm rather a rule. The past posts have discussed the limitations of this view by the behavioral school. Economics has often posited rationality in the context in which the choices are exercised rather than theoretical abstract view of rational action. Rational action in theory seems to be grounded in zero restraint situation yet in practice, there are numerous restra

Green Revolution and Indian Agriculture



As Larry Lessig puts forth in ‘CODE’, the policy makers use four means to influence allocation of resources. Green Revolution represented the architecture or the product being changed to influence the increase in food supply in the country. It was in 1967-1978 that India began the transformation from endemic famine hit nation to one of the pioneers in agricultural production.  In the 1970’s while the per capita food production was around 180 kgs, it increased to more than 200 kg by the early 1990s inspite of doubling the population. It was a far cry from the days of the disastrous famine in Bengal in 1943 (caused by state indifference than by shortage of food), which wiped out nearly 4 million people  and 1964-65 when PM Lal Bahadur Shastri appealed to people to fast one day per week to ensure availability of food to all.  
Borlaug revolution of hybrid seeds sowed the roots for wheat and paddy production in India. The rise in prosperity among farmers in Punjab, Haryana and Western UP can be substantially owed to the fact of Green Revolution. Green Revolution included use of modern technologies, fertilizers and high yielding seeds to increase the production of crops. A large amount of land was also released under agricultural category to satiate the hunger of growing population of our nation. All these formed determinants for increasing the supply of food grains.
In simple economic terms, the introduction of technology shifted the supply curve to the right and increased the amount of food available to the society. In the initial phases, even a small change in the architecture of the seed and other inputs resulted in more than proportional change in the output produced thus causing what economists call as increasing returns to scale. The presence of increasing returns enabled the food supply to go up at lower increments of inputs while prices too started to show a downward decline. But increasing returns are only upto a point. Smaller land holdings, over use of chemical fertilizers, over use of ground water, soil fertility all begin to show diminishing returns after a certain time. Current trends suggest a fall in per capital cereals production by around 15 kgs in the last decade. The industrialization of agriculture suited the large scale production of grains consume a large amount of energy. This energy is absorbed from the soil and water thus causing the condition for decreasing returns to emerge. The water consumption leads to salinity and negative impact on ground water reserves. Further the use of fertilizers can result in the generation of byproducts that damage the soil and also the overuse can create the drug resistant pests in the fields. These byproducts, what economists call as externalities would impose social costs thus decreasing the benefits of the green revolution in the long run.  This is now manifested in lower groundwater reserves and depleting soil fertility in Punjab and Haryana etc. the incidence of certain diseases in these areas is also being attributed the over use of fertilizers.  
Now a time for architectural change to bring back the increasing returns in the form of permaculture and integrating traditional systems with modern science like keyline ploughing and swale building. Further linkages to cities and food production sites have to be revisited. The benefits of the low hanging fruit of green revolution have been exhausted.  The supply curve has been shifting and shifting leftwards. The production possibility curve is shifting inwards. The gap between demand and supply would be an equivalent of another India or China in the next fifty years.  Food reserves have halved. Profitability of alternative products like corn and cotton result in farmers adopting these crops in the Western world at the altar of food production. Moreover, the food prices being relatively inelastic do not generate benefits to Western farmers on accounts of bumper forecasts. We await a disruptive sustainable innovation. Is organic farming the answer?

Source: Based on the writings of noted critics like Vandana Shiva, Adam Fenderson, Gwynne Dyer and reports issued by Food and Agricultural Organization.

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