Program Lectures

Introduction to the Lecture Series

 These lectures provide an introduction to agricultural policy analysis.  The target audience includes Indonesian practitioners of food and agricultural policy at regional levels.  This series of eleven lectures is designed particularly for faculty members in regional universities.  The intent is that younger faculty will apply the concepts, introduced in these lectures, in their teaching of university students, their applied research for local governments, and their training of local government officials in basic methods of policy analysis.

 The underlying logic of the lecture series is to begin with a broad framework for understanding agricultural policy analysis, to develop in depth the Policy Analysis Matrix (PAM) approach to identifying competitiveness, efficiency and policy transfers, and then to investigate key components of the PAM method product markets, factor markets, the market for foreign exchange, and environmental externalities. Throughout the series, equal emphasis is placed on the identification and analysis of policy issues and on the written and oral communication of policy results.   

The concepts in the eleven lectures are developed sequentially.  It is best to begin with lecture 1, work through the series in order, and end with lecture 11. Teaching at the university level is likely to be most effective if all eleven lectures are included.  But some of the lectures can be omitted in short workshops that train local officials or technicians in regional policy analysis.  Of the eleven lectures listed below, the most critical for local policy analysts are the first three, either the fifth or the sixth, the seventh, and the last. If more time is available, the fourth and eighth lectures are useful additions.

Navigation Instructions for the Lectures

 Each of the lectures consists of a series of PowerPoint slides of outlines and detailed notes. The titles of the slides are shown in the column on the left side of the page. To navigate among slides, click on the titles in that column.   

No reading list in included for this lecture sequence. The readings, instead, are built into the lecture slides.  Whenever part of a slide is underlined, a URL link is established to a portion of a book or article. By clicking on that underlined link, a participant brings up a reading related to that slide. Most of the specific linked readings are to Eric A. Monke and Scott R. Pearson, The Policy Analysis Matrix for Agricultural Development, 1989. (A pdf version of the book can also be downloaded for hardcopy printing.) A few readings are whole chapters, notably those from C. Peter Timmer, Walter P. Falcon, and Scott R. Pearson, Food Policy Analysis, 1983.

Selections from these documents containing some of the most important concepts have been assembled as a Course Reader and can be downloaded in a pdf format.

Components of the Lecture Series

The lecture series consists of eleven integrated topics. The following brief synopsis of each lecture is intended to guide participants through the course and to show the underlying logic of the sequence.  Participants are encouraged to sample the lectures to see whether the materials covered are familiar or new.  Most will find that even familiar topics are covered in ways that provide additional insights into the conceptual and practical applications of agricultural policy analysis.  Therefore, everyone who plans to use this material for teaching should plan to work carefully through each lecture.

 1. A Framework for Agricultural Policy Analysis. Governments form agricultural strategies by choosing a set of policies to further their objectives subject to the constraints on the agricultural economy. This lecture extends this logic to build a framework for understanding policy.

  • Download slides and notes in a pdf format.

2. Introduction to the Policy Analysis Matrix. The Policy Analysis Matrix methodology provides information to help policy makers address three central issues of agricultural policy analysis competitiveness, efficiency, and the extent of policy transfers. The PAM is thus a central tool for regional agricultural policy analysis.

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3. Policy Transfers in the PAM. By comparing the returns, costs, and profits of agricultural systems in private (actual market) prices and in social (efficiency) prices, the PAM provides measures of the extent of policy transfers and of market failures. The results show how policies individually and collectively affect private profitability.

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4. Product Markets in PAM:  Price Determination and Gains from Trade. To analyze how policies affect tradable outputs and inputs, one must thoroughly understand the process of price determination and the gains from international trade.  Inefficient policies change prices, interfere with the gains from trade, and create efficiency losses. 

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5. Product Markets in PAM:  Policies that Raise Prices. Governments use subsidies or international trade restrictions (tariffs or quotas) to raise product prices.  Good policy analysts measure the impacts of price policy on quantities produced, consumed, and traded, on the welfare of producers, consumers and the treasury, and on efficiency.

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6. Product Markets in PAM:  Policies that Lower Prices. Governments use subsidies on imports of food or on all food consumption to lower the domestic price of food. Policy analysts investigate the effects of policy on quantities consumed, produced, and imported, on transfers among consumers, producers, and the treasury, and on efficiency.

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7. Introduction to Factor Markets in the PAM. The main inputs in Indonesian agriculture are labor and land.  Understanding factor markets, those for labor, capital, and land, is critical in analyzing agriculture. The key is to discover whether policy distortions or market imperfections cause observed factor prices to diverge from efficient ones.

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8. Exchange Rate Policy in the PAM. The foreign exchange rate seems far removed from agriculture.  But exchange rate policy determines whether the prices of tradables (those linked to foreign markets) keep up with the prices of nontradables.  It thus has a central influence on the competitiveness of agricultural commodities in world markets.

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9. Introduction to Benefit-Cost Analysis. The basic PAM calculations focus on the divergences between private and social prices that signal the impact of government policy. However, by adding information on the cost of a capital investment and its effect on a second I-O table, it is a small step from the PAM framework to a benefit-cost evaluation.

10.  Environmental Externalities in the PAM. Benefit-cost analysis within the PAM approach can also be extended to include analysis of environmental externalities and environmental degradation. For example, the use of chemicals can have negative effects on downstream users of water, or the unwillingness to invest in drainage can negatively impact future uses of groundwater. 

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11.  The PAM as an Integrated Framework for Policy Analysis. Distorting policies or market failures cause divergences between private and social prices. Both the PAM approach and partial equilibrium analysis are used to study divergences and analyze policy.  These complementary methods provide critical information for policy analysis.

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12.  Communicating PAM Results to Policymakers. For effective policy analysis, the clear and brief communication of results is as important as the accurate collection and analysis of empirical information. If a policy analyst is unable to write good policy briefs and present effective seminars, policy makers typically ignore the results.

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Complementary Use of the PAM Computer Tutorial

 The teaching of the PAM approach is aided if participants follow the PAM computer tutorial. This tutorial is accessed by clicking on the entry, Tutorials, found on the Outreach home-page and then by clicking on the Policy Analysis Matrix tutorial on the Computer Tutorials page.  The tutorial is a self-contained application of an Excel spreadsheet to demonstrate computer application of the PAM methodology. There are 10 chapters, and each takes about two-three hours to complete.  Links are made to the PAM lectures and to the Monke-Pearson book on the PAM.

 Effective teaching of policy analysis usually consists of a combination of lectures, readings, and practical applications. Faculty members of regional universities are encouraged to work through the lecture outlines and notes, the linked readings, and the computer tutorial at their own speed.  The workshops to train local policy analysts should alternate lectures and computer sessions, including one of each during each half day.  This two-step process helps participants to learn new concepts well by teaching the same ideas in two complementary ways one conceptual and the other practical.