This textbook integrates three related fields in economics, namely agricultural/forestry economics, environmental economics, and international trade, by foregrounding cost-benefit analysis as a significant policy tool.

Exploring how welfare measures can be used in the analysis of agricultural, trade, and other economic policies, Applied Welfare Economics, Trade, and Agricultural Policy Analysis fills a gap in the literature on agricultural policy analysis by explaining the economic efficiency improvements and income transfers of various agricultural policy reforms in the United States, Canada, and the European Union.

G. Cornelis van Kooten addresses methods of identifying and measuring economic surpluses (costs and benefits), the precautionary principle, identification of an appropriate discount rate, the importance of non-market values, and the role of agriculture in trade negotiations and climate change. Applied Welfare Economics, Trade, and Agricultural Policy Analysis draws on new research, brings attention to the existing literature, and includes review questions that challenge programming skills. The techniques developed in this text can be applied to the development and reform of agricultural policies in various regions in response to trade negotiations and many other situations involving government policy.

Providing a broad-based background for analysing economic policies, this textbook brings economic rationality to political decision making.

List of Tables
List of Figures
List of Acronyms

Chapter 1. Introduction 
1.1 Setting the Agricultural Stage 
1.1.1 Top Agricultural Commodity Producers 
1.1.2 Food Security: Green Revolution and Crop Yields 
1.2 Structure of the Book 
Guide to Literature 

Chapter 2. Project Evaluation Criteria 
2.1 Private Financial Analysis 
2.1.1 Financial Ranking Criteria 
2.1.2 Conclusion 
2.2 Society’s Perspective: Social Cost-Benefit Analysis 
2.2.1 Benefits and Costs as Rent and Surplus 
2.2.2 The Fundamental Equation of Applied Welfare Economics 
2.2.3 Total Economic Value 
2.2.4 Total (Average) Value Versus Marginal Value 
2.2.5 Conclusion 
2.3 Multiple Accounts and Alternative Criteria 
2.3.1 Environmental Quality 
2.3.2 Regional Economic Development and Employment: Indirect Benefits 
2.3.3 Other Social Effects 
2.3.4 Concluding Observations about Multiple Accounts 
2.4 Alternative Methods for Evaluating Projects 
2.4.1 Cost-Effectiveness Analysis 
2.4.2 Multiple Criteria Decision Making 
2.4.3 Life-Cycle Assessment 
2.4.4 Cumulative Effects Analysis 
2.5 Extreme Events and Irreversibility 
2.6 Discounting and Choice of Discount Rate 
2.6.1 Dilemmas in Choosing a Discount Rate in Cost-Benefit Analysis 
2.6.2 Risk Adjusted Discount Rates 
2.6.3 Discounting in an Intergenerational Context
Guide to the Literature
Food for Thought 

Chapter 3. Externalities and Nonmarket Valuation
3.1 Cost Function Approach 
3.2 Expenditure Function 
3.2.1 Hedonic Pricing 
3.2.2 Recreation Demand and the Travel Cost Method 
3.3 Contingent Methods or Direct Approaches 
3.3.1 Contingent Valuation Method 
3.3.2 Choice Experiments/Stated Preferences 
3.3.3 Constructed Preferences/Stakeholder Method 
3.3.4 Fuzzy and ad hoc Methods for Determining Nonmarket Values 
3.4 Benefit Transfer 
3.5 Concluding Discussion 
Guide to Literature 
Food for Thought 

Chapter 4. International Trade and Applied Welfare Analysis
4.1 Spatial Price Equilibrium Trade Modelling 
4.2 Unrestricted Free Trade 
4.3 Trade and the Measurement of Wellbeing in Multiple Markets 
4.3.1 Vertical Chains 
4.3.2 Vertical and Horizontal Chains 
4.4 Economic Policy and Trade: Examples 
4.4.1 EU Import Restrictions on Canadian Durum Wheat 
4.4.2 Incentivizing Anti-Dumping and Countervail Duty Complaints: Byrd Amendment 
4.4.3 Restricting Log Exports 
4.5 Concluding Discussion 
Appendix 4.A: Mathematics of Supply Restrictions 
Appendix 4.B: Calculation of Objective Function in SPE Models 
Guide to Literature
Food for Thought 

Chapter 5. Governance, Rent-Seeking, Global Trade and the Agreement on Agriculture
5.1 Institutions and Governance 
5.1.1 Models of Government 
5.1.2 Takings 
5.1.3 Institutions 
5.1.4 Financing Government and Public Projects 
5.2 Land Use and the Principal-Agent Problem 
5.3 International Trade Negotiations and Agriculture 
5.3.1 Agreement on Agriculture 
5.3.2 Agreement on Subsidies and Countervail Measures 
5.4 Tariff Rate Quota (TRQ) 
5.5 Concluding Discussion 
Guide to Literature 
Food for Thought 

Chapter 6. Analysis of Agricultural Policy: Theory
6.1 Background to Analysis of Agricultural Policy 
6.2 Stock-Holding Buffer Fund Stabilization 
6.3 Quotas and Supply-Restricting Marketing Boards 
6.3.1 Quota and General Equilibrium Welfare Measurement 
6.3.2 Quota Buyouts 
6.3.3 Designing and Dismantling a Multi-Region Quota Program 
6.4 Price Discrimination 
6.5 Agricultural Technology: Genetically Modified Organisms 
6.5.1 Agricultural Research and Development 
6.5.2 Genetically Modified Organisms 
6.6 Measuring Externalities in Agriculture 
6.7 Concluding Discussion 
Guide to Literature 
Food for Thought 

Chapter 7. Agricultural Policies in the U.S. and Canada
7.1 Agricultural Support: A Brief Overview 
7.2 U.S. Agricultural Policy 
7.2.1 Analysis of U.S. Price Support Programs 
7.2.2 Reducing Production and Disposing of Excess Grain 
7.2.3 Decoupling 
7.2.4 Moving Forward 
7.3 Canadian Agricultural Policy 
7.3.1 State Trading: The Canadian Wheat Board (1935-2012) 
7.3.2 Crop Insurance 
7.3.3 Western Grain Stabilization Act (1976) 
7.3.4 Transportation Programs and Subsidies 
7.3.5 Supply Management 
7.5 Concluding Discussion 
Guide to Literature 
Food for Thought 

Chapter 8. Agricultural Policy in Europe and Asia
8.1 Agricultural Policy Reform in the European Union 
8.1.1 Background to the European Union 
8.1.2 High and Increasing Costs of Agricultural Programs 
8.1.3 Integration of New Members 
8.1.4 Reform of the CAP and Increasing Environmental Concerns 
8.1.5 Further Analysis of Sector-Level Programs 
8.1.6 Brexit 
8.2 Agriculture in Developing Countries 
8.2.1 Economy-wide Economic Reform and Chinese Agriculture 
8.2.2 India and the Rice Economy 
Guide to Literature 
Food for Thought 

Chapter 9. Agricultural Business Risk Management 
9.1 Privatizing Agricultural Hedges: Financial Products versus Insurance 
9.1.1 Index Insurance and Derivatives 
9.1.2 Futures Trading and Options 
9.2 Agricultural Business Risk Management in the United States 
9.2.1 Deep Loss Protection: The Federal Crop Insurance Program 
9.2.2 Agricultural Business Risk Management Programs in the 2008 Farm Bill 
9.2.3 Agricultural Business Risk Programs in the 2014 and 2018 Farm Bills 
9.2.4 Dairy 
9.2.5 Trade Issues 
9.3 Agricultural Business Risk Management in Canada 
9.3.1 The Shift from Price Support to Risk Management 
9.3.2 Enter Growing Forward 
9.3.3 Shift from Growing Forward (GF) to Growing Forward 2 (GF2) 
9.3.4 Evaluation of Canada’s Agricultural Business Risk Programs 
9.3.5 Going Forward: Canadian Agricultural Partnership 
9.4 Concluding Discussion: Lessons for Agricultural Business Risk Management 
9.4.1 Do Agricultural BRM Programs Distort Production? 
9.4.2 Comparison of U.S. and Canadian Approaches to Risk Management 
Appendix 9.A: A Brief Look at the Economics of Risk and Risk Aversion 
9.A.1 Systemic versus Idiosyncratic Risk 
9.A.2 Expected Income Maximization and the Risk Aversion Coefficient 
Guide to Literature 
Food for Thought 

Chapter 10. Climate Change and Applied Welfare Economics
10.1 Anthropogenic Climate Change and its Impact 
10.1.1 Climate Sensitivity 
10.1.2 Damages 
10.2 Economic Evaluation: The Role of Integrated Assessment Models 
10.2.1 Climate Models and Policy Models 
10.2.2 Carbon Price Policy Variable 
10.3 Economic Impacts of Climate Change on Agriculture 
10.3.1 Land Rents and the Regression Approach 
10.3.2 Mathematical Representation of Landowner Decisions 
10.4 Climate Change and Food Security 
10.5 Discounting and Climate Urgency 
10.5.1 Discounting Carbon 
10.5.2 Economics of Wood Biomass Energy: Climate Urgency and Discounting 
10.6 Mitigating Climate Change 
10.6.1 International Action to Mitigate Climate Change 
10.6.2 Agricultural Role in Mitigating Climate Change 
10.6.3 Managing for Carbon: Carbon Pools and Fossil Fuel Substitution 
10.7 Discussion 
Guide to Literature
Food for Thought 

References

"Van Kooten provides a tour de force, drawing on applied welfare analysis and political economy to comprehensively tackle farm and forestry policy and international trade issues, including inter-temporal climate change. Complex concepts are clearly explained and illustrated, always with an eye to intended effects and opportunity costs. This book will stimulate a generation of graduate students, while the key arguments are equally accessible to current policy practitioners."

"This is an excellent textbook for applied welfare analysis written by one of the leading scholars in the field. G. Cornelis van Kooten summarizes the broad knowledge he has accumulated over his impressive career as a leading scholar in the field. The book is written accessibly and will be useful as a source for courses at the bachelor level, but also serve as an excellent reference for policy makers and other stakeholders that want to refresh some of their knowledge."

"Applied Welfare Economics, Trade, and Agricultural Policy Analysis is a refreshing treatment of agricultural and trade policy analysis through an economics lens. In rich detail, the book covers topics such as social cost-benefit analysis, externalities and nonmarket valuation, international trade policy, agricultural support policies, agricultural business risk management, and climate change This book is a must-read for students and policy makers interested in deepening their understanding of the application of welfare economics to agricultural and land-use policy."