Five economic principles applied to stored product protection

Abstract

Society has long recognized the critical importance of stored product protection for welfare of humans and domestic livestock. Economists note additional benefits in terms of more efficient resource use, facilitated trade, and market stability. Estimates of the stored product losses vary greatly but are large in aggregate and potentially economically devastating to individual enterprises. Economic principles can be applied to stored product protection to understand current practices and to indicate potential pathways to refine strategies for stored product protection. The appropriate selection of the adaequate method in stored product protection will choose the alternative that provides the greatest net benefits. Cost-benefit analysis is a powerful tool for rationalizing the resource allocation. The decision should focus on ”how much” or ”which one”. Economic threshold models offer insight into discrete choice problems. The good storage protection practice should recognize and deal with externalities. Protection activities may be driven by economic externalities and may themselves general externalities impinging on others. Economic theory discusses which goods should be provided privately and which publicly (by government). Economic theory identifies the circumstances where government supported research is sound policy. Minimize transactions costs to improve market efficiency. Contracts, voluntary industry standards, government regulations, and treaties, if properly formulated, can reduce transactions costs and improve commerce and trade.