Managing agricultural price instability has been a major concern for policymakers since time immemorial. The last three centuries have been run through with lively controversies on the best way this could be achieved, as illustrated by the controversy between Galiani and Physiocrats. This longstanding debate ended in the 1980s when dominant thinking on the subject emerged in both academic and political circles. Since then, and despite a few discordant voices, the domination of this viewpoint has been so strong that almost all research on the topic has been abandoned. The debate was nevertheless reopened in the 2000s due to the recurrence of food price crises both in the Sahel and the Horn of Africa and on international markets. However, in this revived debate the thinking that has dominated for the past 30 years remained the main source of inspiration both for the recent report issued by 10 international organizations and for the G20 action plan (PDF).
Based on a very extensive review of the theoretical and empirical literature, this webinar provides a critical assessment of the dominant thinking on the management of agricultural price instability as applied to grains. The presentation will begin by introducing the four pure strategies that can be combined to manage price instability (ABCD framework) before presenting the current line of dominant thinking as a subset of these strategies. We will then discuss the degree to which this school of thought’s underlying assumptions are satisfied and the consequences if they are not. It will then be clear that this line of thinking substantially underestimates (i) the magnitude of price instability generated by grain markets, (ii) the degree to which farmers and consumers in developing countries are exposed to this instability, and (iii) the resulting effects on welfare (including macroeconomic and long-term consequences). This will lead us to draw implications for national and international policies. The main arguments presented will be illustrated with data from Mali (West Africa).