Economic analysis of agricultural projects PDF

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186 Book reviews been superseded in many laboratories. It contains a few odd expressions resulting from translation (although this has been generally well done) and some references are not listed. Overall, it is a useful and comprehensive source book which can be recommended to soil scientists, alth...

Description

186

Book reviews

been superseded in many laboratories. It contains a few odd expressions resulting from translation (although this has been generally well done) and some references are not listed. Overall, it is a useful and comprehensive source book which can be recommended to soil scientists, although with reservations. The ultimate test is whether the methods used by the authors have worked in practice. A. Wild

Price Gittenger, J. Economic Analysis of Agricultural Projects. (2nd edn.), Johns Hopkins University Press, Baltimore and London, 1982 xxi + 505pp. Price: £28"25 (US$48.75). The economic analysis of development projects, in agriculture, as in other sectors, is an expanding worldwide industry with a fast-growing labour force. A continuous investment in human capital is needed for the provision of training in the necessary methodology. The Economic Development Institute of the World Bank, on whose behalf this text is published, has itself provided courses for over 10,000 senior officials of member governments, while many other institutions throughout the world are organizing training workshops and longer courses in the field of project analysis. For practically all these courses at EDI and elsewhere the Economic Analysis of Agricultural Projects by J. Price Gittinger, first published in 1972, has become a standard text. The second edition is 'completely revised and expanded'; strikingly so ! Whereas the first edition was a comparatively slim volume (221 pages) covering the broad issues in fairly general terms, it has now grown to more than twice that length and incorporates more detailed and rigorous treatment of identifying, pricing and valuing costs and benefits. Much additional material has been added on farm budgets and other aspects of financial analysis, and a little more on the methodology of comparing costs and benefits. One unfortunate side effect of this expansion is that the new edition is rather expensive for use as a recommended course text, at least in the hardback edition advertised. It consists of four main parts plus appendices. Part I, entitled the 'Project Concept', deals with the r61e of project analysis in the general planning context, the project cycle and the identification of costs and benefits. It includes a summary of World Bank reviews of project

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performance which suggest a surprisingly high level of predictive accuracy in the initial appraisals. Part II deals with the financial aspects of project analysis, covering farm investment analysis in particular depth. Financial analysis of processing industries and the project effects on government receipts and expenditures are also discussed. This section, concerned essentially with financial accounting procedures, is the largest and most detailed in the book. Part III is concerned with economic aspects of project analysis, including the determination of the premium on foreign exchange, and adjustment for transfer payments and price distortions, in estimating aggregate economic values. Reference is made to the problems of evaluating intangible costs and benefits. Part IV, on 'Measures of Project Worth', describes and compares the usual discounting procedures. There are Appendices giving guidelines for project preparation reports, three-decimal discounting Tables and advice on sources of institutional assistance for project preparation. From this outline it may be apparent that this is a 'how to do it' book, giving detailed descriptions of the procedures for calculating measures of project worth even to the extent of describing how to use a pocket calculator for the task. In this respect it meets the objectives Price Gittinger has set himself: 'The book has not been written only for a narrow grouping of agricultural economists. Rather, it is intended for all who must share in shaping agricultural projects if these undertakings are to be high-yielding investments: agronomists, livestock specialists, irrigation engineers and many others'. However, in comparison with other books on project evaluation, this one is less concerned with the underlying philosophy and the justification for the recommended procedures. This may be the right approach in view of the wide intended audience, but there are dangers in failing to make cost-benefit analysts fully aware of the implicit value judgements they are making. Such value judgements are implicit in the decision whether to use world prices for potentially traded goods, in estimating the premium on foreign exchange, in treating the marginal value of a unit of investment as equal to the marginal value of a unit of consumption, in evaluating labour as the marginal product in alternative employment, in treating the opportunity cost of capital as the social time-preference rate and in ignoring the income distributional impact in calculating measures of project worth. These issues are not discussed at any length, since incorporation of such discussion would probably cause problems for the non-economists in the intended audience. Thus this book should not be

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criticised for these omissions. It is probably the best practical, applied manual available on the economic analysis of agricultural projects. Nonetheless, we should all recognise the dangers of training civil servants to base national economic planning decisions on formal procedures without full consideration of the underlying ethical and political judgements. There are a few points with which one might take issue. First, the recommended approach, of treating the initial investment as occurring in year 1, and the first incremental cash flow as occurring in year 2, might be questioned. It is arguably more logical to assume that the initial investment occurs at the outset (date 0) and the first year cash flow is obtained at date 1. Secondly, on page 255 it is suggested that the estimation of consumer surplus depends upon the demand curve having a 45 ° slope, which seems a little odd. Finally, this reviewer has difficulty in accepting the proposed addition of incremental working capital to the annual investment cost, as it seems to introduce double-counting, the cost already being included in the annual operating costs. However, it must be admitted that other authorities on Capital Budgeting and Investment Appraisal also recommend Price Gittinger's treatment of working capital. Despite these quibbles, this is bound to be an influential and widely used book both as a course text and for reference purposes.

M. Upton

Livestock Production Systems and Livestock Development in Tropical Africa. Kieler Wissenschaftsverlag Vauk, 1982.

Jahnke,

Hans

E.

xx + 253 pp. No price given. Two comments in this book illustrate the need for better understanding of its subject matter. The demand for livestock production in tropical Africa is expected to grow at 4-5 9/o per year; that is, to treble by the end of the century. In contrast, there is a general disappointment with livestock development projects and major agencies are contemplating withdrawal from the African livestock sector. This book, by a former senior staff economist at the International Livestock Centre for Africa, looks back two decades and forward the same length of time. The physical canvas is also substantial, involving 22...