Contents - Previous - Next
This is the old United Nations University website. Visit the new site at http://unu.edu
Vl. The role of small group and household economies in renewable resource transformation
1. Economic theory and resource systems
1.1. Risk, uncertainty, and decision-making in household resource use
2. Behavioural concepts in household decision-making
3. Conventional wisdom and popular participation in development planning
Patterns of renewable natural resource use usually reflect the decisions of large numbers of individuals, households and small groups, and an understanding of the structure and functions of resource systems at the national and regional levels can be realistic only if decision-making processes at the community level have also been analyzed. Although the satisfaction of human needs is one of the important goals of development policy in most developing countries, needs can only be considered realistically as those of a particular group of individuals, such as a household, kin group or small community, since in traditional non-Western societies individual needs are generally satisfied through these small group relationships.
Nevertheless, it is important to emphasize that not all individuals in a community or region think or behave alike a common sense observation increasingly supported by a growing body of literature on intra-cultural and intracommunity behavior. The strongest variations are often found in the use of and access to renewable resources, perception of the biological and physical environment, and in risk-taking and decision-making in a wide range of economic and social activities.
Most observations on intra-cultural diversities and heterogeneity have been recorded as "deviations" from norms or cultural patterns that were presumed to be standardized. As such they were usually dismissed or ignored when "social structure" or "typical" cultural patterns of behaviour were described. Social science descriptions based on the idea of a common, shared, homogeneous culture, and theoretical propositions founded on assumptions of intra-cultural homogeneity, which view culture as the set of standards of rules, are legion, especially for simpler, pre-industrial, non-Western societies. Many peasant communities, for example, have characteristically been depicted as conservative, fatalistic, suspicious of outsiders, resistant to change and imbued with the "image of limited good." And many social scientists have viewed homogeneity of values, attitudes, goals and other cognitive patterns as essential to the maintenance of developing societies.. Although more recent studies have illustrated intra-societal and intra-cultural heterogeneity, the predominant tendency continues to reflect fundamental assumptions of cognitive homogeneity and behavioural sharing.
Concern with intra-cultural diversity indicates that further research and theory-building should be based on intensive and longterm analytical studies of processes at the microlevel. But lest its value be diminished, the study of microlevel behaviour must be related to the larger regional and national processes of social change and evolution, such as the relationships between individual and group adaptations to the larger system, wherein lie the more significant social questions. The relationship between micro- and macrolevel interactions has given rise to considerable debate on whether individuals, households and organized groups constitute significant units of adaptation but clearly the nature of the relevant unit varies depending on the ecological context.
The activities of households are especially important to rural development planning, since in developing countries the household sector produces a large proportion of the "nonmonetized" goods and services for its own use. Whereas in some countries the household sector may produce some 40 per cent of the accounted and unaccounted national income, the share of the household is even greater in producing those goods and services required to satisfy basic human needs. Although the role of the rural sector in the process of economic development is now well-recognized, scientific knowledge on traditional rural economies and small group and household behaviour is grossly inadequate for the formulation of realistic national policies or for the design and implementation of effective rural development programmes.
The new "household economics" approach may offer the possibility of developing a theory of the traditional rural economy useful for planning the development of marginal areas, and should comprise an important component of the resource systems approach at the micro-level. A major problem in the analysis of traditional rural economies is the difficulty of separating the various household functions, since in the peasant household production, consumption, saving and investment are not independent activities and are generally governed by simultaneous family decisions. Thus for meaningful analyses, data should be collected simultaneously on these activities. Unfortunately, although the large body of survey statistical data available on small farm management and production costs is useful for piecemeal studies, it has little value for the study of resource systems at the micro level, since it artificially discriminates among the various farm household functions. Another serious complication arises from the self-contained, subsistence nature of most communities in marginal areas. Typically, locally available renewable natural resources are used to satisfy household and community demands, and the major product and factor flows do not enter, or enter only minimally, into the market place.
The production activities of most households in marginal areas consist of several complementary economic activities that as a whole provide a balance of subsistence goods. Commonly, small-scale fishing, animal husbandry, hunting, and collecting of forest products are the economic complements of cultivation in traditional societies; and in many parts of Southeast Asia traditional integrated farming systems such as those that combine cropping with animal husbandry and aquaculture, or ricefield fisheries are commonplace.'° Artificial discrimination is also introduced into those economic studies of traditional farming that focus only on the cropping component as the principal activity: other economic activities, which together might account for more capital, labour or time inputs are overlooked or down played. Clearly, such a fragmented view of traditional household economic activities is grossly misleading.
Moreover, in many cases normative economic models are of little value in the analysis of traditional rural economies, since individual households rarely function without reference to others in the community. Typically, a high degree of interaction exists among households in marginal areas, and normative economics is constrained by tradition, kinship and the communitywide needs for security and survival. In the long run, household welfare depends on that of other households and on such relationships as mutual assistance, welfare and patronage.
Social motives for cooperation have been succinctly illustrated in Szanton's study of a subsistence market in the rural Philippines:
More fundamental than increasing profits, spreading risks, and gaining assistance is the concept of the individual's right to survive. This is expressed in many ways, always emphasizing the importance of a person's humanity and the general responsibility of all that no one should fall beneath some basic human level. Everyone has a right to survive and provide for his family - a right which transcends ail other economic or legal considerations. This leads to an obligation to share one's surplus with those who are in need of it for necessary or indispensable goods, particularly when the need is made obvious. .. The sanctions against vendors who refuse or hesitate to share are both social and economic. They are labelled ungenerous and unaccommodating, and their status declines in the community, a loss which may ultimately lead to economic sanctions .... The refusal of a man's request (to a male vendor), especially when made on the grounds of his basic human right to survive, is considered degrading and easily leads to blows or a knife attacke.
Similar relationships have been reported among artisanal fishermen and small-scale farmers from Java. Sharing the proceeds of the sale of a fish catch and working together as a crew has a more profound meaning for Javanese artisanal fishermen than that of simply dividing income and opportunities for employment. Sharing is an ingrained philosophy in the traditional Javanese fishing community and is based on the belief that nobody should go hungry and that everybody should receive a certain share of the fishing activity itself. Any asset such as a fishing boat or gear has a social function, and sharing, therefore, goes beyond the fishing activity. The entire catch is not auctioned, for example; and a small amount is divided among the crew in the same proportions as are the proceeds of the sale. When this in-kind share is large, the individual fisherman often sells it to provide pocket money. When the catch is only minimal the boat-owner, who is generally richer than the other crew members, will forego his share. Sharing goes beyond the crew members to include poor people of the village. A small share of the catch is given to the boys who clean the boat; trash fish are sold cheaply to women petty traders who then retail them to earn a small income; children from poor households are allowed to pilfer fish from the baskets passing en route to the auction stalls; and a small quantity of fish is donated for communal sale to provide funds for community-wide needs. Traditional fishing communities are bound by close interpersonal relationships via these institutions for sharing, which demonstrate that all people in the community are linked together in one way or another, and that everybody has access rights to a common property resource. Traditional fisheries on the north coast of Java are not a business undertaking but rather a subsistence operation that is involved with the welfare of all members of a community.
Although sharing of resources and products among households is widespread in traditional societies, in many cases sharing may be differential, based to some extent on the economic stratification within a community, and it may also rely heavily on kinship or other organized group linkages. In rural Javanese society there is considerable evidence to suggest that ".... people with land are sharing their wealth with those in the same class and usually with their relations or close friends and that the poor are simply sharing their poverty amongst themselves.... First in importance to a Javanese household is to have good relations with close neighbours, then with others in the same hamlet, and lastly with households in other hamlets."
Many models of resource use in rural societies also overlook other "invisible" elements that exert strong controls on the operation of resource systems. In the supply of labour, for example, it is widely recognized that what many outsiders would consider to be optimal labour supply is constrained by sociocultural factors, such as kinship obligations or the time needed to prepare for festivals. But the fact that a great deal of time is invariably invested in the socialization and enculturation of children, particularly to prepare them to procure food, is invariably overlooked.15 Food, being essential for survival, is of continuous and conscious concern. Its procurement is institutionalized, purposive, and intimately connected with all social subsystems in society. Few domains are as critical in the eyes of a traditional farmer as the instruction of his children to perform the tasks of food procurement. Only through such training will the continuity of the family and the community be assured, and, in the absence of a viable, external social security system, will the needs of old people be guaranteed. Thus in this context, household decisions on time allocation are clearly based in part on central government policies regarding the provision of a social security and old-age pension system. Many such macromicro linkages, or more appropriately their absence, constrain decisionmaking at the household level, and make it imperative that the resource systems approach to marginal area development consider carefully the various levels involved.
The adaptative strategies - "the patterns formed by the way the many separate adjustments that people [or other significant units of analysis] devise in order to obtain and use resources and to solve the immediate problems confronting them,"17 - of individuals and households confronted by changing, problematical and often hazardous environments provide a valuable means for understanding how societies organize resource systems and relate to the macro-level or larger processes of manenvironment relationships and social change. The concept of adaptive strategies is also closely related to evolutionary ecology and to micro-economic theories of optimization and choice. As such it provides a valuable means of understanding the functioning of resource systems and of elucidating the relationship between micro, and macro-levels within them.
1. Economic theory and resource systems
A fundamental premise of traditional economic theory is that economic activities are motivated by the desire to maximize income. To the rural household, then, the price that it receives for the product derived from a particular local resource system is of the utmost importance. In terms of market prices, much of the most relevant economic theory in understanding renewable natural resource uses involves the concept of pure competition and assumes that the laws of supply and demand operate in a predictable manner, based on changes in product prices. Among the most important concepts in understanding renewable natural resource use patterns, marketing procedures, rural incomes or other related phenomena, is the price elasticity of demand.
Another of the fundamental concepts in normative economic theory, and one that provides the basis for a great many other dependent concepts, is that of the production function, which describes the relationship between input and output in a system. From the general production function relationship two indices may be derived: "average product," or the total product divided by the quantity of inputs at a particular level, and "marginal product," or the change in output resulting from the last quantity of input. In both indices the "Law of Diminishing Returns" operates.
Marginal product analysis can be used to determine optimum intensity of resource use as well as optimum level or quantity of output. From this it is not particularly difficult, assuming "economic man" and pure competition, to determine the best combination of inputs required to attain a given level or several different levels of production or to determine the best combination of resource uses with fixed input levels. Over a longer time period, however, producing households might vary the types and quantities of both inputs and outputs, and according to normative economic theory would alter their use of resources in order to maximize net income. Linear programming, a mathematical method of allocating resources to maximize or minimize a particular objective, has become the principal practical method of solving theoretical resource-allocation problems. One of the major problems of this method is the assumption of the linearity of all functions, an inflexibility that sometimes creates problems in analysis. This linearity of objective and constraint functions is not, however, required for non-linear programming, but this approach is severely handicapped by requiring much more data than does the former.
Although a state of static equilibrium may be approached, it can never be completely achieved in a resource system. Change in any one component of a system can and usually does lead to changes in others. Changes in commodity prices or in any cost of production, for example, set off a sequence of events. Invariably, the process of change is highly complex also because of the relationships between a particular resource system and other systems.
Both exogenous and endogenous factors cause change in resource systems. The former are easier to conceptualize. Examples would be the development of new technologies that affect production costs or the availability of alternative employment that increases the opportunity cost of household labour. Universal are oscillations in prices, levels of production and the area used for resource procurement as former positions are regained after unanticipated, adverse weather conditions. More difficult to specify is endogenous change as it relates to the reciprocal relationships among components of a resource system. In normative theory and models some variable is always assumed to be independent and affecting the others; for example, production techniques affect net profits, but in the long term profit margins also affect production techniques. The feedback effects of such reciprocal relationships reduce even further the likelihood that a state of equilibrium can ever be achieved. Thus normative economic models become even more tenuous since they assume a undirectional relationship and the constancy of given variables.
Dynamic aspects do exist within a number of traditional economic models, especially in models of general equilibrium. It is recognized, for instance, that although demand is defined for a particular time period, it depends in part on future demand; so many traditional economic models can function in dynamic situations when a continuity in relationship among different specified time periods rs assumed to exist. Recursive or dynamic programming models have utilized linear programming and similar models to add a dynamic quality to empirical models. Among the simplest types are those in which resource use patterns are developed from a static theoretical model over successive time periods. Apart from the definition of functional relationships among the variables, each time period is independent. The model becomes dynamic when the values of some variables, or the variables themselves, change through the time periods. Recursive programming models may optimize a specified objective in each time period, where parameters of the system in the current period are related to optimal solutions obtained in the previous periods. The programme can also be developed to limit the amount of change possible between time periods, in order to replicate the effects of time lag or inertia in real life, such as cautious response to environmental changes in order to minimize risk and uncertainty, and to make resource use patterns at each time period depend on the specified functional relationships and on preceding patterns.
1.1.Risk, uncertainty, and decision-making in household resource use
A large element of unreality enters normative economic theory with its assumption that future events can be anticipated. Yet one of the all-pervasive aspects of decisionmaking in renewable natural resource use is that many events, such as weather conditions during an agricultural cycle, cannot be predicted with complete accuracy. As a consequence, more recent models have been developed that account for the uncertainty inherent in prediction. But many models still assume that some objective in resource use is optimized, although it is not necessarily income maximization.
The term ''risk" assumes that decision-makers can, based on past experience, estimate the probability of occurrence of some future value or event, such as the chance of drought destroying rice crops, but that the estimate is subject to varying degrees of error. Assuming a state of competitive production and that a farming system with only monocultural land use is practicable during a given year, the problem becomes one of deciding the best land use. The straightforward decision is one that notes that "average" weather conditions occur most frequently and that rice yields are the highest under such conditions. However, "average" weather conditions do not really occur that often and in very dry years sorghum yields the highest income. The situation becomes more complex in marginal areas where biological and physical factors such as soils that drain too rapidly or higher elevations subject to lower temperatures make conditions far less suitable for rice cultivation. Somewhat more complex, but yielding better decisions, is the use of an elementary probability technique that reveals which crop would yield the highest "expected" income, taking into account all the possible weather conditions.
The analysis of decision-making, however, is complicated by the personality characteristics of the farmer or members of the farm household. He might be willing to gamble for the highest "expected value" and take his chances on the occurrence of drought. On the other hand, a conservative farmer would wish to minimize losses in case of the worst possible weather conditions. Relaxing the above assumptions, somewhat. most farmers would probably plant a combination of crops in order to spread the risk, as is done in many tropical agricultural systems. Optimum combinations that yield the highest "expected value" can be calculated using linear programming. However, in addition to representing an attempt to reduce risk, crop diversification can also be an example of complementary production, optimizing the use of varying ecological conditions in different parts of the farm, or a longrun rotation system, or indeed a combination of the various factors. Distinguishing a single motive is a complex problem, particularly if costs per unit area per crop partly depend on the degree of crop diversification. Depending on cost, for example, a farmer might be forced to decide between risk benefits of diversification and the cost benefit of monoculture. Most small-scale farmers have no way of estimating certain of the risks involved in their enterprise, and are forced to make decisions under conditions of uncertainty. Under such circumstances, decision-makers may estimate or impute risk probabilities in accordance with their own psychological characteristics, rather than on the basis of empirical evidence.
2. Behavioural concepts in household decision-making
Over the past 25 years, partly in reaction to the unrealistic behavioural assumptions of normative economic theory and as a consequence of the work in other social sciences, knowledge of the behavioural characteristics of decision-making theory has advanced considerably. Normative economic theory is predicated on highly specific assumptions about decision-makers and the conditions under which they operate. Complete information regarding, among other things, all prices and returns is assumed, as is the ability to compare precisely all inputs and outputs, the capacity to perform all the calculations necessary to determine an optimum decision, to optimize an objective such as income maximization, and to have the capability of operationalizing the decision once it has been reached. Few small-scale users of renewable natural resources come close to this ideal pattern of behaviour. It is now apparent that theories based on assumptions that more realistically align with observed human behaviour would provide better descriptive or normative models. The problems of using normative economic theory are particularly acute in non-market economies where no criterion such as prices or monetary value exist.
Some behavioural concepts such as utility, transitivity and subjective probability, together with the basic decision making models to which they give rise, are fairly close to those of normative economics, and having been developed by both psychologically and economically oriented social scientists, are transitional between economic and behavioural theory. In an attempt to overcome the problem of not having market prices for use as an evaluative criterion by decision-makers in nonmarket economies, economists have used the concept of utility to describe comparative value. But there are problems inherent in this concept. It may work in a free enterprise, commercial agricultural system, for example, where market value and utility may be fairly close, but the relationship between personal utility and price may not be linear, and if linearity exists it probably varies among individuals and communities, especially where ethnic differences exist. In any event, such a discrepancy will be an important influence on decision-making, particularly in the willingness to make the extra inputs required to increase income. Utility is even more difficult to measure in non-market economies with no market prices. The problem then becomes one of comparing different commodities. An example of intransitive choice is a situation in which A may be preferred over B. and B over C, but then C may rank over A. Where rankings are consistent, transitivity is said to exist. Moreover, different individuals have different choice ranking. In subsistence economies with a polycultural balance that satisfies dietary requirements, minimizes risk or fulfills some other function another problem arises. For instance, a subsistence household in a marginal area may prefer one papaya to one handful of rice, but would probably prefer 100 handsful of rice to 100 papayas.
Subjective probability (imputed risk or personal probability) lies at the core of hehavioural theory, and its importance derives from the fundamental behavioural hypothesis that decisions stem from a tendency to maximize expected utility (the product of the utility of a pay-off and the subjective probability of the occurrence of a pay-off). It can be defined as the extent to which an individual thinks that a given event is likely to occur. Research indicates that where individuals are forced to make a decision, they maximize expected probability based on a subjective probability rather than on an objective or real probability. Subjective probability is related to personal characteristics (e.g., optimism) and the prior experience of the decisionmaker. Research also indicates, as might be logically anticipated, that individuals gradually and in a predictable fashion improve their estimates of probability. Among the considerable recent research on non-market agriculturalist's patterns of subsistence a careful maximizing in the use of their resource assemblages emerges, and if behavioural theory, especially game theoretic concepts, are applied, small-scale subsistence farmers can be viewed as optimizers. This work also clearly shows that, in the absence of behavioural modifications, normative economic theory offers little explanation of subsistence-level resource use characteristic of marginal areas.
Decision-making has been classified by psychologists into various types that range from very deliberate problemsolving to automatic, subconscious decision behaviour. Most tends towards the latter type. This clearly is in complete conflict with the assumptions on which normative economic theory is based. It appears that automatic, subconscious rather than deliberate problem-solving is a response to most individual's inability to process large amounts of data and desire to simplify that process by avoiding an overload of demanding work Traditional assumptions of optimization must therefore be modified to incorporate these findings. Probably individuals could be said to attempt to optimize some utility objective while minimizing the personal effort required to achieve it. Moreover it also appears that most decision-makers prefer, rather than personally processing large quantities of data, to follow the precedents of already established patterns. These findings may go far in explaining "tradition," "conservatism", and "habit" in resource use, and may help to explain the considerable observed uniformity in decisionmaking among farmers in given regions (e.g., with respect to the adoption of innovations). In defence of traditional models it should be noted that although human limitations do not permit accurate, deliberate decision-making aimed at optimizing at a given point in time, existing patterns are gradually adjusted so that an optimum pattern is approached over longer time periods. Massive decisions perhaps cannot be usually made, but individuals do make small, incremental decisions that in aggregate might lead to large-scale changes.
Another weakness of traditional models is the assumption of the availability of all the information needed for decisionmaking. Seldom is this the case in real life, where the decision-makers' "decision environment" rarely, if ever, coincides with the complete set of information available in the "extended" or "real environment". The completeness of an individual's decision environment is a function of his educational level, the communication system and his willingness and motivation to make the effort required to obtain information. Further, all aspects of decision-making are closely related to culture, technology and to peer group pressure. The assumption that man optimizes some objective or even seeks to maximize expected utility, is dubious. Rather than analysing all possibilities, individuals probably seize on the first satisfactory decision encountered. This process is greatly influenced by an individual's level of aspiration. Moreover, most theory assumes that man seeks to reach only one objective, the maximization of utility. Multiple objectives. however, are more likely, and short cuts are taken in decision-making to enable action to be taken on several fronts.
Another basic feature of human decision-making appears to be stochasticism, a degree of randomness such as is manifested when the same individual makes different decisions about the same object at different points in time under otherwise identical conditions. Such patterns of randomness can normally be determined based on a statistical distribution of probabilities with known variance. An individual's decisions are not usually static, as they are portrayed in most models, but rather are dynamic, with later decisions depending on those that preceded them. Related to this is the fact that satisfaction or aspiration levels also change as decisions are made in sequence.
Finally, it is imperative that the difference between group and individual decisions be understood. Group decisions appear to be more deliberate, explicit and often better publicized, and generally they are of greater importance in establishing and maintaining patterns of resource use within communities and regions.
Several other important behavioural factors must be considered in the study of resource systems. Spatial variations in the decision environment must be considered, for instance, because production functions vary spatially in accordance with ecological differences and with variation in the decision environment. They also depend on such individual factors as motivation, and are strongly influenced by group behaviour and geographical access to information. The ways in which innovations diffuse in given areas, information systems and communications networks, and the individual's perception of his environment and its resources and the constraints and opportunities that it presents are also critical in planning for resource transformation. A dynamic approach that fully considers the factors and problems briefly discussed above is imperative in any meaningful analysis of resource use in developing countries, where the powerful influences of urbanization and industrialization are forcing major changes in rural land use patterns and leading increasingly to a re-evaluation of better uses for marginal areas.
Contents - Previous - Next