More Evidence Psychological Constraints Matter

A really nice article, recently published in the journal Food Policy, just crossed my desk… erm… email inbox. “Explaining the Performance of Contract Farming in Ghana: The Role of Self-Efficacy and Social Capital” (pay-wall, sorry).

Contract farming is the practice of extending business agreements between suppliers (i.e. smallholder farmers) and buyers (i.e. supermarkets, food processors, or exporters). The practice is often promoted as a tool for poverty alleviation and rural agricultural development, but the benefits relative to the costs of contract farming are far from consistent across time and space. The question central to this paper is what explains these differences in the performance of contract farming?

Here are some highlights from the paper:

• The authors suggest culture matters! Yeah, that’s right. BREAKING NEWS: Economists concede culture matters! They investigate how much historical events explain cultural differences among pineapple farmers.
• The historical events that the authors focus on the presence of cocoa cooperatives and Christian missionary schools, both established via the British colonial period.
• Next the authors make the claim that cocoa cooperatives and Christian missionary schools have shaped the levels of self-efficacy and social capital of individuals within Ghana’s population and that (and here’s the punch line) that these levels of self-efficacy and social capital have been sustained throughout history and still represent important implications today.
• They find that culture does matter, specifically along two cultural traits: self-efficacy and social capital.
• The authors suggest that policies that ignore this reality, could lead to unrealistic expectations and predictions of policymakers and thus could lead to inefficiency in achieving policy goals or unintended consequences of the policy itself.

I think this paper is cool for a number of reasons. I’ll just briefly mention two:

First, self-efficacy relates to much of the work I’ve done relating to hope and aspirations. Self-efficacy is a psychological concept that explains an individual’s perceived ability to achieve the goals or aspirations they have set for themselves. Important to economics, self-efficacy influences the way people make decisions about what sorts of investments and non-zero risk choices to make. An individual with a low self-efficacy may not make choices in the way traditional models of choice and behavior within economics may predict.

My work on hope and aspirations, at times, felt a bit crazy. I’d often wonder if my work should even be called ‘economics’. It is reassuring to see other development economists are also thinking about similar topics. The idea that constraints to economic development are not only external and physical, but also internal and psychological is slowly catching on.

Second, in college I spent several months studying in Ghana. I’ve since spent time in other countries that were colonized by the British: namely Kenya and Myanmar. In each of these places, I’ve felt the long-term effects of colonialism. Colonialism brought many things to many countries. Some of them good and some of them bad. What I’ve noticed throughout my travels is that many of the negative impacts of colonialism have lingered. Like a bad smell, even after the source has been removed it remains in the air for some time.

I have a map at my desk at home of the continent of Africa from way back in 1897. It shows how the continent was (arbitrarily) divided up between the world powers at the time. It reminds me of the shared colonial history of much of the modern day developing world. I’ll go out on a limb and say that everyone who studies development knows deep down that this shared colonial history still matters. In development economics at least, this knowledge rarely shows up in many academic studies. It is refreshing to see a study that not only mentions the colonial history of Ghana, but considers it to be a meaningful influence on modern day development policy.

Here is the abstract to the paper:

Self-efficacy is the belief of an individual to have the ability to be successful in a given domain. Social capital is the economic value of a person’s relationships. In the context of this study, self-efficacy is the belief of a farmer to be able to improve her income with contract farming, which increases her actual ability. Social capital increases the ability of the farmers through social support.

We surveyed 400 smallholder pineapple farmers and find that both self-efficacy and social capital are decisive for their successful integration into contract farming. To identify causal effects, we use two instruments, which are also of interest on their own: the historical presence of (1) cocoa cooperatives and (2) Christian missionary schools. During Ghana’s colonial period, the British established cocoa cooperatives, which differed in their performance as a function of biogeographic factors and thus persistently shaped the self-efficacy of the farmers. Roughly at the same time, Christian missionaries established missionary schools, which impacted the traditional societies so that social capital decreased. The finding that self-efficacy and social capital are still shaped by historic variables could indicate that these variables are only slowly changing, or that they only do so in the absence of policy intervention. The latter raises the possibility that effective policies could benefit from strong reinforcing feedbacks once self-efficacy and social capital improve.