Three frameworks for commodity-producer decision-making under uncertainty

• Main Author: Muth, Karl
• Published: London School of Economics and Political Science (University of London) 2015
• Subjects: 338.5; HB Economic Theory
• Online Access: http://ethos.bl.uk/OrderDetails.do?uin=uk.bl.ethos.679895

This monograph examines the – at times, seemingly irrational – decision-making behaviour of entrepreneurs in the East African agricultural market. It seeks to reconcile empirical observations made between 2011 and 2014 in the towns of Oyam and Kapchorwa, two communities with centuries of entirely separate agricultural history, with a larger decision-making framework. Drawing on decision sciences, development economics, and other literatures, various theoretical frameworks are explored to explain the domain-specific decision-making observed in Uganda. First, two largely rational, cost-focused decision-making scenarios are described, with the context and domain-specific boundaries of each described. Next, a third, economically sub-optimal decision-making scenario is described, with the factors distinguishing it from the first two explained. In other words, the agricultural entrepreneurs behave as econs1 (exhibiting the anticipated behaviour) in the first two instances, but exhibit System 1 thinking2 (demonstrating unexpected behaviour) in the final instance. A comprehensive discussion reconciles the seemingly-conflicting empirical observations by segregating them by context and arguing the two decision-making systems employed, while contradictory, can and do co-exist as domain-specific approaches.