Agricultural Economics Department
Date of this Version
4-27-2022
Citation
Cornhusker Economics, April 27, 2022
agecon.unl.edu/cornhuskereconomics
Abstract
Traditionally, producer education efforts around farm management are directed at understanding the academic topics of business operations and management including, accounting, law, human resources, marketing, production, risk, finance, etc. The information, techniques and tools taught are often concrete and focus on measurement, analysis, and data. For instance, a traditional grain marketing education program would generally include topics in forward contracts, options, futures, hedge to arrive, basis contracts, storage, and seasonality. While these programs can be quite powerful in developing quantitative skills and knowledge, they neglect a key element needed by all farm managers to make objectively clear decisions. This key is a recognition, understanding and maintaining control of their individual behaviors and natural filters that affect their decision -making processes. Decision-makers must be able to recognize and understand their own foibles and take measures to nullify potential bias and errors in their thinking process. This valuable element in education and training can be acquired through the study and use of behavioral science, in this case, behavioral economics. An understanding of the relationship between the individual making the decisions and the challenges and tendencies they have as a human being in making objective choices positions them to make improved decisions that are better suited for their desired outcomes and goals. By recognizing one’s own behavior, adjustments and compensating actions can be taken. Understanding behavior, along with its application, is a powerful foundation upon which all the other quantitative tools, methods and knowledge may be leveraged. This short, introductory exposé on the relationship between farm management and behavioral economics is far from exhaustive. The hope is that readers will see value in the topic and desire to learn more. If acted upon, this desire can help them pursue knowledge and skills which will propel them to a higher level of decision-making performance. Ultimately, this improved ability to make decisions will benefit both their business and personal endeavors.
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