The Rationale for Public Extension Services

Agricultural extensionists are intermediaries between farmers, on the one hand, and researchers, input and credit suppliers, marketing agents and other agents that intervene in agriculture, on the other hand. Thus, fulfillment of their role requires management of two-way flows of information and communications skills as well as technical knowledge. Often, their main role is to stimulate a learning process in which both they and farmers participate. John Farrington has listed the four principal functions of agricultural extension:

• Diagnosis of farmers' socio-economic and agro-ecological conditions and of their opportunities and constraints.

• Message transfer through training courses and mass media, and through direct contact between extension agent and farmer or indirect contact involving intermediaries, such as 'contact farmers' or voluntary organizations. Messages may comprise advice, awareness creation, skill development and education.

• Feedback to researchers on farmers' reactions to new technology to refine future research agenda.

• Development of linkages with researchers, government planners, NGOs, farmers' organizations, banks, and the private commercial sector. In remote areas, extension agents have taken on a number of input supply functions directly.63

61. FAO and The World Bank, Agricultural Knowledge and Information Systems for Rural Development (AKIS/RD), Strategic Vision and Guiding Principles, Food and Agriculture Organization of the United Nations, Rome, 2000, pp. 7-8.

62. William M. Rivera, Agricultural and Rural Extension Worldwide: Options for Institutional Reform in Developing Countries', paper prepared for the Extension, Education and Communication Service, Draft, Food and Agriculture Organization of the United Nations, Rome, October 2001, p. 9.

63. J. Farrington, 'The changing public role in agricultural extension', Food Policy, 20(6), December 1995, p. 537.

It can be added that the messages delivered by extension agents can include information on public-sector programs in which farmers may be eligible to participate. In an era when increasing emphasis is being given to policy measures involving direct support to farmers, as opposed to market interventions, extension agents can inform farmers of the nature of those measures, and also provide feedback to the government that is useful in designing such measures. In addition, the HIV/AIDS crisis is imposing special demands on extension agents in many countries, as discussed later in this chapter.

In regard to the purely technical role, the information transmitted to farmers by extension activities takes two forms: that which is embodied in physical inputs (machinery, seeds, etc.), and pure information that is not embodied in goods. Umali-Deininger has classified pure information into four categories:

• Cultural and production techniques, such as timing for planting and harvesting, use of inputs, animal husbandry and livestock health, crop protection and farm-building design.

• Farm management, such as record-keeping, financial and organizational management, and legal issues.

• Marketing and processing information, such as prices, market options, storage procedures, packing techniques, transport and international standards for quality and purity.

• Community development, such as the organization of farmers' associations.64

Extension services traditionally concentrated on providing the first and last types of information. Increasingly, it is necessary to provide the second and third types as well. Improving productivity requires attention to farm management and not just cultivation techniques. Adapting to more open trade regimes and shifting to higher-value crops requires timely access to marketing and processing information, and the ability to translate it into actions on the farm. This circumstance points to the importance of basic education for increasing production and incomes on farms.

The rationale for public provision of these functions has been the public-good nature of information about many agricultural technologies. The classical justification for the role of the public sector in disseminating such information is that it is likely to filter from one farmer to another. It cannot be provided only to one person, excluding others from access to it. In addition, the value of the information is not diminished by an increase in the number of recipients of it. There are specialized kinds of information that are marketed by combining them with the sale of inputs, but many kinds of knowledge about agricultural technology cannot be marketed in that way.

In her seminal paper, Umali-Deininger has refined the public-good argument concerning agricultural extension. She applies the principles of rivalry and excludability. 'Rivalry (or sub-tractability) applies when one person's use or consumption of a good or service reduces the supply available to others. . .. Excludability applies when only those who have paid for the product or service benefit from it' (Umali-Deininger, 1997, p. 208). Most goods are rival in the sense that one person's purchase of a good makes it unavailable for others. Services can exhibit different degrees of rivalry, including decreasing rivalry over time as, for example, information provided to a group gradually leaks out to others.

Purely private goods are those that are both rival and excludable; purely public goods are neither. A tractor is an example of the former, and mass communication of agricultural information is an example of the latter. However, many kinds of agricultural information, including those that extension agents are required to deliver, fall somewhere in between these extremes. Umali-Deininger suggests that the modalities of delivering information need to be carefully designed in recognition of its inherently public

Fulfilling the role of an extension worker requires special aptitudes. Miguel Angel Núñez offers the following list of characteristics of the 'new extension worker':

• Be a native of the area in which he or she works and have family links there.

• Be familiar with the cultural values of the area.

• Have knowledge of forms of mass education.

• Know agro-ecological techniques.

• Have experience in participatory undertakings at the community level.

• Have experience in training.

• Have a commitment from the organizations that sponsor her/him to continue to disseminate the training process throughout the region.

(Miguel Angel Núñez, 'La extensión agrícola en el marco del desarrollo sustentable', Políticas Agrícolas, IV(1), 1999, p. 61 [author's translation].)

and private characteristics, otherwise they will fail to perform to expectations. To clarify the area between purely private and purely public goods, she proposes use of the concepts of toll goods and common pool goods. In her own words:

Toll goods are excludable, but not rival; for example, the supply of information provided by a private extension consultant exclusively to a group of farmers is not reduced by the addition of another member to the group.. . . Common pool goods are those that are rival but not excludable; in other words, other people cannot be stopped from using them. For example, the purchase of high-yielding self-pollinating seeds such as rice and wheat reduces the supply of such seeds, but their ease of replicability makes exclusion difficult and costly in the long run. Farmers do not buy rice and wheat seeds every season, because they can set aside part of their harvest for planting the next crop (Umali-Deininger, p. 208 [emphasis added]).

This approach to analyzing the information flows relevant to agricultural technology leads Umali-Deininger to some conclusions about the role of extension services. Her principal conclusions are the following:

Information designed to improve existing cultural and production practices, farm management, or marketing and processing techniques and provided by traditional agricultural extension approaches is a toll good in the short term. . .. But the diffusive nature of nonexcludable information transforms it into a public good quickly. .. . Thus, how quickly information is diffused determines whether the private sector has an incentive to provide it. If the information diffuses easily, the possibilities of charging for it are limited, and private firms will have little or no incentive to provide such services . .. delivery of nonexcludable information will remain the responsibility of the public sector or of private nonprofit agencies. . ..

As farm operations become more commercialized and agricultural technology more specialized, the corresponding extension services need to support these activities also become highly specialized. Such specialization leads to exclusivity of the information and, therefore, the extension activity. For example, the results of a soil analysis or the development of computer programs to facilitate farm operations are location- and client-specific. Such information may not be useful to other farmers. .. . Asymmetric information problems, however, increase the difficulty of assuring quality. Unless the private fee-for-service extension industry can effectively police itself to ensure the quality of the information communicated, public intervention will be necessary to enforce quality standards and legal contracts.. . .

Medium- and large-scale producers can spread the cost [of private extension services], resulting in lower per-unit costs and higher rates of return. Consequently, the larger the farm operations, the greater the potential demand for 'fee-for-service' extension.

.. . because the value of their marketable output is low, resulting in higher per-unit costs, small-scale farmers typically find it less attractive or profitable to 'purchase' the extension service. Subsistence farmers have limited, if any, incentive to pay for extension services.

Government policies can greatly affect the demand for extension services, through their (direct and indirect) influence on commodity prices and aggregate demand. High (direct and indirect) taxes on agriculture reduce farmers' incentives to adopt improved technologies.. . . The allocation and level of public expenditure on rural roads, markets, and irrigation infrastructure, for example, influence the development potential of particular localities and thus the return on investments in technologies that enhance productivity. Public expenditures on education, especially in rural areas, have a strong influence on the capacity of farmers and consumers to absorb new information.

A major implication of the shift in the classification of information from a 'free good' to a 'purchased good' is that the demand for paid agricultural extension services will originate almost exclusively from market-oriented farming operations and particularly from medium- and large-scale farmers.. . . Conversely, private-for-profit firms will tend to neglect areas composed of more marginal farmers. ... (Umali-Deininger, pp. 210-211 and 215-216).

This forceful conclusion refers to unsubsidized extension services. Umali-Deininger adds the qualification that small farmers may be able to purchase extension services in groups. Her broad recommendation regarding the financing role of the public sector in extension, including the option of subsidization of privately supplied services, is as follows:

When should extension be funded by the public sector? Where extension delivers public goods and information with high externalities, such as environmental or conservation-related information, complete privatization is neither desirable nor feasible. Two other arguments could justify public subsidization of extension to small farmers: first, when small farmers may be unaware of the benefits of improved technologies and unable to afford them; and second, when small subsistence farmers may derive considerable non-monetary benefits (including better nutrition and health) from adopting new technology (p. 217 [emphasis added]).

This conclusion is part of an increasing consensus that there is a role in agricultural extension both for the public sector and for unsubsidized private services, as well as for public services that are offered at a cost to clients. Umali-Deininger's analysis marks an important step forward in understanding the role of public and private sectors in agricultural extension. While her framework provides the first truly systematic basis for dealing with these questions, her analysis can be made more realistic by including the role of uncertainty and other factors that impinge heavily on farm decisions. Consequently, the outlook for private extension services may be brighter than she suggests, albeit with subsidies for small-scale farmers to enable them to purchase those services.

Even if the information provided by extension proves to be non-excludable as time passes, farmers may wish to purchase it for any of the following reasons:

(1) There is a premium on the timeliness and quality of information. Farmers may not wish to wait to obtain information from other farmers through the diffusion process, and they may be fear that second-hand information is not as accurate as it was originally. Thus they may be willing to pay for information that is more timely and of higher quality.

(2) As a corollary to the timeliness issue, access to information can raise barriers to entry for potential competitors. Even if information is non-excludable eventually, those who gain first access to it may be able to sew up markets, thus effectively excluding competitors even if the latter obtain the same information. This consideration can be particularly relevant to non-traditional products. For example, in Honduras low-income rural women in the village of Sabana Grande have recently specialized in eggs and certain kinds of flowers, shipping container-loads of both products to nearby Tegucigalpa each month. Those who try to emulate them in the market for flowers would face lower prices, since the women from Sabana Grande are now meeting the bulk of the demand for certain varieties. (3) Uncertainty is omnipresent in agriculture. Entering into a contract for extension services may represent a form of insurance against the eventuality of infestations of other problems that require a rapid response, even if the recipe for response eventually filters out to other farmers. A farmer who is on the verge of losing his or her crop needs a rapid solution and may not be concerned that other farmers may be able to obtain the same information at no cost in due course.

These considerations imply that the potential market for commercial agricultural extension is greater than Umali-Deininger's analysis implies. However, income constraints and seasonal cash shortages limit the ability of poor farmers to pay for extension services. If poverty alleviation is a national goal, then a public subsidy to poor farmers to enable them to obtain extension services may be justified. The modality of granting such a subsidy almost always will require organization of poor farmers into groups of beneficiaries, but the case for the subsidy can be strong on grounds of poverty alleviation alone.

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