Principles of Good Practice in Dealing with Risk in Agriculture: A Review of Agricultural Decision Analysis

Because the analysis of risky choice in agriculture is important but difficult, agricultural economists need both suggestions on how they can do decision analysis better and some agreed-on principles. In this chapter, we argue that the importance of risk aversion has generally been exaggerated relative to the task of finding better ways to deduce relevant and reliable probabilities. Getting better probabilities demands careful thought, drawing on what is known about the pitfalls and on evolving insights into better methods. Our aim is to stimulate a debate leading to a clearer consensus about better practice in these matters.