Agricultural policies and the reduction of uncertainties in promoting diversification of agricultural productions. Insights from Europe

Product diversification is often presented as an evolution of farm production systems that could contribute to a more sustainable development of agriculture (Kremen and Miles, 2012). Diversifying products at farm level may come with benefits for farmers, and beyond, for society at large, by enabling a more efficient use of natural resources. But diversification also raises complex issues at farm level, with multiple dimensions: technological, process, marketing and organisational. It is thus a complex change for farmers, not only in terms of internal management of resources within the farms, but also in terms of relations with their socio-technical environment, both with actors of the supply chains and with actors of agricultural knowledge and innovation systems (AKIS). Such deep changes can induce situations of strong uncertainty for farmers regarding diversification options: uncertainty about the costs and benefits of diversification, but also about the paths towards diversification. Thus, reducing uncertainty might be a key step towards diversification. The question of the role of uncertainty in technological choices such as product diversification has gained an increasing attention among scholars in economics and social sciences (see for instance Marra et al., 2003; Knowler and Bradshaw, 2007; Chavas and Di Falco, 2012). This is true both in the field of micro-level analyses within standard economics and of meso-level analyses within institutional economics. Our contention in this paper is twofold: i) to show that these two fields of economic studies can be associated with different forms of public intervention for the support of diversification; ii) to open a debate on the need to better integrate and combine these different forms of public interventions. The chapter is organised as follows. In a first section, we present insights from a micro-economic perspective on the costs and benefits of product diversification. In a second section, we present insights from institutional economics on technological transitions towards diversification. In both sections, we present the type of policy instruments associated with these theories. In a third section, we propose some illustrations of these policies based on a description of instruments of the Common Agricultural Policy (CAP) of the European Union (EU). It highlights the need for more pluralistic and open debates about the instruments derived from various economic theories. A better dialogue could help prioritizing the instruments that would have the most impact according to the contexts of agricultural production.