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Some general remarks on coordination mechanisms and their potential role in rural policy

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  • Pietrzak, Michal

Abstract

The aim of the article is to discuss (from the perspective of transaction cost economics and systems theory) the limitations of state policy, in particular agricultural policy – ​​aimed at intervening in transactions between economic agents. The conceptual framework of the analysis is based on the distinction between ideal types of coordination (competition, hierarchical control, values/norms and horizontal self-alignment processes) and actual institutional arrangements. The latter may be based mainly on one of the ideal types or be a composition of these mechanisms. Agricultural policy should solve the problems of rural areas that cannot be resolved solely on the basis of the market system. However, it should be remembered that state policy – ​​analogous to the market – is also plagued by its own failures. This applies, in particular, to extensive, universally applicable policies implemented from above – based on the mechanism of hierarchical control. In such a case, market failures may be limited (and consequently market transaction costs), but, on the other hand, political transaction costs (both variable and fixed) may be enormous. The main conclusion from the considerations carried out in the article is the expected relationship, predicting that the costs of both categories of transaction costs (market and political) taken together will probably be the lowest in the case of agricultural policy being a mixture of different coordination mechanisms, and not only hierarchical control. This conclusion is consistent with the evolution of agricultural policy towards the Rural Policy 3.0 paradigm, recommended by the OECD. This paradigm is basically based on stronger decentralization, improving the cooperation of central administration with local administration (public and local government), as well as on the involvement of third sector organizations (NGOs) and private enterprises.

Suggested Citation

  • Pietrzak, Michal, 2018. "Some general remarks on coordination mechanisms and their potential role in rural policy," International Journal of Agricultural Sciences and Technology (IJAGST), SvedbergOpen, vol. 181(4), December.
    • Handle: RePEc:ags:ijag24:344554
    DOI: 10.22004/ag.econ.344554
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    References listed on IDEAS

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