The Economics of Rural Organization.

• Author: Samanta, Subarna K.

Markets in LDCs or developing countries are permeated by imperfections of institutions, structures and operations. Commodity and factor prices are often not organized adequately (or rather badly) and the economic agents often respond to economic signals and incentives in a way which do not reflect the "real cost" of commodities or factors because of the existence of various distortions in those markets. The editors (Karla Hoff, Avishay Braverman and Joseph Stiglitz) of this volume examine and analyse the concept and the impact of "market failure" in a rural agrarian economy, and argue that governments have an important role to play in integrating markets and modifying prices to be conducive to economic development. This book aspires to fill the gap between the competing explanations for such market failures and the corresponding remedies (Planning, Institutional and Chicago School approach) by pointing out that "individual rationality or optimization will not in general coincide with social rationality". I am thrilled to see such a book discusses the long neglected issues related to rural economies.

Apart from an expository introductory chapter, this book is a collection of 28 different papers. It has four main parts containing these 28 chapters (papers). Each part has methodological foundations with theoretical analyses, complemented with a number of case studies obtained from different developing countries.

Part I consists of chapters 2 through 10 and covers a wide range of issues related with rural credit markets that include problems and puzzles associated with imperfect information and policy perspectives with respect to government intervention. In chapter 3, Braverman and Guasch analyze the administrative failures in government credit programs and in the next chapter Stiglitz presents a lucid debate about the relative merits of peer monitoring and its effect on credit markets (for example, Grameen Bank in Bangladesh is operating successfully, while in India, Jahar Employment Planning Scheme has faltered). In chapter 5, Udry presents a case study from northern Nigeria where so-called moral hazard and adverse selection hypotheses are not decisive for the organization of agrarian institutions. Feder, Lau, Lin and Luo, in chapter 6, present another study from rural China where credit market is segmented between a formal sector and an informal sector. In chapter 7, a case study from Pakistan is presented by Aleem who finds that the...