RURAL DIVERSITY UPSIDE DOWN: HETEROGENEITY AND POLICY DEVELOPMENT Paul Hebinck & Ruerd Ruben

Department of Sociology/Department of Development Economics Wageningen Agricultural University

The Netherlands Paper presented to the 14th International Symposium on Sustainable Farming Systems 'Changing

Agricultural Opportunities: The Role of Farming Systems Approaches Association for Farming Systems Research and Extension

11-16 November 1996, BMICH Colombo, Sri Lanka

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RURAL DIVERSITY UPSIDE DOWN: heterogeneity and policy development Paul Hebinck & Ruerd Ruben Workshop: Methodological Issues: Systemic Questions to Basic Disciplines Abstract Differentiation among farm households is increasingly recognized as an important dimension of rural development process. Prospects for technological change and rural organization strongly depend on the dynamic interactions with markets and institutional environments. Farmer responses to agricultural policies demonstrate, however, a wide variety, thus reinforcing rural diversity. Consequently, attention should be focused on the appraisal of agricultural policy instruments that recognize the biases of intervention at farm household level. Farming Systems Research (FSR) clearly contributed to the understanding of differentiation between farm households. While various procedures are used for the development of farm typologies, hardly any ‘upscaling’ of FSR towards policy level has occurred. FSR is mostly used to identify specific recommendation domains for innovation and extension, but contributed less to the identification of (economic) policies that are tailored towards the specific possibilities and constraints of different categories of farmers. Policy support research that recognizes the differentiation among farm households should direct its attention towards the analysis of relevant interfaces, e.g. the way in which economic incentives reach the farm and are interpreted by farmers. While the policy framework is intrinsicly generic, it is recognized that a new approach is required to balance supply and demand aspects. The paper proposes an analytical structure for a recursive socio-economic perspective on rural differentiation, indicating major consequences for farming systems analysis and policy appraisal. Recognition of heterogeneity as a parameter for policy research will open up new horizons for farming systems research. Keywords : Farming Systems; Rural Differentiation; Diversity; Agrarian Policies; Contract

Choice; Interfaces; Endogenous Development. 1. Introduction Farming systems analysis (FSA) introduced a new approach to agricultural research and development. The approach is based on the conceptualization of farm households and their activities as a system. It particularly emphasises the interdependence between the components under control of the farmer and their interactions with external biophysical and socio-economic factors that influence farm household opportunities and decisions but are not under farmers’ control (Shaner et al., 1981). FSA enabled a reorientation of agronomic research towards multi-locational trials and on-farm tests, involving farmers in the adaptive phase of technology assessments (Fresco, 1988). Consequently, FSR is clearly ‘client oriented’ and takes the farm household as the integrating unit where major decisions on crop choice, land use, production techniques and resource allocation are taken. Systems research started in the 1960's as a critique against positivist science based on a strongly reductionist approach of reality. The analysis of nested interactions among different sub-systems proved to be especially useful for agronomic research, where interactions between soil-, plant-, and weather conditions are subject of detailed analysis (Ruthenberg, 1970). Recent efforts to promote the so-called Eco-regional approach within the CGIAR network recognize the importance of regionally specific solutions, while precision farming points towards spatial diversity. Moreover, also

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social sciences embraced the systems approach as a procedure to analyze the effects of human interventions. However, the concept of ‘hierarchy', as well as the dynamic interpretation of ‘change’ remained largely unsolved issues (Maxwell, 1984; Drinkwater, 1994). Meanwhile, a more populist interpretation of farming systems research received increasing attention (Chambers et al., 1989). This ‘farmer first’ approach puts emphasis on factors influencing the demand for technologies, taking into account farmers’ knowledge on genetic diversity and enhancing a process of indigenous technology development. Diagnostic procedures based on farmers participation and a more interactive role of the researchers should enable an innovative process that permits farmers to direct their own development. Consequently, the role of extension is completely redefined, facilitating farmers experiments and choice according to their priorities. Linkage mechanisms are identified that may strengthen the relationships between research and extension (Kaimowitz et al., 1989). Most ecological and sociological perspectives of farming systems focused attention on demand aspects and farmers needs, while economic approaches tend to emphasize supply aspects. Macroeconomic policies deal mainly with general production conditions that may enhance farm development, taking the agrarian production structure and the emerging farm pattern for granted. Moreover, supply response is assumed to be rather straightforward as long as factor and commodity markets are well developed. Although this latter condition is hardly fulfilled in most developing countries, economics has been far more successful in contributing to policy support systems. There is hardly any analytical connection between both approaches, and institutional frameworks that permit attunement tend to disappear. Major consequences of this divorce have been illustrated by the farming styles research, revealing the coexistence of numerous development perspectives under conditions of uniform agrarian policy, due to diversity among farmers with respect to their level of commoditisation, available resources, farm household goals, and their perceptions and ideas. Instead of a hierarchical view, a more dynamic dimension of selective articulation strategies that farmers apply to (re)define their relationships with the technical and socio-economic environment is incorporated in the analyses (Van der Ploeg, 1990). This implies a more interactive approach where various development perspectives embedded in widely differentiated contexts are outlined for various types of producers. All FSR or FSA approaches are more strongly management-oriented and meet limitations in addressing issues of improving public policies to support the selective development of farming systems. Chambers (1994) does no go beyond asking for an ‘enabling state’ that refrains from surplus extraction, without specifying possible differences within the agricultural sector. While agrarian policies tend to be defined at a rather generic level, most macroeconomic approaches fail to capture diversity in supply response. Actor-oriented approaches from rural sociology contribute to the explanation of differences in farmers’ responses to similar economic incentives by referring to communication and information failures and the diversity of interfaces that contribute to different interpretations by farmers. Current agency-theory based on institutionalist micro-economics offers a comparative framework for the analysis of diversity in rural contracts. An integration of the latter two approaches may be helpful to erect a more policy-oriented farming systems framework that takes rural diversity as a starting point for analysis and design. Main questions that will be addressed in this paper refer to following issues: (a) which processes systematically explain the coexistence of diversity in farmer's responses to policy measures?; (b) which structural and behavioural variables may be used for a policy-relevant differentiation among farm households?; and (c) how could agrarian policies be defined in such a way to respond adequately to diversity among farm households? Answering these questions permits a reversal of the traditionally supply-oriented character of agrarian policy formulation towards a more interactive policy approach that adequately takes into account farmers diversity. 2. Dimensions of Rural Diversity

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The coexistence of different farming systems under seemingly similar agro-ecological and socio-cultural and economic conditions raises the question on the possible explanation why diversity is inherent to rural and agricultural development. Diversity considered as intrinsic to development goes beyond modernisation theory (e.g. Hayami & Ruttan, 1985) and some strands of Marxian thought on rural development (e.g. Bernstein, 1986), that only recognize differences among farms as an empirical phenomenon of secondary significance, as a leftover of previous conjunctures, or as a temporary aspect of development. When agrarian development is not viewed upon as a uniform process, it becomes essential to analyze agrarian development and change with a view to understanding different responses to change. Besides differences in resource endowments and the access to input en output markets as the more ‘objective’ factors that explain rural diversity (Griffin, 1971), also diversity among farmers with respect to the prevailing objectives and the derived style of farm management could be used as a benchmark for the development of farm typologies (Hebinck, 1995, Van der Ploeg, 1990). Moreover, internal and external factors are not completely independent, and thus market relations and management styles mutually interact. Finally, multiple variables and realities should be recognized that influence farm household behaviour, in such a way that adjustments in agronomic practices, cropping patterns and technology choice could be understood as a result of adaptive decision making. The debate on rural diversity has been focused too long and too much on the political dynamics of rural development. Particularly the classical Marxist and Neo-marxist strand has linked and tried to explain the phenomena of rural differentiation as such in terms of rural class formation. The debate was basically on whether to understand this process as one of polarisation (c.f Lenin, 1982) or differentiation (e.g. De Janvry, 1981; Bernstein, 1986). Although these arguments are not to be excluded from the debate, they represent too much of a one-sided approach by focusing only on landownership, labour relations, political practices, etc. Explaining and understanding diversity in terms of farming practices and farmer strategies as they are reflected in both different agronomic practices and in different relationships with markets and institutions implies that diversity is analyzed as contextualised and embedded in locally specific socio-cultural, political and economic contexts. The following aspects of rural and agricultural diversity have been distinguished: (a) differences in farm household objectives or farmer strategies; (b) differences in resource endowments and factor mobilization (contract choice) and the link with farmer strategies; c) differences in production systems (e.g. agronomic practices; crop and technology choice); (d) differences in management styles and farming practices; (e) differences with respect to external relationships (information, commoditisation), and finally (f) differences in supply response. We will discuss briefly these six dimensions of rural diversity and address especially the ‘vertical consistency’ among these different components. Farm household objectives Diversity in farming systems can be related to the relative importance given to the objectives of food security, profit maximization or risk aversion. Unequal intra-household relations and bargaining among household members may lead to different negotiations for the setting of priorities. While food security is usually associated with subsistence production, and profit objectives are related to market-oriented production, risk criteria may enhance a diversified combination of activities. If objectives of sustainable resource use are involved as well, a specific time horizon for the realization of the stated objectives and valuating of off-site effects becomes important. Farm household objectives are mostly analyzed within a revealed preference framework (e.g. taken actions indicate ex-post preferences), deriving implicit objectives and goal weights from explicit choices that give rise to different activities. For example, depending on the socio-economic and bio-physical context, rural producers may prefer to derive most of their income from farm activities, from off-farm agricultural or non-farm employment, or they even may decide to migrate to towns. Rational behaviour refers in this respect to the use of production factors according to subjective scarcity.1 Very limited in-depth research is, however, devoted to the analysis of farm household objectives and

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decision procedures under different or similar socio-economic conditions. Why households respond differently to (changes) in their conditions and opportunities is of fundamental importance to understand for agrarian policy formulation. Factor Endowments Availability of primary production factors and relative factor endowments are commonly used criteria for farm stratification procedures. Based on the induced development theory (Hayami & Ruttan, 1985) developed originally for international comparison, similar frameworks are erroneously used to analyze inter-farm differentiation. The basic error refers to the use of market prices that reflect absolute scarcity instead of subjective prices based on differences in access and information on markets. Agrarian contract theory offers a more detailed framework for the analysis of the effects of different access to production factors on the structure of agrarian production systems (Hayami & Otsuka, 1993). The coexistence of wage labour, share cropping and tenancy relations is then explained by referring to differences in transaction costs related to the access and control on certain production factors. This permits multiple external relations by farm households in order to satisfy simultaneously various objectives. Agronomic Practices and production systems The dynamics or structure and composition of farming systems, and the interrelations between cropping, livestock and off-farm activities received major attention in FSR&A. Aspects of relative factor intensity (e.g. land, labour or capital intensive production systems) and the tendencies towards specialization or diversification of production are commonly addressed. Sustainability criteria are addressed by referring to stock and flow aspects (e.g. nutrient balances). Detailed research at plot/field and farm level revealed an enormous amount of information concerning the interactions within and between different components. Dynamic crop growth models could be refined, although intercropping and multiple cropping activities are still not formally incorporated. Even more difficulties arise with the formal analysis of possible reactions on changes in external biophysical or socio-economic conditions. Dynamic features of farming systems still require basic attention, as the analysis of patterns of change or adjustment of activities implies basically an understanding of the decision-making procedures at farm household level. Therefore, the weighted combination of objectives and available options represents a major input, but a number of subjective elements tend to be equally important. Styles of farming This dimension of diversity is (empirically as well as analytically) related to a huge variation in labour processes.2 The analysis starts from the perspective that agricultural practices are locally specific: they are conditioned by ecological circumstances, embedded in peoples’ cultural repertoires, and interlocking with different sub-markets. Agricultural labour processes are not just simple derivations from market relations and terms of exchange. Agricultural production, for instance, contains the possibility of obtaining the elements of the labour process and the means of consumption through market relations and/or through production and reproduction on the farm and kinship relations and networks, e.g. outside the sphere of the market.3 On the other hand, the variation in labour processes is closely associated with different perceptions and insights of farmers of how to farm, with locally specific forms of social organization of production, as well as with the different ways farmers generate agricultural knowledge (learning through practice [e.g. Bourdieu, 1982] and "l'art de la localité" [e.g. Mendras, 1970] and/or - it is often a mix - relying on ‘external’ bodies of knowledge). Agricultural practices involve a local, and often extremely diversified knowledge of ecological, technological, institutional and cultural conditions which is continuously being enriched through mutual exchange and communication with ‘external’ institutions. It is emphasized therefore in the literature as well as by farmers themselves that farming is essentially an artisanal labour process.4

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The variation in labour processes is associated with and understood in the realm of two clearly defined research themes: farming styles, and, farming strategies (which is discussed earlier in this paper). The variation in the labour processes (and the differential ‘degrees of commoditisation') is translated into different agronomic practices and institutional relations, e.g. farming styles. A farming style is defined as ‘the specific ordering of various aspects of farming practices based on the perception of farmers on how to farm’ (Roep et al. (1991 , p. 3). The emphasis on style is to stress the crucial importance of farm labour, the organization of the labour process and relations with markets and the institutional environment, (see also Van der Ploeg, 1990, and Van der Ploeg & Roep, 1990). Variation in farming styles, then, is due to differences and the strategic positions farmers choose as far as markets, technological developments, relations with agribusiness companies, extentionsists, etc. are concerned. Interfaces Styles of farming research stresses both the socio-cultural and economic context and the technological and organizational aspects of rural and agricultural development as well as pin-pointing the relevance of intervention programmes. In concrete terms: whether a technological solution and related extension message and/or the formation of particular markets is relevant and suitable in particular settings (i.e. for individual farms as well as for regions). It is needless to stress that styles of farming research emphasises the particular way in which farmers process and generate knowledge; how they are engaged in a negotiation process about technological improvements; interlock with specific sub-markets; and how they actively redesign technology disseminated within the framework of intervention programmes (see van der Ploeg, 1991; Long & van der Ploeg, 1989, 1994, 1995; Hebinck, 1995). The relationships emerging in such intervention programmes, where different bodies of knowledge and experiences meet as it were, often fail to combine to form a situation out of which development may be -as expected - the outcome of technology or any other type of rural development interventions. These situations or meeting points and interactions between different social systems based on differences of normative values and social interests are referred to as interfaces (Long, 1989). Interfaces result, in most cases, particularly in those where structural discontinuities are found, in a process of message (de)construction: the redesigning of innovations. The subjective interpretation of information is therefore related to the subjective position of actors among and vis-à-vis each other. Differences in access to information, as well as the individual way each actor interprets this information and transforms it into a new ‘discourse’ will thus result in rather heterogeneous patterns of production, or may even strengthen the wide variety of responses to planned change. This framework can be applied in the field of market information, where transaction costs account for differences in access. Moreover, social class dimensions influence subjective costs and prices. Carter & Mesbah (1993) developed therefore an operational framework to identify differential shadow prices for land, labour and capital as experienced by different categories of farmers. Recent research on the functioning of so-called Real Markets also reveals the complex nature of prices as informational device. Supply Response Most theories on supply response are based on the induced development approach, looking for adjustments in the farming system due to changes in relative factor prices. Comparative empirical research on supply response reveals that stronger reactions are to be expected to changes in output prices compared to changes in input prices. Moreover, taken into account also expenditure effects from price changes on household consumption, perverse supply response reactions can be explained as well (Singh et al., 1986).

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Differentiated supply response among farm households has been less subject to analysis. Aggregation at regional or national level is mostly rather straightforward, although interactions among households (e.g. non-market exchange of production factors) may disturb the outcomes. Endogenous Development Development is always a process characterised by the articulation of both external and internal resources. ‘Most forms of development (...) involve the welding of local with extra local labour and resources. Development does not merely happen in localities, but through localities, each with their own distinctive composition of labour power and resource endowments. It is inevitable that development process (...) are shaped by local factors’ (Lowe et al, 1995: 93). What becomes crucial, therefore, is that development becomes the balance of ‘internal’ and ‘external’ elements (Ploeg & Long, 1994: 4). Starting from this, implies that endogenous development is conceptualised here as a complementarity among ‘locally available resources, such as the potentialities of the local ecology, labour force, knowledge, and local patterns for linking production to consumption’ (Van der Ploeg & Long, 1994: 1-2) and policy induced changes in the availability of external resources. These are combined by the actors involved in a coherent way and form the starting point for the interpretation, selection and evaluation of internal and external elements actors wish to incorporate in the development process. It is crucial to underline the locally specific outcomes. In one region the balance may a have a specific aim: the guaranteeing and consolidation of local elements and factors, to strengthen and to enlarge local inputs and resources. In general it is essential to realise that these models and activities as projects carried by people themselves who attache meaning to these activities (e.g. actor projects; Long & Van de Ploeg, 1994). Farming styles are such actor projects. 3. Linking paradigms The present section aims to offer a framework for the interpretation of the causes and consequences of farm differentiation. This may be done by linking the paradigms of (i) contract-choice and evolutionary economics (addressing material and institutional aspects of rural change) and (ii) actor-oriented approach from rural development sociology (addressing more behavioural issues). Both approaches are strongly founded in the concept of endogenous development, recognizing the dynamics of heterogeneity within the agrarian structure due to missing or failing markets, producing a wide variety in supply response and trade-offs between the objectives at farm and policy level. The analysis of rural diversity linking concepts of rationality and livelihood permits a much better understanding of farmers supply responses to common public policies, and offers an alternative explanation for the disappointing results of macro-economic policies in some African countries. Therefore, major attention is given to the constraints for rural exchange that arise from limited access to markets (high transaction costs), scarcity of information, and high levels of risk and uncertainty. Consequently, farming styles and rural contracts are mostly preferred that are based on selective integration and institutional exchange. Interface analysis The concept styles of farming combined with interface analysis may provide one of the keys to understand rural exchange constraints, livelihood, market and institutional relations and responses to policies. The earlier section argued that styles of farming represent the categories to capture the relevant diversity in rural and agricultural development processes. It has been made clear that the various styles of farming interlock with different sub-markets (for labour, capital, knowledge and information, instruments and objects of labour, outputs). The notion styles of farming (or "l'art de la localité") allows to raise various critical issues. One issue raised here5 is that it critically questions the outcome of processes of externalization and subsequently underlying processes of market formation.

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Externalisation refers to the process of re-allocation of tasks, which in previous conjunctures were part and parcel of farmer practices, to ‘external', specialised institutions such as agricultural research, processing of agricultural commodities and the production and supply of inputs, etc. Historically, this coincided with the design and implementation of agricultural policies: efforts of the state - and to a certain extent also NGO's -to create specific institutions and programmes aiming to foster agrarian development as well as to staff these institutions with specific agents. Consequently, policies reflect the interests, perceptions and ideas of those actors staffing these institutions.6 With these normative models, as one may argue, it is attempted to remodel and reorganize diversity in agriculture in such a way that it fits the interest of policy makers and dominant actors in the political arena of a region or country Research in, for instance, Kenya (Hebinck, 1990) and Europe (Van der Ploeg and Long, 1994) allows the general conclusion that policy interventions tend to neglect the so-called endogenous development potentials of agricultural systems and people: they do not pay attention to development ‘alternatives’ practised by farmers themselves which are based on local resources and bodies knowledge, locally specific forms of organisation, local or regional markets, peoples cultural repertoires, past experiences, etc. These (agricultural) practices do, however, form the reference points for rural producers to evaluate external interventions (by the state and NGO's) in their lives and forms the basis for their response to the latter's ‘good intententions'. (This, in fact, is one of the crucial interfaces in rural and agricultural development we seek to address in the last section of this paper.) One of the responses is the need and subsequent quest for specific (sub-)markets, a field in which agricultural policies may contribute. Contract choice New Institutional Economic (NIE) approaches of rural diversity rely on contract choice theory and evolutionary economics. The NIE approach emphasises the relations between farmers and other rural actors (traders, moneylenders, landlords, etc.) and the implicit terms of change that are agreed upon to guarantee access to land, labour and capital. Production relations are thus composed of behavioural determinants (e.g. risk) and material determinants that are locally and personally specific (Binswanger & McIntyre, 1987). A further extension of this framework also includes management and supervision costs on land (sustainable land use), labour (incentives to avoid shirking) and capital (moral hazards) to conclude that a wide variety of contracts may occur depending on the specific nature of each of the resources (Bowles et al., 1993; Hayami & Otsuka, 1993). Evolutionary economics, on the other hand, introduced a path-dependent element by using agency theory at an aggregate level (Andersen & Moene, 1993). This implies the coexistence of different farming systems, as well as the possibility to trace these 'technological trajectories’ back to differences in social organization. The relationship between institutional change and technical development becomes (again) a major theme of research, but without the deterministic features that characterized (neo)classical economics. The paradigm of endogenous development permits a complete reversal of the direction of causation, recognizing that the incentives for adaptive behaviour or organizational change may be generated through the confrontation between the farm household objectives and actual farming styles (Wossink, 1993). Note that we can no longer speak of a 'consistency’ between both aspects, as the analysis of the expected dynamics of rural change asks for a theory based on driving forces and decision making procedures. Most economic policy research is largely engaged in supply response analysis, addressing adjustment at farming systems level due to changes in relative prices (Singh et al., 1986). Models used for this appraisal are fairly well developed and may include both productive and reproductive aspects of the farm household, following the Chayanovian tradition. Major extensions to supply response analysis refer to the inclusion of missing markets, recognizing differences in access to and information on factor and commodity markets (De Janvry et al., 1991). Intra-household bargaining processes are only partially included, and more complex farm households objectives can not be fully recognized.

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Farm management theory is historically engaged with the analysis of farmers decisions at enterprise level. The concept of farm household as a 'coalition of participants’ opens the way for a review of the exchange relations within the farm. Moreover, farming strategies and contractual choice parameters are strongly interrelated (Eswaran & Kotwal, 1985), which implies that distributional and welfare aspects are dependent upon the interaction between the farming system (agronomic practices) and the institutional framework. Again, endogenous rural change may be expected to emerge from conflicts or inconsistencies among both components, and thus most attention should be focused on the feedback mechanisms. Synthesis: endogenous development Endogeneous development implies that basic attention is devoted to the mechanisms for fine tuning agricultural policies in the fields of technology development, the generation of knowledge and information, and market formation and prices towards the needs formulated by those actors representing the styles of farming in a particular locality. The fine tuning of policies requires, however, both contextualisation and problematisation of policy formulation. One of a series of fine tunings of policies we have in mind is related to knowledge and information and segmented market formation based on differentiated demand and thus supply. Agricultural policies starting off from local initiatives taken, local practices and development potential do have a role to play. Fine tuning in this sense has much to do with identifying endogenous development potentials and specific development processes at work at the local and/or regional level. This implies both a de-aggregation from the national to the local/regional level to capture the local specificities and a ‘de-ideologyssation’ of ‘public’ policies. 4. Rural Diversity, Agrarian Policies and Institutional Change In the following, we will address the question: how could agrarian policies be defined in such a way to respond adequately to diversity among farm households? This implies a reversal of the traditionally supply-oriented character of policy formulation, making use of the available knowledge on the processes that cause rural differentiation. Taking into account the above described aspects and processes that generate and enhance rural heterogeneity, the major question to be addressed now refers to the available options to define a policy framework that recognizes the intrinsicness of these differences and could possibly take advantage of diversity. Therefore, both the institutional structures that support the policy making process, as well as the contents of policy measures should be reviewed. Analytical efforts to capture differences in resource endowments, farming styles or agronomic practices through the ex-ante definition of specific farm categories for rural stratification are mostly used to increase targeting efficiency (v.d. Walle & Nead, 1995), but still recognize diversity mainly as a static phenomenon. Moreover, they neglect the dynamic interactions among the different components, and fail to understand the ex-post character of heterogeneity as a reaction to changing circumstances. Diversity becomes thus an endogenous process that is reinforced by agrarian policy. Recognizing the interaction between farmers and policy measures offers an interesting starting point for a new debate on rural development. Some elements that may contribute to this re-engineering process are commented in the following. Information and Knowledge Policies that focus on the improved access to information and the reduction of transaction costs intend to reduce biases in input supply or marketing. The ‘translation’ of (market) information into knowledge is, however, a highly subjective process that already tends to reinforce heterogeneity. Instead of policies promoting transparency of markets, major attention could be focused on subjective conditions that determine the learning process and the concrete demands emerging from it.

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Segmentation and Self-selection or actor networks Taking into account resource scarcity, competition among farmers is mostly based on market access and purchasing power. In practice, however, exchange is based on far more complex structures of market segmentation. Knowledge of the relevant entry conditions permits the installation of distributional systems based on self-selection (e.g. networking), instead of supply determined systems that tend to provoke adverse selection.

The selective articulation/interlocking of farmers with various (sub-)markets offers a viable starting point for differentiation of input demand (e.g. seed material) and output channels. These segments may eventually be formalized through systems of certification, creating a (temporary or permanent) separate market segments, once sufficient scale economies can be reached. Fieldwork in various regions pinpointed the specific social forms of organisations carrying these initiatives as knowledge networks (see Hanyani-Mlambo & Hebinck for an example). Exchange and reciprocity Most agrarian policy measures are seen as a specific incentive to generate adjustments in the farming system. Farmers interpretations of these incentives have to be understood within the exchange framework in which they are normally involved. This implies that only fully commercialized farms will reflect the expected behaviour. Intensity of supply response of other, less commercially oriented farm households depends on their net supply or demand position. Within the framework of contested exchange, prices and technology are part of a system of interfaces that link-up farmers with the environment. Their reaction will thus also conform to the

farmers creating segmented markets A concrete example may illustrate the directions for policy changes the paper aims to put forward. The example originates from Siaya District, Western Kenya. Farmers in Siaya District massively (although not completely) abandoned in the late 1960's their local maize varieties and changed to hybrid maize seed (HYV). Now, some 25 years later the following problem emerged: the requirements of use of hybrid maize technology, e.g. buying seeds and fertilizers every season, appear, at least for poor farmers, difficult to fulfil because of hiking prices and severely limited purchasing power. This must be seen against the background of an emerging agrarian crisis in Siaya. In addition, soil fertility is declining rapidly and the pressure on the land has increased substantially. Small or resource poor farmers are now increasingly distantiating themselves from HYV-maize and are actively looking for local varieties which are adapted to the local, ecological circumstances. Their quest is, however, not so easy. On the one hand because the still available local varieties have taken up the characteristics of HYV's, a.o. requiring fertilizers, and are considered to be not usable any more. On the other hand, Kenyan agricultural institutions neither do have access to the 'old’ local varieties which used to be grown in the region. One of the responses of Siaya farmers to these conditions is forging contacts with traders crossing the border to Uganda asking them to bring local varieties. These varieties are than subject to intense on-farm research and experimentation by farmers themselves, exchanging information and knowledge. It may be the case that these relationships are non-commoditised and based upon kinship, reciprocity or any other kind of trust relationship. What these farmer networks in fact try to create is the creation of a market segment which was before missing: new local varieties and the knowledge and information required for the use of these commodities. The transaction costs for the formation and operation of this market are covered by the farmers themselves.

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common pattern of reciprocal exchange. Clear identification of -, and negotiation on the reciprocal (trans)actions enables the subsequent definition of effective policy incentives. A crucial question emerging is what the possible new role for public policies (the state or NGO's) could be in such situations. 5. Conclusions Generic frameworks for agrarian policy analysis are strongly supply-oriented and based on a strict definition of exogenous parameters and endogeneous effects. For a more dynamic interpretation of their dynamic relationship in time and space, the interactions between structural and behavioural variables have to be understood. Moreover, also the reversed chain of causation - from subjects towards policies formulation, and the macro-micro-macro level interactions - requires serious attention. Endogeneous development implies that demand aspects are more recognized as driving forces of the process of rural development and change. The interactions between technological choice and institutional organization are positioned in the forefront of analysis. Main attention is dedicated to balances among locally available and externally purchased resources, making the forms of engagement in market exchange to a vital decision. While some authors argue that the process of globalisation will lead inevitably to transparent markets with standard exchange transactions, the reversed tendency of increasing market segmentation is equally feasible. This means that policy interventions could re-organize heterogeneity, but are less likely to reduce diversity in supply response. This will be even more true in developing countries, where inequity in property relations will be reproduced through market exchange. Some promising perspectives can be indicated for policy regimes that look at the potential of rural diversity. Taken into account the demand-orientedness, the following issues are at stake: * development of market segments Instead of the full development of missing markets and the reduction of transaction costs, giving selective incentives for the formation of market segments to strengthen local initiatives could be a feasible alternative. This implies the elimination of style and regionally specific constraints for farm development is a vital element to permit competitiveness. Sometimes also particular property regimes and social forms of organisations may be required. * self selection Most policies for rural development include activities providing rural employment opportunities, permitting the survival of farm households at an economically and socially not feasible size. Although land reform is a more structural solution (that could also enhance efficiency and market supply7), most redistribution actually takes place through exchange. Therefore, targeted interventions can only be expected to be successful if clear elements of self selection are introduced. This implies that participation is related to real efforts, and that general facilities are foremost eliminated. * Coping strategies Different mechanism for coping with natural, market or background risks can be recognized, and policies should reinforce their risk bearing capacities and/or their risk taking behaviour. Small farm households may be better served with diversification of their survival opportunities outside agriculture. External relations may enable them to create an extra-economic basis (such as rural industrial value adding; migration and remittances; (petty)trade for livelihood, etc.).

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For policy bureaucracies to develop and implement such an alternative route boils down to commitment (both state and NGO's) and recognition and appreciation of diversity and heterogeneity in the field of rural and agricultural development. Developing an attitude which images the rural areas and agricultural sector as a productive laboratory for change and alternatives is thus essential. Notes 1. For situations of group choice and interdependent decisions, game theory offers a similar framework, based on the expected behaviour of other agents. 2. Marx (Capital, Vol III) was one of the first who has drawn our attention to the diversity of production processes and co-existence of various labour processes. Within the historical specific situation in rural England in the 18th century, he distinguished between labour processes linked to specific commodity circuits and those founded upon a complete circulation of commodities. Marx defined a labour process as composed of three interacting elements: the labour force (household/family, wage labour); the objects of labour (seeds, pesticides, fertilizers) and the instruments of labour (tools, machines). It also encapsulates agricultural knowledge issues. For this reason, labour processes can not - and should not - be viewed as isolated from the social relations and forces of production. Extending this argument towards (Third World) agricultural systems, we may put forward that any labour process in agriculture, whether on a capitalist farm enterprise or on a family farm or whatever categorization one is used to, can be characterized in terms of a maintenance of a certain balance between use-value and exchange-value, between commoditised and non-commoditised forms of production and reproduction, between local and scientific bodies of knowledge. The connotation 'degree of commoditisation’ and the extent of externalization is used by many researchers (see Van der Ploeg 1986, 1990 for a discussion) to reflect this strategic balance. The maintenance of this, occasionally precarious, balance has two important aspects. On the one hand, it is part of a strategic line of defence arranged by peasants and household producers vis-à-vis capital and the state. On the other hand, it is central to the strategy of peasants to regulate and arrange production and reproduction according to their interests, opportunities and perceptions. The degrees of commoditisation are all reflections of certain rationalisations and strategic choices farmers make in order to produce and to safeguard - or at least attempt to protect - the reproduction of farm and family. Chayanov (1966) for instance has emphasized clearly the precarious balance between labour power and consumers within a farm enterprise as a major regulatory device for household production. 3. Long (1984, 1986) stresses that livelihood strategies contain a wide range of possibilities: ‘although integration into markets and external institutional structures may reduce the range of economic alternatives available to the farmers, the availability of non-wage household/family labour and resources (e.g. tangible and non-tangible means, p.h./r.r), coupled with the maintenance of local networks based on kinship, friendship or patronage, allow farmers to continue to resolve certain of their livelihood and consumption problems outside the market.’ (Long 1986, p. 19). Hence, farmers’ strategies vary considerably in the way farmers maintain locally specific, and socio-culturally defined relations. 4. "L'art de la localité" forms part and parcel of the cultural repertoire of peasant communities and represents one of the essential mechanisms through which the direct producers tries to retain control over his or her production process, and, to manage the labour process according to own perspectives, objectives, and resource endowments. Market incorporation and the emergence of new knowledge ‘systems’ with new agents (e.g. scientists instead of farmers) may have produced changes (new opportunities and/or constraints) but did not lead, however, to a complete destruction and/or vanishing of these local bodies of knowledge (see Chambers et al., 1989; Richards, 1985; Scoones & Thompson, 1994). 5. Besides this issue, it questions the simple distinction between ‘local or indigenous knowledge’ and ‘external or scientific knowledge'. It is in fact more appropriate to speak in terms of a continuum of knowledge processes taking place under various circumstances, in various agricultural systems. The second issue is related to the much touted (and supposed) superiority of ‘external or scientific’ bodies of knowledge over ‘local’ bodies of knowledge (as claimed by modernization theory) and the other way around: the superiority of ‘indigenous knowledge systems’ over ‘external or scientific knowledge systems’ (see Richards, 1985; De Boef, et al. 1993, and contributions to Journal for Farming Systems Research-Extension and Indigenous Knowledge and Development Monitor). Any body of knowledge requires problematisation and the contextualisation in particular power relationships and social relations of production (see Scoones & Thompson, 1994). 6. Public policy is, as Bates (1989:5) puts forward, ‘not formed as the result of some optimization process, which is subsequently distorted by private interests. Rather, policy is the product of the interested actions of private parties who bring their resources to bear upon politically ambitious politicians and bureaucrats and the political process’ (emphasis added, p.h./r.r.). Important questions to derive from such statements are: what kind of agronomic researchers, extensionists, credit officials within or without the state apparatuses, are needed in the practice of agrarian development; what kind of training programmes are required to train local government and NGO officials.

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