On the economics of agricultural production *

Agriculture is in the business of using ecosystem services to produce food. Examining how agro-ecosystems function provides useful insights into the economics of agriculture. Of special interest are the presence and nature of scale effects, complementarity effects and convexity effects in ecosystem functioning. Implications for agricultural productivity and the economics of agriculture are evaluated. At the farm level, this helps to better understand the current trend toward greater specialisation. Current challenges for agricultural contracts, markets and policy are explored. Copyright 2008 The Author. Journal compilation 2008 Australian Agricultural and Resource Economics Society Inc. and Blackwell Publishing Asia Pty Ltd.