Dec

26

My understanding is that Chaos theorists argue there is clustering of big events, as evident in flood records, though I do not know enough to say for certain that this is their argument.

I do, however, have an uncle who is a farmer near the coast of Alabama and who has collected amazing yield data from his own operation and his friends over the past 30 years. The issue is that 1 event has long run effects on future yields unless corrective actions like irrigation and fertilization are employed. Each corrective action, however, has an associate cost which must be weighed. In addition, I think he would say that there does seem to be clustering for farmers, (because it is generally a terrible business), maybe hurricane, disease, drought, etc.

I think his data would also argue that the yield to a plot of land follows an S-curve with adverse events knocking you away from the curve and corrective actions moving you closer. The best time to buy insurance is when you are close to the curve (since insurance does not help your output) and the best time to buy fertilizer and water is when you are away from the curve.


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