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production (i.e., those who are toward the pure subsistence production end of

the spectrum) and (b) where their actual level of living and minimum subsistence

standard are close to the physiologic minimum. For such farmers, the forces of

risk and uncertainty have a special influence.

C. Types of Subsistence Farms

 Let us assume an area of subsistence farming (a) where the total product is

food, (b) where there are no cash production costs (such as taxes) and no pur-

chased inputs (land and labor are the major factors of production, and minor

equipment or farm capital structures constitute an embodiment of farm family

labor), and (c) where the annual level of living for the farm families is entirely

out of farm production. For simplicity, valuation of production and levels of

living (consumption) can be made in units of a food staple such as kilograms of

rice. Under these assumptions, L,which is a consumption variable and which is

traditionally a function of income ,becomes virtually a direct function of output.

Actually total output less production costs equals farm consumption plus farm

production sales plus savings. But we will ignore production costs and savings:

(a) We have assumed above that cash production costs are zero. (b) There is

some evidence of a constancy in the saving rate among peasants which "is consis-

tent with the fact that the marginal utility of consumption does not decrease very

fast in the relevant range of income per capital" [Lau, 1967, p.25]. The more

critical question concerns the relationship between consumption and sales. There

are some who argue that peasant farmers have a target farm familydemand out of

farm production and that sales are a residual. Others [Mathur and Ezekiel, 1961]

believe that such farmers have a target cash requirement (for non-farm produced

consumption goods, ceremonial or religious expenditures, taxes, and interest pay-

ments) which must be met thereby making consumption the residual.