Why discuss disposable income? Because that is what most individuals consider important. Thus, it would seem natural for government policies to be so devised that any economic growth leads directly to an equitable increase in disposable income.
Generally disposable income is used to mean available monetary income. In this context we should also consider available income in kind (fish).
In this context we may divide the population into two groups whose disposable income may be affected by the fish farming activity: (i) the farmers; and (ii) the public at large.
The analysis is short term, considering only the observable changes from one year to the next, and based on the assumption that the rural economy is stagnant and underemployment rampant.
(i) The farmer
The farmer who starts fish culture without “spending” either cash or other resources (with an alternate use) in fact increases his disposable income by an amount equal to the value of his fish production. He achieves this increase as long as two conditions hold: first, that his farmed fish production has not been achieved at the expense of some other good or service; and, second, as long as the additional income does not generate additional taxes. In the case of rural Zambia in 1988 this situation seemed to prevail.
(ii) The community at large
The effects on the average level of disposable income in the community at large depend on: (i) Was the farmer coaxed into undertaking fish farming by a publicly sponsored development effort (department of fisheries)? or (ii) Was he convinced by learning, through his own effort, of others' success in the field, thus not responding to any direct expenditure on the part of government.
In the second instance the farmer learns through his own effort only - there will be no immediate effect on the disposable income available to the rest of the community.
In the first instance, there is an effect. Its nature depends on the manner in which the public effort is financed. There are three possibilities: (i) the public at large is taxed (ii) the government “prints money”; and (iii) external aid funds are used.
In either of the first two cases (taxes or printing money) the public at large will be affected through a lower disposable income. In the “tax” alternative the effect will be immediate; when government prints money the effect will be long term and appear in the form of inflation. The third alternative, making use of external resources, will not cause any reduction in the disposable income for the public at large.
In all three cases a transfer of income has taken place. However, it has not gone to the farmer, as might be thought, but to the government staff directly involved and to those selling goods and services to the government. However, given that we assume that the public development effort is directly responsible for the growth of fish culture, we can argue that this transfer has generated “fish culture” income in the farming community.
(iii) Conclusions
The conclusions are not surprising. The farmers, in this economic environment, are considerably better off. So much so, that they probably would be prepared to contribute a part of their increased income in the form of a tax. The general public, on the other hand, are worse off if taxed for this purpose, and naturally want to be convinced that the income being denied them is put to good use.
In a growing rural economy with close to full employment, the disposable income available to the public at large is affected in a manner identical to that described for the stagnating economy; presuming that government effort (and therefore the need for funds) is the same. For fish farmers through, the situation is different.
Those venturing into fish farming in an economy where there are several opportunities to earn an income, believe that through fish farming, they will be better off, and probably also earn more than in other occupations. It is obvious however, that their disposable income will increase by only a fraction of the value of the fish produced, not by almost all of it as is the case in the economy where stagnation and underemployment prevails. The reason is that if they had not engaged in fish farming they would have engaged in something else.
Those who have been engaged in fish culture for some time, may, with government technical advice, be able to increase the productivity of their ponds (in terms of $/man-day) and thereby increase their disposable income. The more the farmer specializes the more difficult it will be for him to switch to other activities. Therefore, such productivity increases may be considered as net increases in disposable income.
