There has been a fundamental development in the theory and understanding of market, private, collective and public organisations in recent years. This paper incorporates the achievements of the interdisciplinary New Institutional and Transaction Costs Economics and suggests a framework for assessing the needs and efficiency of economic organisations and public interventions in agriculture. Our new approach includes: study of farm and other agrarian organisations as governing rather than production structures; assessment of comparative efficiency of alternative market, contract, internal, and hybrid modes of governance; analysis of level of transaction costs and their institutional, behavioural, dimensional, natural and technological factors; determination of effective horizontal and vertical boundaries of farms and other agrarian organisations; specification of the economic role of government and the need for public interventions in agrarian sector; and assessment of comparative and alternative forms of public involvement in agrarian sector.

The problem of efficiency of economic organisations in general, and agriculture in particular, has been among the most topical in academic, political, business and public debates in the last several decades.1 That issue has been especially important in transitional countries undertaking fundamental reforms in institutional and organisational structures of agrarian sector in the last 20 years.2 The problem of efficiency of agrarian organisations is usually simplified and limited to the “productivity of resources” (“factors of production”) in various types of farms. Moreover, comparisons are made of levels of efficiency across farms of different types, subsectors and countries independent to the specific economic, institutional or natural environment. Besides, the question of efficiency is often politicised as a unilateral priority given to a particular type of organisation—free market, private farming, family farm, cooperative, public, etc. In all this analysis, the public intervention is justified and called for to correct rare cases of market deficiencies— “tragedy of commons”, “negative externalities”, income disparities, etc.

Broadly applied, traditional approach cannot give an answer to the fundamental question: Why do there exist so many organisations of different types and size in a particular country, subsector, etc. performing with a great variation in efficiency? For instance, in Bulgaria, there have been highly sustainable “inefficient” organisations throughout the transition now such as unproductive subsistence and semi-market farms, production cooperatives with profitability several times lower than private farms, and inefficient contractual arrangements.3 Neither the traditional approach is able to assess the effective needs and forms for public intervention or explain numerous “public failures” in the agrarian sector around the world.

Governance And Public Policy Journal, National Rural Employment Guarantee Scheme, Swarnajayanti Gram Swarojgar Yojana, Government Policy, Microfinance Programme, Social Exclusion, Microfinance System, Commercial Banks, Development Projects, Econometric Analysis, Decision-Making Processes, Infrastructure Development.