Generalized Safety First and the Planting of Crops

Heady (1952) suggests that farm managers seek the allocation of crops that best minimizes the probability of realizing a disastrous harvest. I use this intuitive idea to construct a normative model of land allocation that is more robust to distributional assumptions and utility specifications than existing rules. In particular, the new rule discriminates between candidate allocations by considering moments of higher order, such as skewness, in addition to mean and variance; this allows the decision maker to distinguish between crops with upside potential and those with downside risk. The rule is demonstrated using the data from Lence and Hart (1997)