AGRICULTURAL ECONOMICS

study of the allocation, distribution, and utilization of the resources used, along with the commodities produced, by farming. Agricultural economics plays a role in the economics of development, for a continuous level of farm surplus is one of the wellsprings of technological and commercial growth. Agriculture is the source of livelihood for more than half of the world's population. In some countries more than four-fifths of the inhabitants support themselves by farming, while in the more industrialized countries the proportion ranges much lowerto less than 3 percent in both the United States and Great Britain. In general one can say that, when a large fraction of a nation's population depends on agriculture for its livelihood, average incomes are low. This does not mean that a nation is poor because most of its population is engaged in agriculture; it is closer to the truth to say that because a country is poor most of its people must rely upon agriculture for a living. the study of the allocation, distribution, and utilization of the resources used by and commodities produced by farming. The system of economic relations involved in agriculture includes the livelihoods of more than half the people on earth; in some areas, the proportion is as much as three-quarters of the general populace. Agricultural economics plays a role in the economics of development, for a continuous level of farm surplus is one of the wellsprings of technological and commercial growth. The peasant farms of the past were largely self-sufficient, producing just enough foodstuffs for their cultivators, with perhaps a small surplus for the local market. Typically, a farmworker produced enough to feed three other people, two of whom were of the household. The excess might be used for rent or to buy supplies smallholders could not make for themselves. An average farmer planted small quantities of many different crops, thus ensuring that the members of the household were not completely dependent on the harvest of any one of them. This description was true for the United States until the middle of the 19th century, and it still holds for many areas in the developing world, from Asia to Africa. Such farms are not, in any important way, connected to market economies. They are also not very productive, mostly because they are usually neither fertilized nor irrigated adequately, and the soil is frequently exhausted from decades of intense cultivation without replenishment. Production increases in underdeveloped regions arise only from increases in the amount of land tilled or the amount of labour employed per area of cropland. As the population grows, crops requiring more labour usually take the place of less-labour-intensive crops. With low yields, peasant farmers are ever subject to famine and thus are reluctant to take risks on innovative methods. However, given convincing demonstrations of the virtues of new methods or seed stocks, even the most traditional farmers will change their ways, as was shown in the 1960s by the rapid adoption of many improved agricultural techniques throughout the world. With investment in the fertilizers, insecticides, herbicides, irrigation systems, machinery, and high-yielding varieties of food crops that have been developed in the past century, yields per unit of land can be increased enormously. For instance, high-yield varieties of rice were not introduced in Bangladesh (then East Pakistan) until the 196869 growing season, yet one year later a fourth of the total crop came from the new strains. The substitution of mechanical power for animal power and the increased use of fertilizers reduces the need for labour and land. In 1910 feeding the horses and mules that pulled farmers' plows required the output of more than one-fourth of the world's cropland, and nearly one-tenth of the work on farms involved caring for draft animals. Mechanizing agriculture ends farmers' dependence on these resources. By making land more productive, fertilizers also remove additional pressure to expand the amount of cultivation. Rising harvests yield ever greater surpluses for the market, while the decreasing need for human labour pushes people out of the countryside and into the cities. The surplus enables other types of development to take place while drawing farmers into the larger market economy. Unlike peasant cultivators, farmers in developed nations are vulnerable to outside economic conditions. Farm prices are notoriously volatile, rising or falling by as much as one-third or one-half from year to year. Part of the reason for this extreme variability is the consumer's low level of response to agricultural price changes. To increase sales for other products, it is often necessary only to reduce the price; in agriculture, however, large price reductions stimulate very little added demand. In addition, even if changes in demand do occur, farmers have limited ability to respond to them. They must plant on the basis of expectations; if their expectations are not borne out, they cannot do anything about it until the next harvest. Dependent on the market, such farmers are caught between relatively high fixed costsmachinery, fertilizer, feedstocks, interest, and so onand fluctuating income. As a result, farm incomes throughout the world still tend to be lower than incomes from nonfarm pursuits. Governments have tried a number of methods to make farming more rewarding. Among these are direct payments, limitations on production, tariffs and levies on food imports, and taking agriculture out of the market system altogether. In the United States farmers are frequently paid not to grow particular crops, thus preventing soil exhaustion and keeping the market from being glutted. Price supports are also offered for major crops including wheat, rice, cotton, and tobacco; if the market price falls below certain levels, the Commodity Credit Corporation (CCC) will buy farmers' crops, which are then usually distributed in economic aid programs. The European Community (EC) has a complex agricultural policy for its member nations. The EC exacts levies on farm imports, driving their prices up until they reach the domestic levels. Farmers operating within this system have been able to keep grain prices, for example, 60 to 90 percent higher than prevailing levels in North America. During most of the Soviet era, collective farming was practiced in the Soviet Union and a number of other communist nations. Markets were abolished, and each farm was simply required to produce an assigned quota, for which the state paid a set price. Before 1953, the year of Joseph Stalin's death, the Soviet state paid very low prices, and farm incomes were low, providing in effect a subsidy for industrialization. In the post-Stalin period prices were raised significantly, and cultivators fared better. Following the disintegration of the Soviet Union in 1990/91, collective farming was de-emphasized. The effects of these various policies are mixed. Although they have raised productivity, they have not always benefited farmers. It is apparent that real income from agriculture has less to do with governmental policies than with the local level of economic development. Rising farm prices have frequently been offset by an increase in the number of farmers and in the acreage put to the plow; rising prices also frequently have the consequence of inducing farmers to spend more on fertilizers, machinery, and other items, thus lowering their net income. The problem of maintaining growth in productivity, guarding the natural resources of the land, and adequately rewarding cultivators for their work in societies with advanced agricultural practices has not yet been fully solved. Additional reading Theodore W. Schultz, Transforming Traditional Agriculture (1964, reprinted 1983), has become a classic on the complex problems involved in the modernization of agriculture. The interrelationships between agriculture and the rest of the economy are detailed in Robert D. Stevens and Cathy L. Jabara, Agricultural Development Principles (1988), a beginning text; and Isaac Arnon, Modernization of Agriculture in Developing Countries: Resources, Potentials, and Problems, 2nd ed. (1987). Ceres (bimonthly), published by the FAO, addresses agriculture and food production in developing countries. R. Albert Berry and William R. Cline, Agrarian Structure and Productivity in Developing Countries (1979), establishes a correlation between small farm size and agricultural productivity in developing countries. D. Gale Johnson, World Agriculture in Disarray, 2nd ed. (1991), analyzes the relationship between domestic agricultural policies and international trade. Various farming systems are examined by B.L. Turner II and Stephen B. Brush (eds.), Comparative Farming Systems (1987), case studies of 12 major world systems; Zhores A. Medvedev, Soviet Agriculture (1987), a historical treatment; and Karl-Eugen Wdekin (ed.), Communist Agriculture: Farming in the Soviet Union and Eastern Europe (1990), a look at the Communist approach before its abandonment. D. Gale Johnson The Editors of the Encyclopdia Britannica