D. Gale Johnson

Resource Allocation under Share Contracts

H ow are resources allocated when a share of the total product is paid for the use of a particular physical asset, such as farm land or a retail store? This is an important practical question because three-fourths of all rented agricultural land is leased under share contracts and they are becoming increasingly prevalent in the retail field. It is also an interesting theoretical issue that has not been adequately treated in economic literature. A share-rent contract usually requires the tenant to pay the landlord a specified proportion of the farms produce or of the gross sales of a retail store. The crop-share lease, which calls for payment of a certain proportion of the crop to the landlord, is the commonest share lease in agriculture. In the cotton areas the true sharecropper pays a share rent not only for the use of the land but for the seed and fertilizer and the use of capital equipment, including work horses or mules. If resources are to be allocated in an optimum manner, certain marginal conditions must be satisfied. In the factor markets, all factors of comparable nature tend to receive the same marginal return. Within the firm, resources must be so employed that the value of the marginal product is equal to the marginal cost of the factor, and the marginal cost of the factor must equal its price. The stipulations of the crop-share lease create circumstances in which both the tenant and the landlord, when each views his interest separately, consciously attempt to violate the marginal conditions required for maximum output. Under a crop-share lease, if the landlords share of the crops is half, the tenant will apply his resources in the production of crops until the marginal cost of crop output is equal to half the value of the marginal output. The same tenant, however, will conduct his livestock operations, where important costs are borne by the landlord and the receipts are not shared with him, in the usual manner. The landlord will not invest in land assets unless the value of the marginal product is twice the marginal cost. It is at once obvious that, if both the tenant and landlord act as though the interest of one is distinct from the interest of the other, the net product of the farm will be less than it could be. The tenant will farm extensively, and the landlord will refuse to make improvements that would pay under a more rational method of pricing land. Before John Stuart Mill, the well-known English economists condemned share leases on these grounds. Adam Smith argued that the tenant would be extremely reluctant to employ his own capital on the farm, inasmuch as the landlord would reI The research on which this article is based has been done on a project financed by a grant for Agricultural Economics Research at the University of Chicago, made by the Rockefeller Foundation. I am indebted to my colleagues, Professors 0. I-l. iBrownlee, E. J. Hamilton, and T. W. Schultz, for suggestions and criticisms.

World Agriculture, Commodity Policy, and Price Variability

The primary emphasis in this paper will be upon governmental agricultural commodity policies and their effects upon price variability. It is the commodity policies of the governments of the world and in the rest of the worlds food and agricultural systems.

Population and economic development

Abstract The traditional view has been that population growth has adverse effects on real per capita incomes. Chinas restrictive population policy appears to have been based on the traditional view. There is substantial evidence that contradicts the conclusion that population growth is adverse to economic growth. Most empirical analyses of the relationship between population and economic growth do not find that there is an adverse effect. The history of the world has been that periods of low population growth have been periods of low economic growth and that high rates of economic growth have occurred when population growth is also high. Most of human history has had low population and low economic growth. Only recently has there been both rapid population and economic growth.

Effects of Institutions and Policies on Rural Population Growth with Application to China

The current emphasis in China on strictly limiting the number of births a family may have creates tensions between rural people and the government which may threaten the long-term viability of the population policy. The author presents this article to show that families fertility decisions are significantly influenced by institutions and policies affecting their lives and that the appropriate mix of policies and institutions can lead to rapid fertility declines. She also presents a set of institutions and policies capable of achieving and maintaining low levels of fertility in China while permitting families to have the number of children they desire. This approach would overcome an important defect of Chinas present policies which rely on the allocation of birth quotas. More precisely the paper presents a framework for understanding the factors which influence family fertility decisions and families ability to have the number of children that they desire compares fertility changes over the past four decades in China and in several other developing countries which have achieved similar rapid declines with a mixture of policies and institutions making it possible for families to have the number of children they desired summarizes evidence on major factors influencing family fertility decisions in a developing country discusses de facto pronatalist policies in China and their probable influence on rural fertility and suggests an effective alternative to Chinas current mix of such pronatalist policies and numerical controls on births. The author also provides evidence in support of the conclusion that the size of Chinas population will have little effect on per capita food supplies or real per capita incomes.

Economic Reforms in the People's Republic of China

The emphasis in this paper is primarily on rural economic reforms. Industrial reforms are treated quite briefly. The primary reason for this allocation is that the agricultural reforms have been much more sweeping than the industrial reforms and have had more striking consequences. Another reason, of course, is that China remains a primarily rural country, with 80% of the population living in rural areas. A final reason is that there has been much trial and error in urban and indus-

Provincial migration in China in the 1990s

Abstract Estimates of migration among the provinces of China were made by comparison of the provincial populations from the 1990 and 2000 censuses. The estimates were made by comparing the 2000 population of each province with what it would have been if population had increased solely due to natural growth—the excess of births over deaths. Unfortunately, the estimate of the increase in provincial populations due to migration was much greater than the estimate of the loss of population by migration. The estimate of the increase in population by inmigration was 39.7 million while the estimated outmigration was only 16.3 million. Possible reasons for the difference in the estimates are presented. Comparison was made between the 1999 population estimate and the 2000 estimate. Migration rates in the United States and China are compared.

Does China have a grain problem

Abstract China does not have a grain problem, but a series of policy problems in the pricing and procurement of grain. Officials complained insufficient grain was produced in recent years, yet grain stocks increased rapidly from 1986 to 1990 and exceeded a years grain output. Government stocks became so large that procurement was impeded by a lack of storage space. Questions are raised concerning the accuracy of the official grain output figures. The increase in feed required for the large increase in livestock and poultry output appears to have exceeded the increase in grain supplies in excess of direct human consumption. One threat to the future production of grain may be the provision of socialized services to the farmers. The extension of socialized services (plowing, planting, fertilizing, harvesting) increases the power and influence of the local cadres and diminishes the autonomy of the farm households.

Inflation, Agricultural Output, and Productivity

Why should inflation have an adverse effect upon agricultural output and productivity? Since most economists accept the view that inflation is bad and should be avoided-if doing so does not cost too much-our kneejerk reaction is that inflation has significant adverse effects upon output and productivity. True, inflation redistributes wealth and income, as most of us who work for universities and, in addition, have annuities derived from defined contributions realize. And when inflation rates reach some levels, the breakdown of confidence in money and financial institutions can have serious economic, social, and political consequences. But have the inflation rates of 10% to 15% to which we have been subjected during the past year had significant resource and productivity effects in agriculture? When I started to write this paper I was not sure how I would answer this question. Was I more sure when I finished? I leave it to you to judge. The first issue that I address is what has happened to productivity in the economy and in agriculture during the 1970s. In considering what may have happened to the growth of productivity in agriculture, we should consider that change in the context of the national picture. The available data on changes in national productivity, whether as measured by total factor productivity or by labor productivity (average labor product) show clearly that national productivity growth has been significantly slower since 1973 than in the years before. What is much less clear is why the slowdown has occurred. What do the data show? Table 1 gives data on total factor productivity for the private domestic economy and selected segments. There can be little doubt that productivity growth after 1973 was at a lower rate than in any other period since 1948. Table 2 provides similar data on labor productivity, and the general picture is the same as for total factor productivity. There are those who argue that the productivity slowdown started before 1973. Tables 1 and 2 give some support for that view, though the pre-1973 slowdown seems to have been concentrated in areas other than manufactur-

The declining importance of natural resources: lessons from agricultural land

During the 20th Century a substantial decline in the economic importance of natural resources, especially farm land, has occurred. Views expressed by Schultz on the declining importance of land are emphasized. Grain yields in the United States were unchanged from 1800 to about 1940, but since then have increased dramatically. Increases in labor productivity occurred much earlier, starting in the early 19th Century and increasing much more rapidly than did land productivity.

Globalization: what it is and who benefits

Abstract Globalization is far more than the international movement of goods and investment. The flow of ideas from one part of the world to another has increased enormously in the past two centuries. The Nineteenth Century saw the beginnings of an enormous expansion of knowledge about living things—specialized institutions devoted to the creation of knowledge were created, including research universities and research institutes. The knowledge that was created, such as the germ theory, was gradually made available throughout the world. The world’s poor people have benefitted enormously as evidenced by a large increase in life expectancy in developing countries, a 60% decline in child mortality in less than four decades, a doubling of grain yields in developing countries after the mid-1960s and a large increase in per capita caloric food supply.