Willard W. Cochrane

Farm Land Prices and Farm Technological Advance

Farm land prices are analyzed in both a theoretical and an empirical framework. The theoretical analysis describes how the representative firm reacts to the expectation of increased income in the context of technological advance and farm price supports by bidding up land prices. The empirical analysis builds on the theoretical formulation and assumes that farm land prices are determined by the interaction of the supply of and demand for land. The major forces influencing supply are nonfarm employment opportunities and return on nonland investment. Demand is influenced by changes in expected income from farm land, which in turn are influenced by prices, urbanization, and farm technological advance. The role of technological advance in raising income expectations is stressed, with the conclusion that technological advance benefits, not the farm operator or farm manager, but the farm land owner.

Some Nonconformist Thoughts on Welfare Economics and Commodity Stabilization Policy

ity stabilization and, second, because it recently has been surveyed by others (Burnstein; Turnovsky; Sarris and Taylor; Smith; Burmeister). As is equally known, this body of literature does.not provide a conclusive argument either for or against deliberate commodity stabilization by national governments or international organizations. But it is not the purpose of this note to try to strengthen the theoretical arguments based upon welfare concepts either for or against commodity stabilization by government. It is the purpose of this note to argue that welfare analysis based upon the concepts of consumer and producer surplus has not in the past made, and will not in the future make, any recognizable contribution to the making of decisions by the United States, other developed countries, the less developed nations, or the international agencies either to initiate commodity stabilization programs or to reject them. This is true for a variety of reasons, some of which are discussed below.

Some Observations of an Ex Economic Advisor: Or What I Learned in Washington

PRESIDENT JOHNSON (D. Gale, that is) asked me to develop a paper recounting my experiences in Washington from July 1960 to July 1964, and what I learned from those experiences that might be of interest to fellow agricultural economists. For my part, this seemed like a good idea; it provided me with the excuse to set down on paper, in an organized way, my thoughts on that interesting, sometimes exciting and often frustrating experience. If, then, you will excuse the use of the first person singular in the story that follows, we will turn to that story.

Focusing on the Specific Problems of Agriculture: A Fresh Look at an Old Policy Approach

In a paper which I presented to this association last summer at Ames, Iowa, I argued that the commodity programs had outlived their usefulness-were in fact creating serious social and economic problems-and should be eliminated at the earliest opportunity (Cochrane). I will not repeat those arguments in this paper. But I also opened up the argument in that paper that policy-oriented economists should focus on the specific problems of agriculture by defining, describing, and analyzing those specific problems and then developing program solutions to them where they appear to merit collective, governmental action. I want to develop this line of argument more fully in this paper. In my last summers paper, I set forth a list of ten specific problem areas in agriculture on which I believe present day policy-oriented economists should focus their attention. That list is as follows: (a) the current farm credit crisis; (b) the economic survival of some 400,000 moderate-sized family farms; (c) the impact of the overvalued dollar on farm exports; (d) barriers to trade ranging from the restrictive policies of most state trading nations to quantitative controls to old-fashioned tariffs; (e) the price and income instability problem-the propensity for farm prices and incomes to swing up and down, widely and sharply, in an unpredictable fashion; (f) widespread soil erosion; (g) the depletion of underground water sources and the pollution of those sources with toxic wastes; (h) the importation and management of foreign workers to undertake stoop labor; (i) f deral taxing policies that contribute to unneeded output expansion and resource concentration in farming; and (j) hunger and malnutrition both at home and abroad.

Food, Agriculture, and Rural Welfare: Domestic Policies in an Uncertain World

S THE TITLE suggests, this paper is concerned with the topics food, agriculture, and rural welfare and their interdependencies. It has become fashionable in recent years to discuss these topics in separate compartments, and for certain purposes such a separation can lead to productive results. But in seeking to focus on needed policy changes in the decade ahead for any one of these topics, I find that I am unable to do so constructively without at the same time dealing with the policy problems of the other two. Thus, in this paper I attempt to deal with the interacting problems of all three subject areas.

THE TROUBLED AMERICAN ECONOMY: AN INSTITUTIONAL POLICY ANALYSIS

This essay is concerned with the long, slow slide of the U.S. economy, which began in the 1970s and which, it is argued, will continue unless extraordinary measures are taken to reverse it. I am not concerned with the business cycle and with the monetary and fiscal policies that push the economy into or out of a business recession. I am concerned with a series of institutional and environmental developments that are drags on the economy. I explore these developments in depth to ascertain how they reduce economic performance. I find that the philosophy of extreme individualism that has come to dominate the social and political landscape has accentuated the economic drags and increased their negative effects. I outline the content of extraordinary measures that must be taken to reverse the long, slow slide of the U.S. economy.

A Proposal to Further Increase the Stability of the American Grain Sector

This paper presents a policy proposal which is designed to complement current agricultural legislation in its attempt to stabilize the United States grain sector. Price and income stability is important to commercial agriculture and consumers (e.g., see Brandow), has been of central concern in past agricultural legislation (Cochrane and Ryan), and will, in all likelihood, continue to be on the legislative agenda in one form or another. The proposal advanced in this paper is predicated on the following statements: First, the programs and instruments contained in the 1977 Food and Agriculture Act are adequate for stabilizing prices between the loan rate and the farmer-held reserve release rates when global production does not significantly veer below trend for grain crops. The target price deficiency payment scheme is also deemed adequate for protecting income levels. (For details and discussion on the 1977 Act, see U.S. Department of Agriculture, Spitze.) But it is our assertion that the existing programs in their present form are not adequate for protecting the long-run interests of American consumers and producers in periods when global production does drastically veer below trend (e.g., the production shortfalls as witnessed in 1972/73). Second, major importers of grains, such as the EEC, Japan, the USSR, and China, insulate their agricultural sectors from the world grain market. These insulation policies exaggerate the price adjustments required by countries openly linked to the world market. (See Johnson, Grennes, Thursby; and Nelson for a discussion of these operational instruments for Japan and the EEC. D. G. Johnson provides a description of agriculture and agricultural policies in the Soviet Union.) Third, prices for agricultural products in the United States, especially grain products, would not have reached the high levels of the early seventies if the major importers, instead of maintaining their protective and insulating policies, had adjusted internal prices in accordance with world conditions at that time.

The Price of Farm Products in the Future

The central focus of this article is on the be havior of U.S. grain prices in the context of prospective world developments over the next several decades. We first look at the process of farm price determination. We next look at the dramatic movements in farm prices, particularly grain prices, in the period 1970-75. Given this background, we explore in some depth what is likely to be the trend in world grain prices over the next 25 years and the bases of that trend development. The conclusion is reached that world grain prices are likely to trend upward over the period 1975-2000. It is argued, how ever, that grain prices are not likely to move along a smooth trend; to the contrary, grain prices are likely to fluctuate widely, sharply, and unpredictably around trend. Finally, the policy implications of future grain price behavior are explored and some tentative policy suggestions presented.