I. Comparative TechnologyB. H. Farmer


II. Social OrganizationCharles P. Loomis


III. HistoryWilhelm Abel


IV. ProductionDale E. Hathaway


V. CapitalGlenn L. Johnson


VI. LaborVarden Fuller


VII. Productivity and TechnologyZvi Griliches


VIII. MarketingHerman M. Southworth


IX. Price and Income PoliciesD. Gale Johnson


X. Developing CountriesJohn W. Mellor


In addition to the articles listed below, agriculture is discussed in a number of other articles. Domesticationdescribes the early history. Other aspects of the social structure of agriculturalists are discussed in Community, article on Community development; Manorial economy; rural society; and Village. Other aspects of the economy of agriculture are discussed under Communism, economic organization of; Credit; Famine; Food; Land; Land tenure; and Plantations.


There are several ways of comparing the agricultural economy of one region with that of another. It can be done in terms of crop distributions, or relative productivity, or the effect on the rural landscape. The method used here will be a classification of agricultural practice in terms of the basic method or technology by which the farmer tackles the job of wresting crops from the earth.

Agricultural technology, as it functions in various natural settings, not only influences crop patterns, productivity, and the landscape, but also affects population density, possibilities for trade and urbanization, and social structure.

If we look around the world and attempt to plot on a map the varying techniques with which different societies face the fundamental tasks of cultivation, we are bound to be struck by the existence, over wide areas containing many millions of people, of relatively unsophisticated techniques that seem to be survivals from an age which the more sophisticated societies have left far behind. There are today but few regions where these unsophisticated techniques are entirely unaffected by new ideas that have spread with modern trade and commerce from those countries with early experience of agrarian revolution (as defined below). The degree of penetration by these new ideas varies widely, however, from place to place.

The agricultural systems of the world may be considered in terms of the following very broad categories, which may, as will be seen, be further subdivided (in some cases using criteria other than technology): (1) shifting cultivation; (2) simple sedentary cultivation with hand tools; (3) simple plow cultivation; (4) cultivation dominated by the effects of the agrarian revolution.

Shifting cultivation

Shifting cultivation is a system under which temporary clearings are made, usually but not invariably in forest country, and cultivated for a short period of years before being allowed to revert to natural vegetation while the cultivator moves on to a succession of new clearings. Typically, the period for which any one patch is in cultivation is a good deal shorter than the period for which it is allowed to lie fallow under naturally regenerating vegetation.

Shifting cultivation as just defined is the dominant agricultural system over wide areas of the earth’s surface. Most of these areas are within the tropics, notably in the Amazon Basin and adjacent areas of South America, in most regions of intertropical Africa, in a number of remote jungle areas in India, in most of the less populated parts of both peninsular and insular southeast Asia, in the highland areas of Manchuria and Korea, and in aboriginal southwest China. This system of agriculture was formerly widespread in many parts of Europe, notably in northwest Spain and in the Black Forest and other forested highland regions of central Europe; survivals may still be encountered. Possibly something like 200 million people, occupying 14 million square miles, are engaged in shifting cultivation.

In addition to the impermanence of cultivation and to the system of “bush-fallow” already mentioned, many but not all systems of shifting cultivation also involve other characteristic traits, notably clearing by slashing and burning the forest or other vegetation (leaving stumps and often bigger trees), and cultivation by hoe, dibble, or digging stick but not by plow.

Perhaps because in western and central Europe shifting cultivation has receded in the face of more advanced techniques of cultivation, there has been a tendency to see it as a primitive method of land use that ought to be replaced or even forbidden. Foresters tend to be particularly hostile to it, because of its undeniably destructive effect on vegetation—shifting cultivators usually (although not always) prefer high forest to low jungle or scrub because under high forest conditions there tends to be a higher humus content and higher fertility. It should be noted, however, that foresters in a number of tropical countries have exploited a system first developed in Burma, the so-called taungya system, under which shifting cultivators are allowed to cultivate clearings on condition that when they abandon them they replant the forest in the form of teak. Hostility to shifting cultivation also springs from those who see it as a cause of soil erosion, particularly when it is practiced on steep slopes—as it is, for example, in Orissa (India) and in the hill tracts behind Chittagong (Pakistan). There can be no doubt that erosion is accelerated in such circumstances. It is worth noting, however, that some shifting cultivators deliberately choose slopes rather than flatter land because it is the former that, under tropical conditions, tend to have the less mature (and therefore less leached and more fertile) soil. There can also be no doubt that shifting cultivation, notably in parts of Africa and Indonesia, has degraded the natural vegetation from forest to grassland.

In a broader sense, too, shifting cultivation may often be seen as an adaptation to tropical soil conditions under which continuous cultivation may be highly dangerous in the absence of advanced techniques for conserving soil and maintaining soil fertility; under such circumstances it may be preferable to cultivate for a year or two and to abandon the plot before too much damage is done to the soil (although in point of fact it is often the impossibility of controlling weeds with hand tools alone, rather than diminished fertility, that drives the cultivator off his plot). It is significant, in this connection, that European settlers in Brazil have, in some areas, taken to a form of shifting cultivation.

It is impossible in the present state of our knowledge to say of all systems of shifting cultivation whether they are in equilibrium with their environment or destructive of it; in many cases more research is needed. A clearer definition of the problem is required because of the wide range of practices, all subsumed in the term “shifting cultivation.” Conklin (1961), for example, shows that “swiddens” (clearings made by shifting cultivators) may or may not be worked with hoes, may or may not be fenced, may be worked from temporary huts or permanent villages, and vary enormously in such features as methods of clearing and duration of fallow. (In this last connection it is important to emphasize that in many regions, notably in west Africa and parts of India and Ceylon, the pressure of population and the demands of cash cropping are such that the period of regeneration between successive periods of cultivation grows shorter and shorter, sometimes until it even disappears altogether. In the absence of techniques of manuring and soil conservation the result is usually the degradation of the soil.) Conklin goes on to point out the merits of “a combined ethnographical and ecological approach” to the study of shifting cultivation and the rarity with which this approach has hitherto been followed.

G. J. A. Terra (1958), writing on southeast Asia with special reference to Indonesia, demonstrates a wide variety of practice among shifting cultivators (who, however, have tended to become sedentary, especially in Java). Thus in Bangka, Billiton, and Minahassa, as well as Halmahera and many other islands of the Moluccas, shifting cultivators have no cattle and depend almost entirely on plots planted with the dibble; but a system of even wider distribution (e.g., in many parts of Sumatra, in southern Celebes, and in the Lesser Sundas) involves shifting cultivation by people who also own cattle and among whom cattle ownership, as in eastern and southern Africa, confers status.

R. F. Watters (1960) also records the wide variety of practice covered by the term “shifting cultivation” and distinguishes a number of major types. He brings out an important point that is often overlooked: shifting cultivation is in a number of areas practiced by people who are perfectly well aware of methods of sedentary cultivation, but use shifting cultivation for a particular category of land. For example, shifting cultivation is practiced in the unirrigable “highlands” in the dry zone of Ceylon, a country where irrigated rice and coconuts are grown respectively in permanent fields on irrigable land and on land with a permanently high water table. In northern Burma, again, culturally identical peoples practice, on the one hand, terraced rice cultivation of hill slopes in areas of high population density, and, on the other, shifting cultivation of similar slopes where population density is low (Leach 1959).

There is, in fact, a close connection between shifting cultivation and low population density: beyond a critical density (which varies with local conditions) the period of regeneration allowed to the natural vegetation becomes too short, and deterioration tends to set in unless the cultivators adopt some of the techniques by which sedentary cultivators manage to cultivate the same field year in and year out. This is one way by which the transition from shifting to sedentary cultivation may be effected; another is the planting of commercial crops, especially permanent tree crops, in abandoned clearings by shifting cultivators (the rubber grown in Sumatra is a good example).

Simple sedentary cultivation with hand tools

It does not follow, however, that all simple sedentary cultivation (that is, for present purposes, sedentary cultivation without recourse to the plow) represents the fixation of shifting cultivation. In southeast Asia, for example, it may well be that the most ancient surviving form of cultivation is the use of permanent gardens to grow bananas, various tubers such as Dioscorea yams and taro (Colocasia esculenta), and tree crops such as the coconut and, less frequently, the sago palm. Carl O. Sauer (1952) believes that this was the earliest of all forms of cultivation. It survives as the sole form of land use in remote Indonesian islands like the Mentawai Islands; and something very like it provides the basic system in Polynesia, where it survives (e.g., in Fiji) in the form of specially prepared and irrigated taro beds. In all these cases, except where modern influences have prevailed, cultivation is by digging stick or, less commonly, by hoe. Fertility in tuber gardens is maintained by a rest period. Tree crops can, of course, be permanent, for trees bring nutriment up from lower horizons of the soil and protect the earth from erosion; they are therefore relatively easy to maintain in equilibrium with the environment—provided the climate is suitable—though yields are often very low indeed in the absence of pest control and fertilizers.

The mixed garden (containing both tree crops and a wide variety of vegetables) that is so characteristic of much of the rice-growing regions of southeast Asia and the Indian subcontinent may be regarded as a special development from the system just described.

In many parts of Africa south of the Sahara “women’s gardens” are to be found immediately around the village. In them vegetables, bananas, and other crops are grown by hand tillage on a more or less permanent basis. The gardens are kept fertile by means of manure from goats, chickens, and the villagers themselves, together with household refuse and ashes.

The agricultural systems of the Inca in pre-Columbian America and of their latter-day successors represent a fine example of sedentary but plowless agriculture in part dependent on irrigation and the terracing of steep slopes.

It must be recognized, however, that it would be extremely difficult to draw a map of the world and to plot on it all examples of the land-use technique currently under discussion and, in particular, to identify all existing cases of the fixation of cultivation in areas traditionally devoted to shifting cultivation. Much more work on this problem is needed.

Simple plow cultivation

It will be appreciated that two of the basic problems that confront the sedentary cultivator are the maintenance of soil fertility and the control of weeds. If fertility cannot be maintained fields must be periodically abandoned, and the cultivation is no longer truly sedentary; if weeds proliferate too extensively (as in the chena, the patch of the Ceylonese shifting cultivator), the same applies. The use of even the simple wooden plow goes a long way toward the solution of both problems. The ability of the plowman to cover at least some of his weeds, and thus to kill them, also adds to the humus in the soil. The deeper and more systematic cultivation made possible by the plow tends to bring to the surface plant-nutrients taken down by percolating rainfall and to improve soil structure; the presence of draft animals to pull the plow at least gives the possibility of stall-feeding and hence systematic manuring—a possibility that is unfortunately not always realized in practice.

Over a vast area stretching from the Mediterranean and the Balkans to the Japanese archipelago, and from central Asia to Ceylon, agricultural technology is still dominated by a simple, traditional plow culture, only marginally affected by the agrarian revolution and those other developments that have transformed the agriculture of such regions as western Europe, North America, and Australia. The vast populations of India, China, and the Middle East depend for their food supply on traditional methods of sedentary tillage using the types of wooden plow handed down from remote generations.

Within this great cultural region there may be recognized a number of subcultures, separated on grounds of technology and associated crop pattern.

In the Middle East, from Afghanistan and Iran to Egypt, one can recognize a belt of plow cultures, perhaps the most ancient of all, where animaldrawn plows appeared much before 3000 B.C. It is characterized, among other things, by a reliance on irrigation of a wide variety of types, from the ancient and modern systems dependent on the Nile to the ingenious tunnels (karez) of Iran and the multitudinous devices used by the oasis dweller. In this area, too, the terracing of hill slopes is in many places a highly developed traditional technique.

The lands around the Mediterranean, with their highly distinctive climate and cultural history, also form a subregion within the belt of plow cultures. The most characteristic and traditional technology hinges on a twofold system of land use: the fields, traditionally growing the staple cereal crops, wheat and barley, and in some places irrigated; and the hillside plantations of vines and olives, figs, and other tree crops. Everywhere (especially in the south of France, in Italy, and in Israel) traditional methods are, however, being rapidly replaced by more specialized cultivation under the impact of commerce and of the agrarian revolution.

In the Balkan peninsula and in certain geographical pockets in western, central, and northern Europe one reaches what may, for convenience and brevity, be regarded as the cool temperate variant of traditional plow culture—the cultivation, using oxen or horses as draft animals, of wheat and barley in favorable places, and of oats and rye in wetter and cooler places, with a fair range of ancillary crops. Here are European peasant societies still relatively unaffected by the agrarian revolution: but the word “relatively” is used advisedly, for almost everywhere today, under the impact of modern communications or commerce, and of institutional changes in communist countries, the old order is vanishing and the transition to a more modern agricultural technology and economy is being effected, here slowly, there more rapidly. Some of the largest agglomerations of population depend on an association of the plow and of other simple animal-drawn tools (harrows, leveling boards, and the like) with irrigated (or, at any rate, flooded-field) rice cultivation. This subculture covers much of Ceylon, southern India, Bengal, and Assam, the deltas of mainland southeast Asia, Java, Sumatra, the Philippines, and southern China and Japan. The total area under “wet” rice (as distinct from “dry” rice grown by shifting or rudimentary sedentary cultivation) exceeds 200 million acres, and rice forms the staple food of well over half the world’s people. Rice is a remarkable crop in other ways too. Because it exists in so many varieties it can be grown under widely varying conditions, from brackish or even saline soils to deeply flooded deltas like those of Thailand and South Vietnam. In many places, given enough water, it can supply two crops on the same land each year. And—a very important point —it can give worthwhile yields on the same land year after year for generations without manuring, although, of course, yields may be greatly increased by the judicious use of manure; dry crops under similar conditions tend, in the tropics at any rate, to give declining yields that may well stabilize at an uneconomic level. The reasons for this valuable property of wet rice are probably to be sought in such factors as the nutrients and clay minerals brought in by irrigation water and the lower temperatures preserved by flooding, which, with anaerobic conditions for much of the year, lower the rate of oxidation and loss of nutrients of vegetable matter. Just as irrigated wheat cultivation historically became identified with the rise of many sociocultural institutions of Western civilization, so with rice cultivation goes a whole way of life, a whole type of civilization, together with the possibility of supporting dense populations for centuries, if not for millennia.

Among the populations supported by plow cultivation of rice there are, not surprisingly, many variations in agricultural economy and technology. Some rice cultivators have highly developed techniques of terracing hillsides and of controlling water in the terraces (e.g., in the hills of Ceylon, in Java, and in the interior of Luzon); others tackle land that is almost flat (e.g., in southern Thailand and in the Malay Peninsula). Again, some rice cultivators, as in China, employ almost incredible ingenuity in seeing that every scrap of waste organic matter finds its way back to the soil—indeed, their technology tends to be intensive gardening rather than plow culture—whereas others, in regions that until recently felt but little pressure of population, use no manure at all except under the modern pressure exerted by a cash economy and by government agencies (e.g., in lowland Ceylon).

North and west of the great rice-growing areas of India and China, in the dry plateaus of the Deccan and the great Indo-Gangetic plains, and the loesslands and delta of the mighty but dangerous Hwang Ho, are other large populations of farmers, densely settled in fertile plains, less densely (but still thickly by American standards) in rockier plateaus with thinner soils. These form two more subcultures, as it were, of the great Old World belt of plow cultures, devoted to millets, wheat, oilseeds, sugar cane, and cotton rather than to rice and its ancillaries. The north Indian peasant tends to have less intensive techniques and lower yields than his north Chinese counterpart, although in India the situation is changing (albeit rather patchily) and China, of course, feels the impact of the communist agrarian measures.

The agrarian revolution

In Europe, agricultural developments of the last three hundred years have wrought such changes in technology and economy that they demand separate, though necessarily summary, treatment. The source of the changes concerned lies, of course, in the agrarian revolution in the widest sense of that term, including not only technical changes but changes in conditions of land holding. A whole complex of developments is thus involved, including the replacement of fallowing with constant tillage; the introduction of new crops and of new breeds of animals; the effects of evolving communications on the specialization of agricultural production; structural change in the agrarian system (evolutionary in the West, revolutionary in Russia); and, more recently, the impact of modern science and engineering as seen in mechanization, pest and disease control, artificial fertilizers, and the evolution of strains of crop suited to particular conditions and resistant to specific diseases. One has only to compare a modern farm in, say, East Anglia (England) or the United States with a peasant holding in India or Egypt to see the contrast. Yet an increasing number of peasant holdings in India and in Egypt are feeling some of the effects of the revolution in question. In both countries, for instance, the peasant may have a very small holding and be cultivating it with a wooden plow and draft animals that have changed little since the time of Ashoka or of the pharaohs; but in both countries he may well be growing, for a distant market, an American variety of cotton developed by scientific genetic research.

It would be difficult to attempt a description of all the types of agricultural technology or of cropping patterns that have emerged and are constantly evolving from the revolutionary changes just mentioned, even if the requisite data were everywhere available. One or two salient characteristics may, however, be highlighted and one or two technological subtypes enumerated. One of the outstanding characteristics of modern agriculture—whether in land of comparatively new settlement such as North America, Argentina, or Australia, or in older agricultural areas such as western Europe—is the high and mounting degree of mechanization, characterized first by new plows, harvesters, and other implements drawn by horses, and then by tractordrawn implements and self-propelled machines like the combine harvester or the rotary tiller. Originally a response mainly to the need for constant tillage, weed control, and other desiderata of the earlier agrarian reformers, the movement toward mechanization has been vastly stimulated by the existence in lands of new settlement of enormous areas of virgin soil combined with a great dearth of labor. The relationship between mechanization and the relative abundance of land and of labor seems to be forgotten by those who advocate wholesale mechanization in underdeveloped and over-populated countries. Wholesale mechanization of Indian agriculture would, for example, merely swell to uncontrollable numbers the already large army of rural unemployed or grossly underemployed, at the same time reducing yields per acre where at present, as in parts of Madras State, the intensive application of hand methods gives phenomenal yields, in this case of rice. The answer would appear to be selective mechanization of processes such as plowing hard-caked soil, impossible under present methods, or of processes handicapped, despite the over-all surplus of labor, by seasonal shortage—for example, weeding the standing paddy crop. In western Europe and elsewhere, mechanization has been associated with a drift of labor from the land into other occupations and often into towns, and with a decline in the proportion of the national labor force engaged in cultivation to a figure that sounds unbelievable to, say, Indian ears.

Another outstanding characteristic of modern agricultural technology is the breeding of new varieties of crops. These new varieties have in some cases revolutionized agricultural geography; for example, it seems probable that none of the lands in the United States west of the Mississippi would be growing wheat today if the only available varieties were those brought by the Pilgrim Fathers. The poleward and desertward march of agriculture is a feature of our times, but it carries with it its own dangers—notably of soil erosion in the case of the extension of cultivation toward and into arid regions.


An outstanding characteristic of modern agriculture is its high degree of specialization. Most African farmers would find it very hard to understand the agricultural methods of, say, a Wiltshire (England) dairy farmer, who produces nothing but liquid milk, of which he consumes only a few pints a day, and who must buy everything else he needs, including even milk products like butter and cheese. It is, of course, the rise of urban and industrial markets, the spread of modern communications, and the development of an exchange economy that have, with changes in methods of production, brought about the world of specialized agricultural production in which we live. Wheat farming in the Canadian prairies, cocoa farming in Ghana, citrus planting in Israel, truck farming in Florida, and cotton production in Russian central Asia are a few examples out of thousands that might be cited. The modern farmer chooses his crop not by applying a traditional technology and a limited range of crop choices to local natural conditions but by watching the market (often distorted, or at any rate affected, by state action). But the farmer still flouts natural conditions at his peril, as those in the dust bowls of the 1930s found to their cost. Monoculture in particular carries grave perils—not only of declining fertility, but of diseases that spread like wildfire when they find ready victims of the same species, or even variety, for mile after mile across country.

One of the most familiar examples of monocultural techniques is the tropical plantation—of tea in Ceylon, of rubber on the Malay Peninsula, of sisal in Tanganyika, and so on. Originally these large units of production, opened up by means of imported capital, often operated by imported labor, and working for distant markets, stood in stark contrast to minuscule local peasant holdings: hence (in part) the theory of the “dual economy,” two contrasting economies side by side in the same area. But in many countries today—notably in Ceylon—local capital and enterprise is active in the plantations, and small holders and peasants are planting the crops once almost entirely confined to the large alien holdings. In other countries, for example Indonesia, the plantation is seen as an alien, colonialist intrusion, and is on the way out.


It cannot be denied that, taking the world picture as a whole, the shifting cultivator, the plowless sedentary cultivator, and the traditional plow cultivator are retreating before the advance of modern commercial agriculture; to be more precise, elements of the modern agricultural technology and of modern agricultural organization are penetrating the formerly almost static world of traditional agriculture. It may be in the form of a new crop (for example, the spectacular spread of manioc—Manihot utilissima—from the New World tropics to almost all parts of the Old World tropics); or the use of artificial fertilizer; or a new system of green manuring. It may be the addition of a steel tip and mold board to a traditional wooden plow, or the development of truck farming, or heavy emphasis on a commercial crop such as cocoa in Ghana or rubber in Malaya.

But this is not to say that all the features of the more ancient agricultural economies are about to disappear, still less that they ought to disappear. There is great danger in the wholesale transplantation of an agricultural technology from one environment to another—witness the spectacular failure of the scheme for mechanized production of groundnuts in Tanganyika. And the dangers are not only physical dangers, dangers to soil and plant cover. There are also grave social dangers. The effects of wholesale and indiscriminate mechanization on an overpopulated society have already been discussed. It is always useful, and often essential, to start from the assumption that a long-standing system of agricultural technology represents an adaptation to local physical and social conditions, albeit at a lower technical level and sometimes in terms of past social conditions, especially where the population/land ratio is concerned.

There is much research to be done everywhere on the relationships involved. Only when there is an understanding of the existing system can changes safely be introduced or adapted.

B. H. Farmer

[See alsoLand tenure. Other relevant material may be found inAsian society, article onsoutheast asia.]


Conklin, Harold C. 1961 The Study of Shifting Cultivation. Current Anthropology 2:27–61. → A bibliography appears on pages 35–59.

Curwen, Eliot C.; and Hatt, Gudmund (1946–1953) 1953 Plough and Pasture: The Early History of Farming. New York: Schuman. → Part 1: Prehistoric Farming of Europe and the Near East, by Eliot C. Curwen. Part 2: Farming of Non-European Peoples, by Gudmund Hatt. Part 1 was published in 1946 as Plough and Pasture.

Dumont, RenÉ (1954) 1957 Types of Rural Economy: Studies in World Agriculture. New York: Praeger. → First published as Économie agricole dans le monde.

Faucher, Daniel 1949 Géographic agraire: Types de cultures. Paris: Librairie de Médicis.

Forde, C. Daryll (1934) 1963 Habitat, Economy and Society: A Geographic Introduction to Ethnology. London: Methuen.

George, Pierre 1956 La campagne: Le fait rural à travers le monde. Paris: Presses Universitaires de France.

Gourou, Pierre (1947) 1964 The Tropical World: Its Social and Economic Conditions and Its Future Status. 3d ed. New York: Wiley. → First published as Les pays tropicaux: Principes d’une géographic humaine et économique.

Grist, Donald H. (1953) 1959 Rice. 3d ed. London: Longmans.

King, Franklin H. (1911) 1927 Farmers of Forty Centuries: Or, Permanent Agriculture in China, Korea and Japan. New York: Harcourt.

Leach, Edmund R. 1959 Some Economic Advantages of Shifting Cultivation. Volume 7, pages 64–66 in Pacific Science Congress, Ninth, Bangkok, 1957, Proceedings. Bangkok: Secretariat, Ninth Pacific Science Congress.

Sauer, Carl O. 1952 Agricultural Origins and Dispersals. New York: American Geographical Society.

Siegfried, AndrÉ; (1943) 1947 The Mediterranean. New York: Duell, Sloan & Pearce. → First published as Vue générale de la Méditerranée.

Terra, G. J. A. 1958 Farm Systems in Southeast Asia. Netherlands Journal of Agricultural Science 6:157–182.

Warriner, Doreen (1939) 1965 The Economics of Peasant Farming. 2d ed. New York: Barnes & Noble.

Watters, R. F. 1960 The Nature of Shifting Cultivation: A Review of Recent Research. Pacific Viewpoint 1:59–99.

Weulersse, Jacques 1946 Paysans de Syrie et du Proche-Orient. Paris: Gallimard.

Whittlesey, Derwent S. 1936 Major Agricultural Regions of the Earth. Association of American Geographers, Annals 26:199–240.

Wittfogel, Karl A. 1957 Oriental Despotism: A Comparative Study of Total Power. New Haven, Conn.: Yale Univ. Press. → A paperback edition was published in 1963 by Yale University Press.


Agriculture-related social action is typically organized through such groupings as the following: the family, which is both a producing and consuming unit, as is also the large estate, such as the manor, the hacienda, the cooperative farm, or the collective; work teams of various composition; associations organized for such purposes as irrigation, drainage, marketing, and purchasing; and related systems from which issue such services as education and religion. The student of agricultural organization is interested in the relationships that compose these units, the relations of these units to one another, and their relationships or linkages to larger pluralities, such as the society and nation and their various subsystems.

The pursuit of such knowledge is impeded by the following factors. First, there is a lack of adequate historical records. A second problem is the vagueness of the term “agricultural organization” and the lack of specificity in its use. If all activities related to agriculture are included, as in the case of “agribusiness,” a sizable proportion of the population may be involved, even in an industrialized nation (for example, 30-40 per cent of the United States labor force); if only those engaged in farming are included, the proportions, especially in industrialized nations, will be much smaller (for example, 12 per cent of the United States labor force). The incomparability of unlikes is also a problem: a farm run by a nuclear family cannot be effectively compared with a hacienda run by hundreds of people. Outwardly similar units may be rendered incomparable by fundamentally different forms of tenure, distribution of power, and extent of status-role differentiation. Finally, ideological differences complicate the study of agricultural organization. For example, the idealization of the peasant family form of agriculture under the German Nazis and similar groups leads to a different viewpoint than that arrived at by the communists, whose view of agriculture is essentially pragmatic. Studies of agriculture undertaken by the Nazi government revealed that familysized farms, as compared to large estates, yielded as much or more of all crops to the market (per unit of land), as well as more human beings; more “cannon fodder” was often the interpretation of this phenomenon by those of different ideological persuasion. Also, the persistent belief that social stability and military strength, viewed as national needs, can be maintained only by a large and prosperous rural population, is an a priori point of view that is not conducive to objectivity.

The typological approach

Almost from the beginning of sociology, concepts that have facilitated the ordering of social action on and between ideal or constructed poles (often called “types”) have been employed in the analysis of many forms of organization, particularly in the case of agricultural organization. Probably the most generally used of these types are Ferdinand Tönnies’ concepts of Gemeinschaft and Gesellschaft (1887), which arose from their author’s familiarity with both agricultural and nonagricultural organizations. The essence of the Gesellschaft-like organization (such as a factory or army) is the all-important, functionally specific goal (such as profits for the factory or winning a battle for the army) shared by the actors; in the pursuit of that goal, facilities and means, including human relationships, are used in a manner that is instrumental, efficient, and economical. The opposite of the Gesellschaft-like organization is “farming as a way of life” carried on for its own sake. The greater the tendency for agricultural organization to be a “way of life,” the less functionally specific are both goals and norms and the more Gemeinschaft-like the organization will be. The essence of Gemeinschaft-like organization and the social relations that compose it is the goal of furthering and maintaining the social relations themselves, which are never subordinated to functionally specific goals. Gemeinschaft-like organizations typically give high priority to the communication of sentiment for effective goal attainment. Status roles, rank, and power tend to be allocated by such ascriptive factors as sex and age in Gemeinschaft-like organizations, whereas these are typically allocated by achievement—demonstrated or potential—in the Gesellschaft-like organizations.

Such polar types (which are not to be confused with classificatory concepts, with variables, or with models) represent dimensions that do not exist in the real world—a fact that does not reduce their analytical utility. There probably is no organization, for example, all of whose members always place goal achievement above any consideration for social relationships, as is typified in the pure Gesellschaft. Similarly, there probably is no organization all of whose members always subordinate instrumental goals to make only the relationship, such as love, revenge, or friendship, an end in itself, as is typified in the pure Gemeinschaft. Determinative system theory, such as is employed in physics, often cannot utilize ideal types, which are of greatest use in the preliminary exploration of the general nature of phenomena. Among the most useful types are local versus cosmopolitan, traditional versus modern, folk versus urban, primary versus nonprimary, and the trilogy—familistic, contractual, and compulsory [seecommunity-society continua; see also Tönnies 1887].

The processual–structural approach

Certain general processual patterns may be noted as one traces the development of man’s effort to produce more and better food and fiber with minimum effort. Different as is primitive agriculture from the sequential stages of technological advance now culminated in the agriculture of urbanized Western society, certain common elements and processes are apparent at all stages. One way of approaching the analysis of these general patterns is by specification of the elements and processes observed to be common to all social systems (Loomis 1960, pp. 1–47, especially fig. 1, p. 8). The following discussion of agricultural organization will be guided by this approach and reinforced by use of concepts from the Gemeinschaft—Gesellschaft typology.

Up to the time of the industrial revolution, relationships in agricultural organization were almost universally Gemeinschaft-like, and kinship ties were of utmost importance. Child-parent relations in the family or extensions of such patterns to the feudal manor controlled by a surrogate father or lord (patron) were evaluated most highly—so highly that they were ends in and of themselves and diffused with intense sentiment. In Gemeinschaft-like agricultural organizations, processes such as that of allocation of status roles, rank, and power conformed to age-old patterns, and the actors observed norms that specified action for every possible exigency (Loomis 1960, pp. 57–118, especially fig. 2, p. 61). The principle of ascription, or who the actor was, was followed, rather than that of achievement, or what the actor could do. These considerations restricted the rational, efficient, and economic use of nonhuman facilities and human services.

Barriers to rational action

Nonhuman facilities, such as real estate and instruments of production, are alienable and subject to successive allocations in the Gesellschaft-like organization, such as the farm that is run for profit. The more Gesellschaft-like the organization is, the freer its members are to enter or be placed in new social relations, discontinue old ones, move in space, and be subject to change in status roles, power, and rank. Inalienable instruments of production, unchanging social relations, and inviolable allocations of status roles, power, and rank constitute inhibitions to the rational use both of human and nonhuman resources. Agricultural organizations of the past and so-called underdeveloped agricultural societies of the present tend to harbor such inhibitions.

It has frequently been hypothesized by sociologists that the higher the value of an object (especially if its use is fused with sentiment), the greater are the inhibitions to its rational use. In the case of ends, value may be measured in terms of willingness of actors to make sacrifices to obtain or to retain an object. In the case of a norm, value may be measured by the intensity of indignation when the norm is violated and by the degree of harshness of the negative sanction imposed upon the violator. Societies in which malnutrition is commonplace and famines are frequent would, according to the hypothesis, tend to value land very highly and to accord it a quality of sacredness; other facilities requisite to a basic food supply would become fused with affectivity and hedged about with restrictions. The hypothesis would explain the widespread restrictions on free sale, purchase, or ex-change of land, which in turn is often the most important basis for allocation of status roles, rank, and power, since these latter are often ascribed by the relationship of a given actor to the land; the manor’s lord, cotters, and villeins are well-known examples (Loomis & Beegle 1950). It has been observed that food crops in the field and immediately after harvest are often considered sacred; their movement and use during this period must be accompanied by proper ritual. Once the crops are sold, they lose their sacred nature. Similarly, the hypothesis may be applied to explain various types of restrictions on the mobility and alienability of human services in feudal and other traditional organizations.

The limits of rationality in agriculture. Contrary to the cyclical theories of development, agricultural organization has, at least since the industrial revolution, become increasingly efficient and economical in respect to human effort and facilities. Exceptions may be cited in various cases of extreme anomie, as disorder becomes so common and painful that reaction in the form of ultraconservative movements occurs, such as in the German Nazi and Italian fascist movements. The over-all trend, however, has been a shift from Gemeinschaft-like restrictions on utilization of non-human facilities and human services in goal attaining activities toward Gesellschaft-like relations in which these restrictions are at least partially eliminated.

Is it likely that the degree of rationality that attends industrial and market organization in its most Gesellschaft-like form can be made to attend agricultural organization? To explore this possibility, let a given agricultural facility, for instance a unit of land, be likened to a unit of money, say a hundred dollar bill. When the possession, exchange, and transfer of a unit of land can be effected with the same sentimental detachment that would mark the possession, exchange, and transfer of a hundred dollar bill, then a parallel degree of rationality will be evinced by the two types of organization. Most students of rural life and agricultural organization cannot foresee as a likely occurrence early rationalization of agriculture, when land, livestock, machinery, and plant would be as removed from the sacred and as imbued with the secular as are parallel operations in nonagricultural production.

Feudal tenures and relationships

Under medieval European tenure, the feudal manor operated with some slaves who could be sold, but most agricultural workers were, in effect, bound to the soil as serfs and were transferred with the estate, although there were degrees of serfdom and some serfs eventually became free peasants. In rank the bondsmen were below the lesser gentry, the nobility, and the royalty. The basic unit was the tribal group or peasant family, which was characteristic of the less fully developed form of German feudalism that spread to the Low Countries and to the north of Italy, as well as of the fully developed French feudalism that came to prevail in England, northern Spain, the two Sicilies, and the Levant (Boissonnade 1921, p. 120 in 1929 edition). How each man was related to the land determined whether he could marry and under what conditions, what services and payments he would have to render, and under what conditions he could leave the estate. His tenure status prescribed his status role, his rank, and his power. The concept Gemeinschaft from Tünnies and the similar concept “status” from Maine (1861) arose out of the great differences that they noted between the feudal tenures of the Middle Ages and (a) the Gesellschaft-like and contractual relations of the present day and (b) the latifundia (arising out of the enclosure movement in England from 1450 to 1600) and other developments elsewhere, as the customary rights of the various tenure groups of lower rank were disregarded and latifundia came into being.

Out of the feudal system grew a stratification pattern based upon the estates, or stände as they are called in Germany. These specified the status roles, rank, power, and life-style of members and institutionalized the means of entry or expulsion by ritual forms. Most of the bases for allocation of placement as exercised under this form of stratification are ascriptive; they have long been associated with rural societies and are still found today in many parts of the world. Since modern business, commerce, and industry require a specified performance, they tend to dissolve the estate form of stratification and replace the ascriptive allocation of its members with allocation by achievement. In the ideal typological form of complete Gesellschaft, there emerges an open-class system in which all persons find their places according to their skills, technical competency, and contributions, with no importance attached to the class position of one’s antecedents or to one’s age or sex. Opposite to this is the caste system of stratification that is found most commonly in agricultural and rural societies, the most extreme example of which exists in India.

Importance of the feudal system. There has been considerable transmission of feudal ideology and of feudal norms, especially those related to rank and power, to the present industrial organization in areas of feudal background, such as England and Germany. Other legacies, however, from the feudal era are probably of greater importance. One such is the influence it had upon the thinking of Marx and Engels, who furnished the basic ideology for communism in Russia and China. The once feudal nations are often contrasted with those having no feudal history in respect to class structure and attitudes toward authority. Marxian doctrine places capitalism in an important intermediary stage between feudalism (or something comparable) and communism. Marx had an unusual interest in the United States, perhaps because of its lack of feudal background. Lenin on the other hand studied the exploitation of Negroes in the rural South and leaped to the conclusion that the United States would follow the European pattern. Marxist and Leninist doctrine aside, recent history shows that industrializing societies without feudal backgrounds more easily adopt equalitarian achievement motivation than do others.

Successors to the feudal pattern

Most of the agriculture of the noncommunist world may be classified according to whether the central producing and consuming unit is the farm family, the large estate, such as the hacienda or the latifundium, or a mixture of these two types of units. The haciendas, latifundia, and similar forms frequently arose out of feudalism. In England, the enclosure movements and other pressures resulted in virtual dispossession of those villagers and farmers that possessed communal property. Much the same development occurred along the Baltic coast in Mecklenburg and Holstein, and in Swedish Pomerania, where the peasants, who were long accustomed to communal tenure of grazing and grass lands, had no protection against property appropriation. The rapidity of change from Gemeinschaft-like relations, with protection based upon custom, to Gesellschaft-like norms of contact left rural dwellers in many areas in a state of semishock, without the necessary knowledge and linkages for secure existence in the new order. The right to ownership and transfer of property in fee simple was not achieved for the peasants in the French Revolution. Owing in part to this failure almost half of the land of France, Italy, and Spain came to be worked by tenants and sharecroppers (Dietze 1933, p. 49). Outright ownership by peasants occurred in much larger proportions in Germany and in the Scandinavian kingdoms.

The farm family. Even during the feudal period, when most rural dwellers were subjected to the feudal system, there were yeomen who, as small independent landholders, continued a free existence in limited areas of Europe, such as Upper Bavaria, Swabia, Thuringia, Saxony, Frisia, and Holstein. An ideology of the yeoman—a farm owner and operator without indebtedness—can be traced to areas where substantial numbers of farm families remained free from bondage to the land. A number of leaders, such as Thomas Jefferson, believed that democracy could best survive when many such farmers, who were ready to fight any attempts to subordinate them, peopled the countryside. For Jefferson, who believed that an occasional revolution was good for the political health of nations, it would be these “free yeomen” who would begin such revolutions.

The so-called family farm is a productive unit in which the family is the central entrepreneurial work unit. The designation covers enterprises of widely different character. A family farm in New Jersey may consist of three acres and one thousand laying hens; in Oregon it may comprise 3,200 acres of wheat and grazing land. In the Western Hemisphere the family farm is a vital force in the agriculture of widely dispersed societies, such as Costa Rica, Chile, southern Brazil, Colombia, the United States, and Canada. Turkey, India, Pakistan, Japan, and Korea are examples of areas in the Eastern Hemisphere where the family farm organization is extensive and important. In some respects it constitutes an American ideal. It became the model used by the Allies in reorganizing conquered areas under their control at the end of World War II. Like other American businesses, farms and ranches tend to become larger and larger for many purposes of production. Nevertheless, the “sacredness” of the family farm is frequently demonstrated in American political action at home, as well as in policy for improving agricultural practices abroad.

In most of the industrialized countries where the family farm has predominated, family control is decreasing as the farming operations become larger. An example may be taken from the Heide areas of Germany, which have long been famous for a free peasantry. There the once independent peasants are increasingly beholden to authorities and creditors, many of whom are from the cities, as competitive agriculture fosters the use of costly overhead irrigation systems, which at once irrigate and fertilize the soil and crops. Other developments that may decrease control by the farm family are the following: increased specialization, greater capitalization, greater dependence on both domestic and foreign markets, and increasing employment of farm family members in industry, resulting in part-time farming and dependence upon the urban wage economy. In addition, vertical integration increasingly links the farm family to various other systems, thereby depriving it of autonomy. An example is provided in the widespread practice of contract farming in the poultry industry, organized by hatcherymen or feed dealers who agree to supply chicks, feed, medicine, capital, electricity, heat, and supervision. Although the prices for poultry are guaranteed to the farmer, the system tends to deprive previously independent farm families of the “yeoman freedom,” making them semisharecroppers under control of urban contractors and capital suppliers.

Changes in agricultural organization

Rapid change in agricultural practices and organization usually comes from societal units outside the immediate agricultural system. Perhaps the chief exception to this generalization in the literature on agriculture is the manner in which there developed a relatively highly advanced form of agriculture among the various Protestant sects, such as the Mennonites and the Amish, especially in the German Palatinate. They were known as “clover” farmers and, because of their great ability as agriculturists, were sought by princes of the time to operate farms of the nobility. Farmers from this same strain also became outstanding agriculturists in Pennsylvania and elsewhere in the New World without outside assistance. I conjecture that this exceptional development may have issued from the knowledge of scholarly Roman Catholic priests who had access in the universities and the monasteries of the time to advanced knowledge about agriculture and who defected in sizable numbers during this epoch, often to found or to join such nonconformist religious groups as those later known as the Mennonites and the Amish. If this interpretation is correct, it is a most interesting form of systemic linkage, by which the defecting priests brought knowledge beyond that of the traditional base to the peasant groups of which they became a part.

Systemic linkage

The traditional base of knowledge gathered from generations of actual farming experience is generally insufficient to spark rapid change. Gemeinschaft-like societies, which typically live by tradition, distrust innovations. Only as agricultural organizations are linked to various knowledge producing and distributing centers does rapid change in agriculture take place. Typical linkages promoting changes are those with credit facilities, organized experimental animal and plant stock breeding, and market economies. Wherever very rapid change in agriculture has taken place, these facilities have been available. No country with advanced agriculture is today without agricultural experiment stations or other forms of scientific activity, operating to improve planting and animal stocks as well as agricultural practices, organization, and technology generally.

Systemic linkage between these agencies and the agricultural production units may take many forms and should receive more careful study than it has been given. The folk schools, universities, and agricultural services have been important in Denmark. Extension services in the United States, rural academies in Pakistan, national ministries of agriculture in Latin America, and agencies of community development and cooperation in India are other examples of the institutionalized linkages between agricultural research and practice. Everywhere that rapid progress has been made, agricultural credit has been made available on a rational basis at interest rates comparable to or lower than those prevailing in other productive enterprises. The credit system of usury, common in the underdeveloped areas of the Far East (which often require that the borrower pay 100 to 300 per cent per annum to a local moneylender bearing a semi-Gemeinschaft-like, personal, or patron relation to the debtor), usually must be abolished or radically modified before rapid progress in agricultural production can take place.

Of utmost importance is the form of the linkage between the agricultural production organizations —whatever type of farm that might be—and the centers of knowledge about such facilities as credit, markets, and the results of basic and applied research. Especially in underdeveloped areas, the chief lack is not in knowledge itself but rather in the transmission of that knowledge. Such scientific establishments as experiment stations, research laboratories in government bureaus, and universities do the “cognitive mapping” necessary to improve the practices, stocks, and technology (Loomis 1960, pp. 12–13, 68–69). The incumbents of certain status roles, such as teachers and extension workers, link the systems in which the concern is cognitive mapping with the systems in which the concern is efficient production. To be effective in their status roles, such professionals not only must have mastered their own specialties in the agricultural sciences but must also be adept at appraising those systems most amenable to linkage. The rate of adoption of new agricultural practices will vary as these factors vary in effectiveness.

Diffusion of innovations

An important aspect of social change in agricultural organization is the relative willingness to adopt improved stocks, facilities, and practices. A series of types or semistatus roles has identified agriculturists relative to their time and manner of adopting new practices once these are made available. In the industrialized West only 3 per cent are “innovators” who are frequently linked directly to agricultural scientists whom they know personally. They evaluate science highly, do much of their own cognitive mapping in accordance with the canons of science, consider profits in agriculture as a most important goal, and take risks to attain this goal by borrowing money. Innovators make decisions and act upon them more quickly than others. In terms of systemic linkage, innovators are not linked to their neighborhoods as closely as others, are more cosmopolitan in orientation, and, although relatively well off financially, usually do not rank as high in local neighborhood affairs as do the next group to adopt practices, namely the “early adopters.” These latter may constitute something like 14 per cent of the agricultural producers. Early adopters and the next group—“early majority adopters”—may constitute together more than 35 per cent of the agricultural producers. They are linked both to the local neighborhood and community groups and to the knowledge centers, such as universities and experiment stations. The last groups to adopt improved stocks and practices have been called the “laggards” and “late adopters”; they evaluate science less highly than do earlier adopters (see Rogers 1962).

The case of an effective and generally adopted weed killer may serve as an example of differential adoption rates; it was adopted almost as soon as it was available by the innovators, whereas it was adopted after a ten-year delay by the laggards (North Central … 1961, p. 6). Laggards confine their interaction almost completely to their neighborhoods and localities, have a minimum of systemic linkage with knowledge centers, have relatively low rank, and are usually older and less well educated than innovators and early adopters. Laggards and late adopters engage frequently in a type of cognitive mapping akin to magic, such as the effect of the moon on seed germination. They tend to seek evaluations and reinforce their own judgments by asking the opinion of friends and neighbors. The end for which farming is conducted for the laggards is often “farming as a way of life,” in contrast to the profit motive, which is a highly valued end for the innovator. Usually the norms for agriculture and for life are highly traditional. Various studies in underdeveloped agricultural societies indicate that, in the above respects, the majority of peasants and laborers resemble the laggards and late adopters. One of the prime problems in the effort to increase the productivity of areas of traditional agriculture is to increase the proportion of innovators and early adopters [see Diffusion, article onthe diffusion of innovations].

Agriculture and society

As agricultural production becomes more efficient and markets and credit facilities more accessible, cities become larger, with the urban increase accruing largely from rural populations, which almost always have higher replacement rates. It has been suggested that high mobility is the chief differentiating feature of urbanized and developing societies. However, the movement of people is not always from the farms to the cities. During the depression of the 1930s a great “back to the land movement” began throughout the urbanized world, and in both Europe and America various forms of settlement designed to combine a home garden or subsistence with city wage work were established. This phenomenon throws in relief some of the fundamental patterns involved in the development of modern differentiated and industrialized societies.

Throughout history man has dreamed of establishing communities that are organized and designed to eliminate human conflict, poverty, and ignorance. Although such blights are often found in agricultural societies, the differentiated, industrialized urban societies generally manifest higher suicide rates, more anomie, and more alienation of man from man than do rural societies. Although it is the belief of many, including the author, that man’s flexible and rational nature, coupled with his ability to transmit knowledge, makes it possible for him to develop organizational techniques suited to conditions in which the division of labor and institutional differentiation dominate, many thinkers disagree. They believe an urban existence is un-natural and dysfunctional for mental and physical well-being. Such thinking is sometimes based upon the following facts and logic. Rural societies, particularly those not linked to modern industrialized cities, are less differentiated and more integrated, in the sense that their members fill fewer conflicting status roles (for example, the policeman who is a neighbor of a habitual delinquent) and manifest greater consensus on the goals and norms that guide life. Moreover, fewer members find existing institutions so meaningless that identity is sought with deviant groups, especially those that take pride in and flaunt their deviancy, as is fairly common in Western industrial society.

To understand the variation among agricultural organizations and rural societies, it may be helpful to visualize the “perfectly integrated society”: the quintessence of societal integration that has no empirical existence but may be projected as an ideal type (see Williams [1951] 1960, pp. 374, 378). It would be small in size, stable in demographic composition and in physical milieu, with relatively few linkages with other societies. It would have few “center activities,” whereby man refines and converts for his final use the products of “field activities,” such as agriculture, mining, lumbering, and herding. In a perfectly integrated society, there is complete consensus on goals and unwavering dedication to the norms of goal fulfillment. People find it a pleasure to do their duty, and spontaneous approval is given to all who do so. In such a society, there would, of course, be no need for social control and no police force or other sanctioning agency.

The impact of urbanization

Factors of differentiation, however, have emerged very early, as recorded history demonstrates. Simple agricultural societies, which are subject to the vicissitudes of flood, drought, and other natural calamities, employ religious rituals, especially at planting and harvest time. The keepers of such rituals—the holy men and the medicine men—not only supply through their activities much needed integration but also frequently specify planting stocks and times and probably become the first agricultural as well as religious experts. Thus, integration becomes increasingly difficult to achieve as status roles become differentiated not only in agriculture and religion but also in many other spheres, such as health, education, and government. “Center activities” become more numerous and important. As societies have become industrialized and urbanized, many variations have been observed, but some similarities and patterns may be mentioned.

First, power or control, even during periods when an agriculturally based nobility rules, comes to be highly concentrated in the urban centers. Moreover, societal integration and boundary maintenance are limited when these centers are few and weak. This is the chief reason why in modern times the spread of communism, contrary to Marx’s prediction that it would be introduced by the city proletarian masses, has been most prominent in peasant societies with weak central activities and government. The rank of various incumbents of status roles in the systems located in the field decreases as urbanization places greater emphasis upon center activities. These differences in rank are determined not so much by the difficulty of learning the skills demanded by the new status roles (it is probably more difficult to learn to train and use oxen and horses as draft animals than it is to operate an elevator in a hotel, for instance) as they are by the fact that the higher replacement rates of families that teach these skills to their children, as well as the lower demand for rural skills, generally disparages field activities. Because of available financial support, most able professionals tend to gravitate to the larger centers, whereas fewer elect to practice in rural areas; thus, there are fewer highly trained specialists (per ten thousand people), such as doctors and dentists, in rural than in urban areas.

Those engaged in center activities over several generations less frequently participate in conservative and reactionary movements and more frequently participate in liberal and radical movements than those engaged in field activities. It is often found that in urban areas the ultraconservatives and reactionaries frequently have recently come from the areas where field activities predominate. This in part explains the emphasis in such ultraconservative or reactionary movements as those of the German Nazis on returning agriculture to its earlier forms.

Those engaged in field activities have higher demographic replacement rates than those engaged in center activities. As centers emerge, the migration results in larger proportions of females and persons of employable age in the areas where center activities predominate. On the other hand, areas in which field activities predominate have larger proportions of males and persons in the younger and older less productive ages. Finally, urbanization—especially rapid urbanization—produces strains that are reflected in increasing rates of suicide and certain forms of criminality, such as homicide. However, when urbanization is in advanced stages and urban traits are being rapidly diffused to the countryside suicide rates of rural areas may sometimes, if only rarely, exceed urban rates.

Charles P. Loomis

[Directly related are the entriesCommunity–society continua; rural society. Other relevant material may be found inFood, article onworld problems; Peasantry; Technical assistance; and in the biographies ofMaine; TÖnnies.]


Boissonade, Prosper (1921) 1964 Life and Work in Medieval Europe: The Evolution of Medieval EconomyFrom the Fifth to the Fifteenth Century. New York: Harper. → First published as Le travail dans I’Europe chrétienne au moyen âge.

Dietze, C. von 1933 Peasantry. Volume 12, pages 48–53 in Encyclopaedia of the Social Sciences. New York: Macmillan.

Fustel de coulanges, numa denis (1864) 1956 The Ancient City: A Study on the Religion, Laws, and Institutions of Greece and Rome. Garden City, N.Y.: Doubleday. → First published in French.

Loomis, Charles P. 1960 Social Systems: Essays on Their Persistence and Change. Princeton, N.J.: Van Nostrand.

Loomis, Charles P.; and BEEGLE, J. ALLAN (1950) 1955 Rural Social Systems: A Textbook in Rural Sociology and Anthropology. London: Bailey & Swinfen. → See sections on land tenure for a comprehensive bibliography.

Maine, Henry J. S. (1861) 1960 Ancient Law: Its Connection With the Early History of Society, and Its Relations to Modern Ideas. Rev. ed. New York: Dutton; London and Toronto: Dent. → A paperback edition was published in 1963 by Beacon.

North Central Rural Sociology Subcommittee for the Study of Diffusion of Farm Practices 1961 Adopters of New Farm Ideas: Characteristics and Communication Behavior. Unpublished manuscript, Michigan Agricultural Extension Service, East Lansing.

Rogers, Everett M. 1962 Diffusion of Innovations. New York: Free Press.

TÖnnies, Ferdinand (1887) 1957 Community and Society (Gemeinschaft und Gesellschaft). Translated and edited by Charles P. Loomis. East Lansing: Michigan State Univ. Press. → First published in German. A paperback edition was published in 1963 by Harper.

Vinogradoff, Paul (1905) 1920 The Growth of the Manor. 3d ed. New York: Macmillan.

Williams, Robin M. JR. (1951) 1960 American Society: A Sociological Interpretation. 2d ed., rev. New York: Knopf.


We now know that the historian’s desire to set in order and tighten the history of agriculture must not go so far as to dissolve the diversity of events into a single trend of evolution or even into a “law,” as did the writers of antiquity with their rigorous sequence of nomadism developing from hunting and fishing and agriculture from nomadism or as did the historians of the nineteenth century, who held that communal ownership was a necessary phase in the evolution of society (de Laveleye 1874; von Below 1920).

Much archeological evidence, including that from recently developed techniques of aerial photography and research on organic remains, indicates that hunting, fishing, and food gathering persisted side by side with simple cultivation during long periods of prehistory. Similar evidence, particularly from implements and aerial photography, discloses early field arrangements throughout Europe that give no appearance of having been farmed in common. [For fuller treatment of the origins and early history of agriculture, see Domestication; Urban Revolution.]

With the development of advanced civilizations in the Near East there came new plants, new implements, new techniques (irrigation, fertilizer, regular succession of crops), and new forms of organization of agriculture (latifundia, slave plantations). These innovations reached the countries north of the Alps via Greece and Rome, although many of them vanished again with the Romans.

Europe’s population, however, had reached a low point at about the middle of the first millennium A.D. It is estimated that no more than four million people (about four per square kilometer) then lived in the area today occupied by England, France, and the Federal Republic of Germany. This in turn meant wide-open stretches for man and animal, little agriculture, emphasis on animal husbandry, and widely scattered settlements.

The medieval expansion

The middle of the first millennium may be regarded as the turning point at which a new expansion set in, an expansion that has continued with reverses and interruptions to the present day. Starting in the sixth and seventh centuries and expanding after the year 1000, forests were cleared, marshes drained, and land along the coasts reclaimed from the sea. The higher elevations were opened up in the lower mountain ranges; the upper limit of permanent settlement in the Alps was higher about the year 1300 than ever before or since. By the time this wave of land expansion subsided (at the beginning of the fourteenth century) the arable land of the old Europe had been increased many times over.

Most of the villages still in existence in central Europe existed at the end of the medieval expansion of cultivated land. Only few inhabited places have been added since, while many have disappeared since the high Middle Ages. For example, it is estimated that about the year 1300 there were some 170,000 independent—that is, territorially separate—settlements in Germany (within the confines of the Germany of 1933). Since there were no more than about 140,000 localities there in 1933, and since several thousand of these were founded in modern times, we may assume that every fifth inhabited place disappeared during the late Middle Ages—i.e., in the fourteenth and fifteenth centuries—and was never re-established.

As large numbers of such deserted villages likewise appeared in the Scandinavian countries and in England, France, and Poland in the late Middle Ages (although in those countries they were reestablished more often than was the case in Germany), we must look for explanations that enable us to comprehend the accumulation of deserted

villages in the late Middle Ages as a universal European phenomenon. The falling population in Europe of the late Middle Ages affords one explanation. The population of central Europe dropped perhaps as early as the great famine of 1307–1317, but certainly during the bubonic plague (the Black Death) of 1348–1350, which came out of the Orient and swept over Europe; and it remained low, for the first wave of the plague was followed by others. The depopulation was followed by migrations. The peasants abandoned the settlements in inaccessible and elevated localities (Norway, the Alps), on infertile soil, or in perilous social circumstances. They migrated into the valleys—to a more productive agriculture or a smaller burden—or else into the towns. The naturalization lists of many towns in the late Middle Ages, and sometimes the very names of those naturalized (which reveal their origins), are evidence of this flight from the land in the late Middle Ages.

Economic conditions must also be acknowledged as a causative factor in the movement from the countryside to the city. During the late Middle Ages the prices of agricultural products fell; the prices of craft products and wages were much steadier (Figure 1). Unskilled laborers often received the counterpart of 20 to 30 kilograms of grain as their day’s wages. This, too, was a consequence of the decreased population, and although the peasants did not comprehend these relationships, they saw that work was easier, life was safer, and burdens were lighter in the towns than on the land. Therefore they migrated to the city, and when they were no longer able to do so, they sent their sons to the townsfolk—as reported in a Prussian source, “to serve or to learn a trade.”

Field arrangements

When the period of deserting the villages came to an end, clearing and settling were resumed, and the manorial system that had come down from the Middle Ages was extended still further. Over large areas of central Europe this was the three-field or multifield economy, with common pasturage and the open-field system.

For a long time it was thought that these field arrangements were linked to the taking over of land during the barbarian invasions. It was believed that the initial settlers had occupied the land in common and divided it into farmstead land, arable land, and meadows, with the arable land divided into larger plots and these plots subdivided into strips, each family then being allocated several strips. This implied that the strip farming of the fields and the broad parceling out of the strips with regular crop rotation had existed “from the very outset,” a notion that had to be abandoned. The village with “open fields” (Gewanndorf) had precursors from which its subsequent form, which has come down to us, evolved through expansion, alteration, and reconstruction.

Expansion signifies the gradual growth of arable land by the extension of clearing. In many cases the later fields can be distinguished from the earlier ones by their names, their location with respect to the village, and their shape; and even today we can perceive the original fields, to which usually only a few farmsteads were attached. As the number of peasant families increased the area of arable land had to be expended. If enough waste land and woodland were available, the arable land could be extended by clearing from the village as a center. Since this work of clearing, especially in the bush and forest, could rarely be handled by a single peasant family, it is easy to understand the parceling out of the newly cleared land. It reflected the individual’s share in the work done in common. The expansion theory explains the gradual growth of arable land, although it does not explain the combining of parcels and strips into large fields, which were cultivated according to strict rules in the old villages.

The alteration theory proposes to explain the origin of this utilization of the arable land in common. It depicts conditions that might well have necessitated a transition from a more individual to a more cooperative economy, perhaps in the following manner. As the populations increased, real properties began to be subdivided; fields were cut up into irregular shapes and locations. This gave rise to the “medley” of pieces of land, which compelled cooperation. Crossings had to be regulated, water rights settled, and cultivation plans attuned to one another. The sown fields also had to be fenced in to protect them from grazing cattle, shepherds had to be appointed, and other arrangements made that could be effected only in agreement with neighbors. This promoted a constant association of the joint proprietors of a field, as well as the arising of a collective consciousness that facilitated renunciation of individual rights, no longer so useful.

We cannot say with certainty when this took place. The origins of these utilizations in common of arable land probably go far back in time. Tacitus describes conditions that might be interpreted as such commons, but these are probably attributable to special circumstances, such as migrations or states of war. It is unlikely that most of the common utilizations of land originated much earlier than the expansion period of the high Middle Ages, and many new villages in the formerly Slavic East were founded in the same period (eleventh to thirteenth centuries). The system of strip farming, which had proved its worth, was transferred to these commons. Field areas were demarcated according to soil quality and distance from the village. On the resulting scattered holdings all the peasants were treated as equitably as possible and moreover were equally affected by wet weather, rain, or hail, a situation that diminished individual risk.

Recent research has shown, however, that a large-field economy had by no means gained as much ground in the high Middle Ages as had previously been assumed, even where it subsequently became the rule. Here we are aided by the reconstruction theory. This theory makes allowance for the period of deserted villages. Once the villages had decayed, the fields had gone to weeds, and property rights had been obscured, planning, distribution, and rearrangement could be effected as in virgin territory. Parcels could be laid out and strips staked out and assembled into large fields without disturbing older rights. Here and there the old field boundaries remained, but as a rule they disappeared on cultivated land. Then, and in many instances only at the beginning of modern times, did the dominant picture become that of the large-field economy of a group of peasants joined in a working association.

Yet a countermovement developed at an early date, leading from the (relative) collective to greater individuation of property and usufruct rights. In England, enclosures, the fencing of sections of fields and forests for individual use, began as early as the fourteenth and fifteenth centuries. In the sixteenth century the peasants of the bishopric of Kempten in Allgäu began to dissolve their villages and common lands and to shift their farmsteads to the former common lands. The north European nobility began to withdraw their fields from the village common lands in the seventeenth and eighteenth centuries, and this trend became stronger in the nineteenth century. Yet the elimination of farming strips, which began thus—with or without the initial disintegration of the villages —remains even today one of the major tasks of agrarian policy in many European countries.

Social arrangements

The little settlements and balk-enclosed fields uncovered by the spade and revealed by genetic research on arable land are evidence of a peasantry that was organized in tiny groups around house and family. Their arable land was sufficient to be cultivated by and to support the inhabitants of the house. Over and above all regional peculiarities, the shape of the Carolingian mansus, the Danish bool, the English hide, the Breton ran, and the German Hufe all bore the stamp of the terra familiae thus delimited and established.

This does not exclude social differentiation. Greater economic power and prominent social status were not lacking even in earliest times, although it was only with the increasing density of population and with the increasing shortage of land that the phase of social differentiation and integration that produced the social pattern of the Middle Ages began.

The central factor was territorial dominion. It set up a relationship to the soil. As long as land was available in abundance, man was the more valuable property and villenage the adequate form of dominion. As land became scarce, rights and obligations could be linked to its transfer. This is what happened in many countries; a rather uniform form of territorial dominion resulted, notwithstanding many differences in detail. The core of such dominion was the manor. This was the seat of the manorial administrators (steward, villicus) who collected dues from the peasants and were overseers of the services the peasants had to perform on the land belonging to the lord of the manor (the terra salica). Most of the land was parceled out to the peasants, who constituted an association subject to manorial law. Manorial law governed their rights and obligations and also subjected the lord’s claims to the verdict of a manorial court, on which the peasants also sat and had a vote as long as the ancient peasant freedoms lingered.

About a.d. 1000 the large landed estates of the kings, the church, and the counts that had characterized the era of the Franks were succeeded by small landed estates. The villicus, who had been a farmer, was succeeded by the manorial feudal knight, who followed the profession of arms and hunting, and pleasures of chivalry, losing interest in his private property. Many of the manors were dissolved or transformed. Rents became important. In some parts of Europe this process went so far that hardly anything more of the old manorial associations than a sheaf of rent rights and rent obligations survived. Elsewhere leaseholdlike conditions evolved, leading in some places to exclusive ownership by the lord of the manor (England) and in others to the peasants’ sole ownership (northwest Germany, Denmark, and Scandinavia). We cannot trace these details in this article, but we do have to point out a special formation that arose in east Germany and the adjacent Slavic lands. In these areas a new structure, the so-called Gutsherrschaft (manorial domain), grew out of the Grundherrschaft (landed estate).

During the period of settlement peasants and knights, still only little differentiated socially and economically, cultivated side by side the land in east Germany. When many peasant farms were deserted in eastern Europe during the late fourteenth and the fifteenth centuries, the knights annexed to their own estates the land thus left vacant. This involved little change in the economy at first, since no markets were available. Only in the sixteenth century, as the population began to increase again, did markets improve. Prices of agricultural products rose, and the markets in the West were opened up to the products of east European agriculture. By the end of the sixteenth century Danzig alone exported as much as 130,000 metric tons of grain annually.

The rising real prices of agricultural products formed the economic background for the expansion of large grain farms in the East (Figure 2). And there were other factors. The rise of mercenary armies relieved the knights of the obligation of military service. Once their military function vanished they were freed for the tasks of agriculture. The weakness of the central power (the state) was another important factor. It resulted in the transfer of major sovereign rights, such as the rights of judicature, taxation, and corvée labor for

public works, to the knights and landowners. This made possible the confiscation of much peasant ownership (Bauernlegen), which contributed in no small degree to the expansion of estate size during the periods of agricultural boom, particularly around 1600 and again around 1800.

At the same time the peasants’ property rights were impaired. Hereditary, little encumbered property became the exception, nonhereditary property the rule. The peasants, with wife and children, were forced to do corvée labor, manual haulage with teams of draft animals; as servants they were bound to the soil and became subjects of their lord.

The emancipation of the peasants (Bauernbefreiungen) eliminated landed estates and manorial domains, thus releasing forces that, together with the industrial and technical advances of the nineteenth century, initiated a new phase in agriculture. [For further discussion of these aspects of medieval agriculture, see Manorial economy.]

Agriculture and the economy

An endeavor to place agriculture within the framework of general economic development may begin with the theories advanced by the classical economists around the turn of the eighteenth century. Malthus proclaimed that population always tends to increase faster than the foodstuffs available. Ricardo added that the condition of the workers grows steadily worse over-all, while that of the landlords constantly improves.

When we compare prices and wages in the fifteenth century with those at the beginning of the nineteenth century, the historical data appear fully

Table 1 — Price and wage movements in the agrarian period: Indices at 1801–1850 based on 1401–1450 = 100
Source: Abel (1935) 1966.

to confirm the theorists’ assertions (see Table 1). In addition, grain prices rose absolutely as well as relatively to the prices of handicraft products. Land rents, measured, say, in rentals for unemcumbered plots of land, rose even more. Wages lagged behind. Around 1800 a Berlin mason, for example, earned hardly more than the equivalent of 7 kg. of rye per day. How he fed, clothed, and housed himself and his family on such an income remains a mystery.

The theorists had less success with their predictions of the future. Population continued to grow in the nineteenth and twentieth centuries, but the living standard of the masses improved. Wages rose much faster than the prices of grain or iron (see Table 2). We find a break in price, wage, and rent trends at the threshold of the industrial era.

Table 2 — Price and wage movements in the industrial period: Indices at 1951–1960 based on 1801–1850 = 100
Source: Abel (1935) 1966.

There is analogous evidence in the narrower field of agriculture. During the initial period farming took precedence over livestock raising, for, as Adam Smith pointed out, a corn field of moderate fertility produces much more food for man than the best pasture of the same size. During the following period field crops were also placed in the service of livestock raising. Meat consumption fluctuated similarly, sinking from far above 100 kg. per capita per annum in the fifteenth century in Germany to about 14 kg. per capita per annum around 1800, after which it began to rise again. Thus, there have been two clearly distinct phases or periods in the history of European agriculture and food supply since the high Middle Ages.

Still, this break indicates only part of what actually happened. The watershed dates can be derived from the statistical data only by omitting the intervening data (as in Tables 1 and 2). The predominating, or at least the more obvious, trend in the statistical series of agricultural production, prices, income, and foodstuff consumption was not a continuous rise or fall, but rather a repetitive (pulsating) oscillation, in turn made up of several superimposed cycles.

Secular cycles. When we employ appropriate statistical methods to eliminate the short-term and mediumterm grain-price fluctuations, we find secular cycles, which can be traced back into the Middle Ages in northern Italy, France, England, Germany, and Austria (Figure 3). Ever since Jean Bodin, in 1568, termed the surplus of precious metals the most important and almost sole cause of the rise of prices, we have tended to look to money for the causes of such long-term price changes. Yet prices varied with respect to one another and to wages, both during the upward and the downward general price trends, and these relative changes cannot be explained by the simple quantity theory of money. They point back to the change in population, which paralleled the change in grain prices in central Europe and has been inversely proportional to the change in real wages ever since the late Middle Ages. This is true not only of the Middle Ages but also of modern times. Population rose sharply in all the countries of central Europe during the sixteenth century and through the beginning of the seventeenth century, after which this increase came to a halt. Population began to rise once more only after about the middle of the eighteenth century, a trend that is even more pronounced today.

The effects of population trends cannot be separated from the effects of the price–wage ratio, since both exhibit the same trend as far as agriculture is concerned. All we can say is that agricultural output and agricultural income paralleled population and price changes.

This is true, first of all, of agricultural acreage. The period of clearing in the twelfth and thirteenth centuries was followed by the period of deserted villages in the late Middle Ages. The price rise of the sixteenth century was accompanied by a second wave of farmland expansion. A third wave set in during the eighteenth century (even earlier in Germany, where it occurred soon after the end of the Thirty Years’ War), again resulting in a substantial increase in farm acreage.

Second, the secular cycles of grain price changes were accompanied by changes in the intensity of agriculture. No matter where we look, at the development of operating technology, yields, expenditures, or the systems of farm management, the decisive advances took place during the periods of

* Wheat prices used for France, England, and northern Italy; rye prices used for Germany and Austria.

long-term price rises. The periods of falling agricultural prices, i.e., the close of the Middle Ages and the decades after the Thirty Years’ War, were associated with extensive farming (e.g., the increase in sheepraising in England during the late Middle Ages at the expense of grain farming) or stagnation in the evolution of agriculture.

Third, the secular price fluctuations were associated with changes in agricultural income. This applies above all (in fact, by definition) to those shares of agricultural income that are to be allocated to the soil as a unique factor of production, that is, to the rent of Ricardo’s theory. It also applies, however, even if in a somewhat qualified way, to the stipulated dues and services of an economic order that conceded influence upon income distribution to authority as well as to the market, i.e., to the “feudal rent charges” of the incipient trading economy. Last, it also applies to peasant income, which usually consisted of wages and rent, but which actually tended to follow rent even on farms of moderate size as soon as wages and rent began to diverge.

Short-term fluctuations. Shorter-term fluctuations were embedded in the secular cycles. They were caused by crop fluctuations, wars, stagnation of trade, and other events, but it should be borne in mind that the effects of even these short-term fluctuations were substantially affected by the longterm changes in prices and income and by the underlying man–land ratio. (For instance, the devastating consequences of the great famine of 1307–1317 can be explained only in association with the long-term shortage of land during the high Middle Ages.) Thus abundant harvests during periods of secular depression in agriculture often brought about what may be termed agrarian crises comparable to recent phenomena of a similar nature. Yet, in addition to the factors in common (often underestimated in the past), the differences between the early and later marketing crises of agriculture are also significant. To begin with, the

interdependence of market and agriculture increased and with it the territorial and functional scope of the crises; second, the secular cycles of grain prices broke down during the nineteenth century into cycles that were still “long” but which were much shorter than before (Figure 4); and third, the causes of these secular fluctuations and hence the causes of more recent agrarian crises (around 1820, 1890, 1930) were quite different from those of previous depressions. The earlier crises occurred in an era of halting population growth or even of decreasing population, while the agrarian crises of the nineteenth century and even of the twentieth century coincided with a marked population increase.

Insofar as ultimate causes can be cited, they must be sought in the participation of agriculture in the powerful expansionist drive that has been manifested ever since the technical and social revolutions of the end of the eighteenth century. Theodore W. Schultz came to the same conclusion (1945, p. 45). Schultz thought that “three sets of circumstances are possible in the rate of growth in the demand and the supply of farm products: (a) an equal increase in both demand and supply; (b) an unequal expansion, in which demand pushes hard against supply; (c) an unequal expansion, in which supply outdistances demand.” He did not discuss the first situation, because it is of no theoretical or historical interest. The second, “with demand for farm products pushing hard against the supply (the state of affairs now present in China and India) … worried Malthus, Ricardo, and their contemporaries. The third condition, where the supply of farm products increases so fast that it presses hard against the demand, is the one that has in fact (since Malthus and Ricardo) occurred.” This is a simple, but quite accurate, formula for making a distinction between the two periods we find in the history of Western agriculture since the high Middle Ages.



Abel, Wilhelm (1935) 1966 Agrarkrisen und Agrarkonjunktur: Eine Geschichte der Land- und Ernährungswirtschaft Mitteleuropas seit dem hohen Mittelalter. 2d ed., enl. Hamburg (Germany): Parey.

Abel, Wilhelm (1943) 1955 Die Wüstungen des ausgehenden Mittelalters. 2d ed. Quellen und Forschungen zur Agrargeschichte, 1. Stuttgart (Germany): Fischer.

L’agriculture à travers les âges, histoire des faits, des institutions, de la pensée et des doctrines économiques et sociales. 5 vols. 1935–1965 Paris: De Boccard. → See especially Volume 2: Première période de Hammourabi à la fin de l’empire romain, by E. Savoy, 1935. Volume 3: L’agriculture au moyen âge de la fin de l’empire romain au XVIe siècle, by R. Grand and R. Delatouche, 1950. Volume 4: L’agriculture du XVIIe siècle à la fin du XVIIIe, by E. Soreau, 1952.

Below, Georg von (1920) 1926 Probleme der Wirtschaftsgeschichte: Eine Einführung in das Studium der Wirtschaftsgeschichte. 2d ed. Tübingen (Germany): Mohr.

Cambridge Economic History of Europe. Volume 1: The Agrarian Life of the Middle Ages. Edited by T. H. Clapham and Eileen Power. 1941 Cambridge Univ. Press.

Duby, Georges 1962 L’économic rurale et la vie des campagnes dans l’occident médiéval France, Angleterre, Empire, IXe-XVe siècles: Essai de synthèse et perspectives de recherches. 2 vols. Paris: Aubier.

Laveleye, Émile de (1874) 1901 De la propriété et de ses formes primitives. 5th ed. Paris: Alcan.

Meitzen, August 1895 Siedlung und Agrarwesen der Westgermanen und Ostgermanen, der Kelten, Römer, Finen und Slawen. 3 vols. and Atlas. Berlin: Hertz.

Schultz, Theodore W. 1945 Agriculture in an Unstable Economy. New York: McGraw-Hill.

Slicher van Bath, Bernhard H. (1960) 1963 The Agrarian History of Western Europe, a.d. 500–1850. London: Arnold. → First published as De agrarische Geschiedenis van West-Europa, 500–1850.


Agricultural History. → Published since 1927 by the Agricultural History Society.

Agricultural History Review. → Published since 1953 by the British Agricultural History Society.

Annales: Économies, sociétés, civilisations. → Published since 1946. Supersedes Annales d’histoire sociale, Vols. 1–3 (1939–1941), which superseded Annales d’histoire économique et sociale, Vols. 1–10 published between 1929 and 1938.

Rivista di storia dell’ agricoltura. → Published since 1961 by the Istituto di Tecnica e Propaganda Agraria.

Zeitschrift für Agrargeschichte und Agrarsoziologie. → Published since 1953.


Until some yet unanticipated chemical revolution occurs, the production of food, fiber, and related products will remain an economic activity essential to the continued survival of man on this planet. Anthropologists have found civilizations or groups that did not travel, exchange goods, or manufacture. They have not, however, reported groups that did not eat, and the civilizations that have not used some method of protecting the human body from the elements have been few. Thus, the economic activity embraced in agricultural production has as its primary purpose the meeting of the physiological needs of man, although in most economies agricultural production involves products that go beyond meeting these needs.

Until a society has met its basic needs for food and fiber its economic activity is directed to little else. In a wealthy or advanced economy the production of food and fiber constitutes a small fraction of its total economic output and often an even smaller fraction of its total consumption. Even so, the importance of agricultural production should not be underestimated and an understanding of the nature of the economic activity involved should not be neglected.

Definition and measurement

The problem of defining agricultural production involves defining both “agricultural” and “production.” Agricultural production as used in this discussion will include the growing and/or harvesting of food and fiber products grown for legal human consumption. Thus, economic activities that may take place within the unit producing an agricultural product, but that occur after harvest, such as processing, curing, or marketing, generally are not considered production. It should be noted that products not classified as either food or fiber—such as flowers, tobacco, and industrial oilseeds—are also usually included as agricultural production. Such products as natural rubber and forest products are often classified as agricultural production.

Agricultural production usually means the production of a product via a biological process: the idea of growing is involved. Even if growth takes place entirely removed from natural processes or the earth, as in modern-day broiler and egg production, it is still classified as agricultural production.

Defining agricultural production is a relatively simple problem; measuring agricultural production is not so simple, and the results are somewhat inexact, even in advanced economies. One problem is the avoidance of double counting in determining agricultural production; another is not counting very large parts of the production that actually occurs.

The problem of double counting occurs because many agricultural products are not consumed directly by humans but are used as intermediate products in other agricultural production. In some countries much of the crop acreage is devoted to the production of forage and feed grains that in turn are fed to livestock: the livestock is eventually used for human consumption. In many parts of the world the farm power is supplied by animals, and much of the crop production is to provide food for these animals which in turn are used to produce food for human consumption. If we are to avoid double counting we cannot count total crop production and total livestock production as net product. It is necessary to deduct that portion of crop and livestock production used for farm power arid that portion of crop production used to produce livestock output. If this deduction can be accurately made, the resulting measurement consists of net farm output destined for human consumption. It should be recognized, however, that even in wealthy countries with good statistical measures of gross crop and livestock output the deductions are only approximations. In countries with poor statistical estimating methods, the estimates are only gross approximations—if they are made at all.

The second problem in measuring agricultural production is that of accounting for much of the production in subsistence agriculture. In parts of the world up to 80 per cent or more of the population live by primitive agricultural production that is primarily for personal or family consumption. Little, if any, of the product that is produced is sold outside the family or the village, unless there is a surplus above family or local wants. In such areas of the world the population estimates carry wide margins of error, and estimates of production and consumption in such areas have an even wider margin of error. One of the reasons that some areas have shown notable increases in agricultural production in the early stages of economic development may be that for the first time production that was previously unmeasured is caught in the newly developing market economy or by improved statistical measurements.

Thus, in using statistics relating to agricultural production one should view them with more caution than is sometimes exhibited. In the wealthy noncommunist countries the statistics generally are reasonably accurate and complete. In the underdeveloped countries wide margins of error are frequent in statistics relating to agricultural production. In some countries the usual margins of error are compounded by national policy deliberately designed to mislead observers regarding actual production, so that such statistics on agricultural production may be of little value.

Types of organization

Agricultural production has been organized in several different ways in different parts of the world and at different periods of time. These various forms of organization have had significant effects upon the rates of change and growth in productivity in agriculture and, in some cases, upon the entire society in which they existed.

It should be recognized that in most respects the different types of organization of agricultural production are not distinct and clear-cut. Classifications of types of organization are in part a function of the economic system in which they are found. Units that would be classified as low-production or subsistence farms in the United States might be classified as medium or large-scale farms in other agricultural economies.

For purposes of classification it is useful to consider four elements: (1) the quantity of resources involved in the production unit; (2) the proportions of those resources (land, labor, and capital) involved in a typical production unit; (3) who has the power to decide how the resources of the production unit are used; and (4) the extent to which such economic factors as product and resource prices determine the way in which the resources of the production unit are used.

Subsistence. Probably the largest in numbers of persons involved, if not in production, is the subsistence agricultural production typical of many of the underdeveloped areas of the world. Subsistence agriculture is often organized around tribal or village groups, with members of the village engaging in agricultural production in the areas adjacent to the village. This organization is marked by a low ratio of land per worker and the almost complete absence of capital goods. Production processes are heavily influenced by custom, superstition, and long-standing experience. Not only is the individual producer capital scarce but community capital in the form of roads, irrigation, communication, and transportation is often absent. In such areas neither the market for products nor the market for productive factors is well developed, so that the usual economic forces of prices and incomes may produce less response than is typically expected in a production process. Thus, much of the subsistence agricultural production in the world is primarily for consumption by the members of the family producing it, although some of its products do move into market systems, both local and international.

Plantation. In those economies where subsistence agriculture is found there is often another form of economic organization of agricultural production—plantation agriculture. Its economic organization contrasts sharply with that of subsistence agriculture: typically, it is entirely market oriented, selling its products in national and international markets. In fact, agricultural production from such organizations often is the major source of foreign exchange for underdeveloped countries. The economic organization of plantation agriculture frequently involves large capital investment, often from foreign sources. The ratio of land and capital to labor in production is higher than in subsistence agriculture. The labor supply for plantation agriculture usually is local, with payment in wages or goods rather than by sharing in the returns. The technical production processes are centrally determined by the managers. Quite often the auxiliary services necessary to the specific production and marketing of the particular commodity involved are highly developed, in striking contrast to similar developments for the rest of the agricultural economy concerned. [See Plantations.]

Hacienda. Another form of economic organization of agriculture is that of the hacienda, found in Latin America. These organizations are privately owned, with the owners generally living elsewhere. Unlike plantations, haciendas usually do not involve high capital investments and modern technical methods. In fact, much of the problem of inadequate agricultural production in many Latin American countries can be attributed to the lack of intensive use of some of the most productive land—which is generally on haciendas. Haciendas are typically used for livestock grazing and cereal crop production, involving low capital and labor inputs per unit of land. The labor used in such production receives little pay and has little or no incentive to adopt new technologies. Almost all observers agree that this system of agriculture is relatively inefficient at both the individual firm and national levels, but since land ownership and political power are closely related there is little incentive to change unless change is forced by outside events.

Large-scale production with collective ownership. Another form of organization of agricultural production is found in the large-scale farms that dominate agriculture in the Soviet Union and some other eastern European countries. These are state or collective farms. In some other areas, notably Israel, agricultural production is organized along similar lines, but the farms are cooperative in structure. The capital for this type of large-scale agricultural production is public capital, not owned or controlled by those who actually produce the farm products. In general, large quantities of capital are involved, in the form of both land and machinery. Such farms are primarily for the purpose of producing for nonfarm consumption and are usually heavily dependent upon nonfarm-produced goods for productive inputs. Even in the communist countries a price system is used as one of the methods of allocating productive resources to and within the agricultural sector. Moreover, some type of incentive system frequently is used in order to induce workers on the large-scale farms to increase output. Since these large-scale farms often are specialized in the production of field crops, workers on such farms often are allowed to maintain their own small plots or farms for the production of fruits, vegetables, and livestock products. Even in communist countries the agricultural workers usually are allowed to market some of the products from these private plots [see Communism, economic organization of, article onagriculture].

Large-scale production with private ownership. In the United States and other countries there are some large-scale agricultural production units which are privately owned; sometimes they are corporate in structure. They involve large capital inputs, use the most advanced technology, and often are highly efficient units of production. Such farms are almost totally dependent upon hired labor; the capital-to-man and land-to-man ratios are usually very high; and the management decisions are usually centralized, with the production specialized in one or a few products.

Large-scale organization of agriculture has proved to be less effective in the production of some livestock products than it is in the production of crops. One exception is the production of range livestock, for which large acreages of land can be used extensively without significant labor inputs. The difficulties of organizing large-scale units to produce livestock products appear to be the result of diseconomies in the areas of disease control and production management decisions that arise in livestock production. Large-scale agricultural production involves centralized decisions on technology and management, whereas almost constant contact between manager and product appears to be a prerequisite to most successful livestock production. However, technical breakthroughs in disease control have made large-scale agricultural production feasible for poultry products, and similar technical developments may make large-scale production units feasible for other livestock as well.

Small-scale production. Somewhat above the primitive subsistence agricultural production units described earlier are the small farms that are common in western Europe, Japan, parts of Latin America, and in the United States. Such farms may involve from one to ten or more acres, so that the ratio of land to labor is low. The capital input usually is low also, and the total output of the unit may not be high. Such farms produce in excess of family consumption needs; in fact, their production often is primarily for sale. However, the resources available are usually too few to employ profitably all of the available labor, so that the level of living of these farmers is low for the society in which they are found.

Medium-scale production. There are, finally, farms that are larger scale than those just discussed but that fall short of the large-scale farms in some continuum of size. This type of agricultural production typifies the agriculture of the United States and western Europe. It is marked by private ownership of the productive resources, with the ownership, management, and labor function carried out by a single family. This type of organization has come to be called the “family farm” in the United States, and its strengthening vis-à-vis other forms of economic organization of agricultural production has always been a major goal of U.S. farm policy.

Despite the rather modest size of these farms relative to the large-scale farms previously discussed, their capital-to-man ratio often tends to be high. This is because the response to technical and economic change in agricultural production in the United States and western Europe has been primarily to increase the capital used in conjunction with the labor of the farm operator and his family, thus enabling them to increase agricultural production substantially. Technical advances in agricultural production in the United States have not but rather to a reduction in the number of subled to a shift from small-scale to large-scale units sistence farms. In the United States these small-scale and medium-scale farms accounted for 70 per cent of total agricultural production in 1959, and their contribution to output actually has risen relative to that of large-scale farms over the past two decades.

These medium-scale and small-scale farms are organized to produce almost entirely for market consumption. They are increasingly dependent upon nonfarm-produced capital items and productive resources beyond the land and family labor. A market price system is the primary determinant of resource allocation to and within these producing units. Decision making about all phases of production is almost completely decentralized to the level of individual producers. Of course, such a system of economic organization requires an extensive public investment in education of the operator and family members, roads, market information, and other overhead services if it is to function effectively.

From historical performance, it appears that, based upon economic criteria, the decentralized medium-scale and small-scale production units in agriculture have excelled in their ability to produce farm products. Rates of growth in output and productivity on such farms have far exceeded those achieved by other types of economic organization of agricultural production. It is probably a mistake to say this superior performance is due to a “free” price system rather than to recognize that it is the result of a complex decentralized production system, heavily dependent on its outside auxiliary services, both private and public, to provide a constant flow of new methods of production and on managers able to absorb and apply these changes in a market economy.

The distribution of world production

Neither population nor agricultural production is distributed equally around the world, and foreign trade does not serve to cause consumption patterns to vary significantly from the population–production distribution. Table 1 shows the distribution of population, arable land, and agricultural production, as estimated by the United States Department of Agriculture in 1958.

Table 1 — Distribution of world population, arable land, and agricultural production, by regions, 1958
 PopulationArable landAgricultural production
 (Per cent of world total)
a. Also North Korea, North Vietnam, and Mongolia.
b. Includes Pacific Islands.
Source: Adapted from U.S. Department of Agriculture [1961] 1962, p. 9, table 1.
United States 6.1 13.5 15.8
Canada 0.6 2.9 1.5
Australia and New Zealand 0.4 2.0 2.2
Western Europe 10.6 6.9 15.7
Eastern Europe 11.2 19.9 14.2
Mainland Chinaa 23.5 8.0 16.0
Japanb 3.2 0.4 2.1
South, southeast Asia and other Far East 26.7 18.3 14.2
Latin America 6.7 7.3 9.1
Africa and Near East 11.0 20.8 9.2
World 100.0 100.0 100.0

The United States, Canada, Australia, New Zealand, and western Europe had 17.7 per cent of the world’s population, contained 25.3 per cent of its arable land area, and, because of the advanced agricultural production techniques used, accounted for 35.2 per cent of the world’s agricultural production. At the other end of the scale the Far East

Table 2 — Distribution of world population and food supplies, by regions, 1957–1959
Source: Food and Agriculture Organization of the United Nations 1963, p. 20, table.9
North America6.621.829.210.4
Far East, including mainland China52.927.818.544.2
Near East4.
Latin America6.

(omitting Japan) had one-half of the world’s population, 26 per cent of its arable land, and accounted for only 30 per cent of its agricultural production.

Total world agricultural production is highly skewed in favor of the developed countries, and trade does little to correct this imbalance. This is especially true for the more preferred products, the animal products, which are even less equally distributed in relation to population than is total agricultural production (Table 2). Europe and North America, with 28.2 per cent of the world’s population, consume 67.6 per cent of the food supplies coming from animal sources. Peasant or subsistence agriculture tends to be crop agriculture, for only after a relatively high income level is reached is it feasible to pay the cost, in terms of energy loss, that is involved in the conversion of crops to livestock products prior to their use for human consumption.

Thus, agricultural production relative to population is greatest in those areas where medium-scale and small-scale market-oriented agriculture, with decentralized decision-making units of production, predominates. In the Soviet Union and other communist countries, where large-scale agriculture is most common, private small-scale farms still are a major source of production of livestock and fruit and vegetable products. The inability of subsistence agriculture to provide an adequate base for economic growth has long been recognized and underlies the various attempts at the reorganization of agricultural production underway in almost every underdeveloped country.

Trends in agricultural production. Total agricultural production in the world has risen markedly in the two decades from pre-World War II to 1960 (Table 3). Despite many impressions to the contrary, agricultural production has risen at a more rapid rate than has population over the past two decades. World agricultural production per capita is reported to have risen about 12 per cent and the per capita production of food products about 14 per cent.

However, despite this encouraging trend in agricultural production, the trends in production and population growth have been adverse to the underdeveloped areas of the world (Table 4). North America, Europe, and Oceania have experienced huge increases in agricultural production, starting from a level that was already favorable relative to their population. As a result, the major agricultural problem in these areas has been the maintenance of income levels of agricultural producers in the face of increases of output of products with an inelastic demand. The less developed areas of the world have experienced almost the same percentage increases in production as the developed areas; but in most cases population growth has exceeded that of agricultural production, so that production per capita actually has declined from prewar levels. Thus, little or no gain has been

Table 3 — Indices of world agricultural production in relation to population, 1952/1953-1956/1957 average = 100*
 Prewar (average)1948/1949-1952/1958 (average)1953/1954-1957/1958 (average)1958/19591959/19601960/19611961/1962 (Preliminary)
*The indices have been calculated by applying regional weights, based on 1952/1953-1956/1957 farm-price relationships, to the production figures, which are adjusted to allow for quantities used for feed and seed. The indices for food products exclude coffee, tea, tobacco, inedible oilseeds, animal and vegetable fibers, and rubber. Mainland China is excluded because of incomplete data.
Source: Food and Agriculture Organization of the United Ntions 1962, P. 16, table 11-13
Total production       
All agricultural products7788102113116119119
Food products only7688103114116119119
Per capita production       
All agricultural products9595101106106106105
Food products only9494101106106107105
Table 4Changes in food production and population, 1959/1960-1961/1962 average in relation to prewar period
 PopulationTotal food productionPer capita food production
 (Percentage increase*)
a. Minus sign indicates decrease.
b. Includes Yugoslavia.
c. Excludes mainland China.
d. Extends from Cyprus and Turkey to Afghanistan and includes Libya, Sudan, and the United Arab Republic.
Source: Food and Agriculture Organization of the United Nations 1962, p. 16, table 11-3.
North America436516
Western Europeb194320
Eastern Europe126246
Four above regions215629
Latin America7169–1
Far Eastc4645–1
Near Eastd5352–1
Four above regions51542
All above regions385613

achieved from the low levels of output per person that marked these areas of subsistence agriculture more than two decades ago.

The comparative ability of certain types of agricultural organization to expand output is further illustrated by Table 5. Here we see that the underdeveloped, peasant agricultural economies have barely regained their prewar levels of crop output per capita and that most of the postwar increase in agricultural production has been in the form of livestock products and has taken place in the developed countries. Thus, the period since 1950 has been marked by attempts by underdeveloped countries to rapidly expand agricultural production to keep pace with population growth, whereas that of developed countries has been to retard rates of increase in farm output to forestall sharp declines in the price of farm products and the income of agricultural producers.

Sources of increased production. Early economists postulated that agricultural production would place a limit upon economic growth and, finally, population growth in an economy. They predicted that expansion of output would require recourse to increasingly inferior land, to the point where food production would limit the amount of other goods that could be produced and even the population. For much of the world this model still threatens to become reality, yet in some economies agricultural products are produced in great quantity and with a declining proportion of the nation’s resources. It is this latter model of agricultural production that has attracted world attention and offers hope that the world can feed and clothe an expanding population and still produce increasing quantities of other goods and services.

This marked increase in agricultural production in the developed countries has been accomplished without expanding the land under cultivation and despite a major decline in labor used. It has been the result mainly of the addition of major capital equipment, in the form of machines, and the application of science to agricultural production. Science has made possible the development of new breeds of animals that produce more product per pound of feed; science has developed crops that produce more usable product from an acre of land; and science has produced new machines that make new capital investment more productive than that which previously existed. Research workers and individual managers have devised improved forms of economic organization that benefit from specialization and the economies of scale.

Thus, most of the increase in agricultural production in the advanced economies has been the

Table 5 — Per capita food supplies available for human consumption, by regions, prewar world average = 100
 CropsaLivestock and fishbCropsaLivestock and fishbCropsaLivestock and fishb
a. Vegetable oils and fats are not included.
b. Animals fats and oils are not included.
c. Not available.
Source: Food and Agriculature Organization of the United Nations 1963. p.18, table 8.
North America178394172460157495
For East. including mainland China843875308338
Near East112721087112572
Latin America77123869793110

result of growth in productivity concurrent with sharp changes in factor proportions in the agricultural economy. One of the major problems of the advanced agricultural economies is to continue to adjust to the sharp changes in factor proportions that are necessary as a result of sharply differing rates of growth in factor productivity.

One of the characteristics of advanced agriculture is its heavy dependence upon reproducible factors of production, in contrast to the traditional dependence of agricultural production upon land. Since these reproducible items used in agricultural production generally constitute only a fraction of the total demand of an economy for steel, chemicals, and petroleum products, the supply of these productive factors is relatively elastic to the agricultural industry. Thus, if the price level for farm products is favorable to the increased use of reproducible factors of production, it is possible to expand agricultural production substantially in a short period of time. This is in sharp contrast to the traditional or peasant agricultural economies, where production is still dependent primarily upon the natural resources of land and water, family effort, and little, if any, reproducible capital. Since the supply of these traditional factors of production is not readily expandable, the output of farm products is not very responsive to favorable prices.

Although the expansion of advanced agriculture is relatively responsive to changes in output or input prices, contraction of aggregate output is much less so. Much of the reproducible capital used in modern agriculture has a useful life extending over several years or production periods, and once put into use in agriculture the capital is likely to continue in production until its productive value is exhausted. Even so, the dependence of advanced agricultural production upon a steady use of expendable flow inputs (fertilizer, insecticides, fuel) means that the prices of these productive factors relative to output prices can and do influence aggregate production.

If total agricultural production in the world is to expand sufficiently to provide for the growing world population, much of world agricultural production must be shifted from peasant or subsistence agriculture to some kind of market-oriented production units making use of advanced technology and large quantities of reproducible capital and having an economic organization capable of dealing with and responsive to economic change. Thus far only a small fraction of the world’s agricultural production is so organized, and improved organization of agricultural production stands as a major task in the underdeveloped economies. In the developed economies, where such advances in the organization of agricultural production have occurred, too little still is known about the basic economics in agriculture of capital flows and technological advance. Thus, the economics of agricultural production remains important throughout the world.

Dale E. Hathaway

[See alsoFoodandLand.


Brown, Lester R. 1963 Man, Land, and Food: Looking Ahead at World Food Needs. U.S. Department of Agriculture, Foreign Agricultural Economic Report, No. 11. Washington: Government Printing Office.

Eicher, Carl; and Witt, Lawrence (editors) 1964 Agriculture in Economic Development. New York: McGraw-Hill.

Food and Agriculture Organization of the United Nations 1962 The State of Food and Agriculture, 1962. Rome: The Organization.

Food and Agriculture Organization of the United Nations 1963 Third World Food Survey. Freedom From Hunger Campaign, Basic Study No. 11. Rome: The Organization.

Freedom From Hunger Campaign, Basic Study, Nos. 1–11. 1962–1963 Rome: FAO.

Schultz, Theodore W. 1964 Transforming Traditional Agriculture. New Haven: Yale Univ. Press.

U.S. Department of Agriculture, Economic Research Service (1961) 1962 The World Food Budget, 1962 and 1966. Rev. ed. Foreign Agricultural Economic Report, No. 4. Washington: Government Printing Office.


Viewed broadly, agricultural capital (or, for that matter, capital in general) includes investments in the production of technological change (Schultz 1964, chapter 10) and in the training of people (Schultz 1964, chapter 12) as well as in physical properties such as barns, tractors, irrigation ditches, hoes, draft stock, cattle, hogs, and growing plants (Tostlebe 1957). So viewed, capital investment in agriculture varies widely from undeveloped to developed countries, from competitively organized to highly controlled economies, and from indigenous systems to plantation systems of farming in tropical regions. The movement of capital into and out of agriculture also varies widely among different kinds of agricultural economies, thereby having profound impacts on the development of the nonfarm sector as well as on the farm sector.

Agricultural capital is thus a most interesting subject of study. The formation, use, and movement of agricultural capital help explain differences in the productivity of diverse agricultural economies and in the welfare of farmers and nonfarmers the world over. By studying capital we can understand some of the differences in productivity between (1) private and publicly managed agricultural systems, (2) Nigerian and Thai rice producers, and between (3) western European and Soviet or mainland Chinese agriculture.

When one considers the formation and use of agricultural capital from a world-wide historical perspective, it is helpful first to examine what goes on in primarily agricultural societies. As such societies develop capacity to produce more than subsistence, it becomes possible for them to save and invest. The diversion of what might have been consumption into investment takes place first privately and later as a matter of public policy.

Once a farmer has acquired the ability to produce enough to feed himself and his family, he can divert part of his energy and resources to producing more tools, buildings, paddocks, and livestock for use in further production. These articles are capital equipment which he invests in production. The resulting increase in production in turn becomes available either for sale or reinvestment in production. If the extra product is sold, the income produced is available to purchase either capital or consumer goods. Often both capital and consumer goods are acquired, and output increases still further. Per capita farm incomes increase if the value of the increased output remains with the producers and if their population increase is less than the increase in output.

At various times in all societies, and typically in some, the process of diverting agricultural output away from consumption into investment has failed to develop, has broken down, or has proceeded slowly. The reasons for this are numerous, including, among others: (1) high birth rates and, hence, high demands for the means of subsistence; (2) meager natural resources and harsh climatic conditions; (3) military action, by either invaders or indigenous governments, which reduces agricultural output or curtails capital investment in agriculture; (4) demands for agricultural output and capital to develop the nonfarm economy; and (5) exploitation of agriculture by public measures. As a result of these and other conditions, governments, organizations of farmers, and other groups have often taken public steps to promote capital formation and investment in agriculture.

Public promotional policies and programs

Public steps to promote capital formation and investment in agriculture include the organization of public agricultural credit systems. Some are highly subsidized, such as the U.S. Farm Security Administration, and others relatively self-sufficient once brought into existence, like the Production Credit Association. Both of these arose as part of a public effort to expand and maintain the use of capital in U.S. agriculture in the depression years of the 1930s.

Also involved have been direct grants of capital to individual farmers. Recipients of such grants include Norwegians whose farms were damaged by the Germans retreating to the sea from northern Finland in World War ii; low-income farmers in the mid-1930s, covered by the U.S. Resettlement Administration; and Nigerian farmers under the Eastern Nigerian government’s tree-crop rehabilitation scheme.

Capital is also moved into agriculture as indirect public investment not going to individual farmers. It may be in the form of irrigation systems, roads, public market facilities, electrical facilities, drainage ditches, and flood control, to mention but a few. These investments may take place through direct grants, subsidized loans, or credit facilities which become self-supporting once established.

Though infrequent in the United States and western Europe, large-scale investment of public funds directly in farm production often occurs in countries with state-operated farms and plantations. In some instances these funds come from taxes levied on the nonfarm economy. In other instances, and perhaps more frequently, they come from levies of various forms on cash export crops such as rice, rubber, and oil-palm produce. The 1962–1968 development plan of the Eastern Nigerian government, for instance, provides for large direct investments in state-operated plantation and settlement schemes. A major source of this money is a “tax” levied on oil-palm producers by a marketing board which pays farmers less than the world price for the palm oil exported through it.

There are also important public capital investments in agriculture which are still more indirect than public investment in roads, irrigation projects, electrical facilities, and the like. These involve public-supported research and education, two of the hallmarks of the truly advanced agricultural economies of the world (Schultz 1963; 1964). The research and educational programs of the U.S. land-grant colleges and the Department of Agriculture are outstanding examples of public investment in human and technological capital. Heavy public investment in agricultural research and training is especially characteristic of the other advanced agricultural economies of the world such as Denmark, England, the Netherlands, Canada, and Australia.

In many economies public investment in agriculture is carried out with money obtained from the farm economy through direct taxes, export assessments, profits from state-owned or operated marketing agencies, or state income from appropriated farm properties. In Thailand, for instance, heavy export charges on rice support extensive public investment in irrigation facilities and in agricultural extension and research. In Nigeria, marketing board profits (taxes) provide capital to promote the agricultural projects of the 1962–1968 development plan.

In some instances, privately organized groups of farmers sell bonds and make credit contracts for the installation of drainage ditches, pumps, and irrigation equipment. In some such cases the savings come from the farm economy; in others, from the nonfarm economy.

Public policy is an important determinant of the rate of capital formation in agriculture. Some policies and programs exploit farmers heavily, leaving little surplus to accumulate in agriculture. If such taxes are levied on commodities in whose production the country has a comparative advantage, the over-all rate of capital accumulation in the country’s agriculture may be reduced substantially even though the tax moneys are reinvested in agriculture. This is especially true if corruption and inefficiency are associated with the expenditure of the funds and if the investments are in the production of crops and commodities in which the country has a low comparative advantage. If the funds are invested outside of agriculture, capital formation in agriculture may be reduced to zero. If taxes from parts of the agricultural economy with a comparative advantage are invested corruptly and inefficiently in the production of nonfarm products which have a comparative disadvantage, the country’s over-all capital formation and economic growth may be greatly curtailed or may even cease entirely.

Various countries have used different combinations of policies and programs both to promote agricultural production and to obtain capital to develop their nonfarm economies. The results have varied from starved people and unsupported industry at one extreme, to farm surpluses, rapid farm capital formation, low food prices, and substantial transfer of people and income out of agriculture for industrial development at the other extreme. Among the countries successful in finding a fairly effective combination of policies and programs is the United States.

U.S. experience

The role which expanded use of capital has played in increasing the output of the U.S. agricultural economy is of special interest to nations faced with the problem of expanding their agricultural output. It commands the interest of administrators and students of economic development the world over.

Strauss and Bean estimated that U.S. farm production doubled from 1870 to 1895 (1940). This expansion involved the use of more land, labor, and capital and better technology. The new technology was largely that developed by “free-lance” inventors and an aggressive group of agricultural entrepreneurs. It brought new equipment, improved breeds of animals, improved plant varieties and species, and advancing methods of organizing individual farms.

From 1895 to about 1925 the nation’s total agricultural output rose about as much as it had from 1870 to 1895 (Barger & Lansberg 1942). This increase was based on the use of more land, additional capital, and improved technology. The amount of labor used stayed essentially the same, but its quality improved with the expanding base for education (Johnson 1955). The capital used in this expansion was different from that of the preceding period. It involved mechanical power and improved varieties of plants and animals. This expansion also involved changes in tillage practices, crop rotations, and control of pests and diseases. At least as important as the new technology was the improvement in the human agent resulting from capital investments in both general and vocational training of farm people.

The next 17 years, from 1925 to 1942, resulted in another increase in production equal to the total output of 1870. When the prices of farm products fell relative to costs, special price-support programs maintained incentives to individual farmers, and special credit programs were developed to bring capital into agriculture. After the early 1940s agricultural production continued to expand at a rate which brought about, by the early 1960s, another increase equal to 1870’s output. By then agricultural production in the United States was approximately four times as high as in 1870. The expansions from 1925 to the early 1960s followed the general pattern of 1895 to 1925. Land use did not expand greatly but labor use contracted sharply, while capital use increased. The expansion of capital use went to improve technology and to educate farmers as well as to provide physical items of production such as tractors, breeding animals, buildings, fences, wells, orchards, and tools.

In the 1870–1960 period there were also important reallocations of agricultural production from farm to farm within regions, from region to region, and between the farm and nonfarm economy. These reallocations greatly increased the productivity of American agriculture relative to small-unit agricultural economies such as those found in Europe in the same period. Capital-embodying technological advance was instrumental, along with institutional changes, in making possible and in bringing about these reallocations of production. Increases in production exceeded, both proportionately and absolutely, the increased use of resources in agriculture. Examples of farm-to-farm reallocations of production are found in the emergence of specialized dairy, stock-fattening, and cash-crop farms in areas formerly characterized by generalized farming. At the regional level fruit, vegetable, and livestock production has been specialized in areas of high comparative advantage. Similarly, the farm economy has come to specialize in crop and livestock production while transferring to the nonfarm economy the production of marketing and processing services, such as power units (tractors instead of horses) and fuel (petroleum products instead of horse feed). Specialization became the outstanding characteristic of the modern American farm.

In addition to the higher output which has resulted from increased use of capital, improved technology, and greater specialization in U.S. agriculture, there is the vast amount of income transferred for investment as capital in the nonfarm economy. This income flow has been largely voluntary in the form of inheritances to off-farm migrants, a process free of the social and political problems involved in taxing and conscripting farm capital for the development of nonfarm economies.

At times this outflow, the pattern of capital accumulation, and the impact of business booms and depressions were such as to reduce the capital available to U.S. agriculture below its needs. This situation has been remedied, intentionally and sometimes unintentionally, with partially subsidized credit programs for farmers and with price-support programs which have increased the income available to farmers for use in capital formation.

While major public investments have been made in U.S. agriculture in education, roads, research, irrigation schemes, etc., no extensive public investment has been made directly in agricultural production; instead, an environment conducive to such private investment has been maintained. This is in sharp contrast to many developing countries. They have taken drastic steps, including taxation, appropriation, and export or other levies on exportable farm products, to transfer income out of agriculture to develop the nonfarm economy. When the depressing effects of these actions on farm production and farm capital formation become apparent, attempts are often made to stimulate agricultural production with direct governmental investment. Results of such policies to date, both in communist and in noncommunist countries, have been far from encouraging—the Soviet Union, China, Thailand, Argentina, and Nigeria being cases in point [see Communism, economic organization of, article onagriculture].

An alternative policy, followed in the United States from 1870 to 1960, has also been characteristic of Denmark, Australia, New Zealand, and England. It is the basis for the current expansion in agricultural output in western Europe. There, new institutional arrangements facilitate more specialization, better prices to farmers, and/or wider markets for those products which can be produced at a comparative advantage. Also, greatly expanded capital investments are being made in both the education of farmers and in the development of agricultural technology, while capital investment in direct farm production is left in the hands of farmers rather than carried out by governments. [See Agriculture, article ondeveloping countries.]

Experience of other countries

A brief survey of the creation and use of agricultural capital in different countries suggests certain generalizations about the types of institutions and policies which lead to rapid formation of capital in agriculture and to the transfer of income out of farming to promote nonfarm capital formation.

Broadly speaking it is possible to group the experience of various countries, at different times, into four categories:

(1) Success in increasing the stock of capital in agriculture, so as to obtain both high-level farm output and the transfer of substantial income out of agriculture for nonfarm development, in the presence of substantial natural resources relative to population.

(2) Success in obtaining sufficient growth of capital in agriculture to obtain both a high-level agricultural output and a transfer of substantial income out of agriculture for nonfarm development despite meager natural resources relative to population.

(3) Inability to obtain adequate capital growth in agriculture for high-level farm output and a significant transfer of income out of agriculture for nonfarm development despite substantial natural agricultural resources relative to population.

(4) Inability to obtain adequate capital growth in agriculture for high-level farm output and significant transfer of income out of agriculture for nonfarm development in the absence of substantial natural resources relative to population.

These categories suggest that agricultural capital formation and use of farm income are not determined solely by initial man–land ratios. Whether this independence is apparent or real is not too important. Obviously, if it is real other factors explain success and failure; if it is only apparent other factors obscure the true relationship. In any event, the other factors are of crucial importance as variables to be controlled by the policies and programs of a country.

The first step in isolating the other factors at work is to examine the countries which fall into the four categories: (1) success with substantial resources, (2) success despite meager resources, (3) inability despite substantial resources, and (4) inability in the presence of meager resources. In the first category are the United States (already discussed) and New Zealand; in the second, Japan (since early in this century) and Switzerland. In the third, we find the Soviet Union and Argentina (since the 1930s); in the fourth, Albania, Haiti and, perhaps, India. Further examination would extend the number of countries, but this list is sufficient to reveal common characteristics of the successful ones. Following are some major differences between the successful and unsuccessful countries.

(1) In successful economies favorable rates of return have been maintained as incentives for private farmers to adopt new technology and acquire new skills. In the unsuccessful economies, farm incomes have often been taxed or otherwise reduced and seldom if ever supported; rewards have not been tied specifically to adoption of new technology and acquisition of new skills.

(2) Whereas in successful countries land rents have been permitted to allocate use of land, in unsuccessful countries land rents have been eliminated or prevented by policy or custom from playing an allocative role.

(3) In the successful countries there has been extensive public investment to provide a broad educational base for farmers. In those not successful general education of farmers has been restricted; little public investment has been made in such education.

(4) Generally in successful countries there has been heavy investment in the agricultural sciences and disciplines devoted to technological advances in farming. In unsuccessful countries there has been little investment of this type.

(5) In the successful countries there has been large-scale public investment in extension programs aimed at helping private farm entrepreneurs adopt new technology, whereas in unsuccessful ones there have not been extensive investments in such extension programs.

(6) In successful countries public programs have not forced capital out of agriculture; at times movements of capital into agriculture have been encouraged. In some unsuccessful countries capital has been forced out of agriculture into the nonfarm economy, and in some instances political considerations have led to the actual destruction of agricultural capital.

(7) Whereas all successful countries have experienced large transfers of income from the farm to create capital in the nonfarm economy, in unsuccessful countries such transfers have been small or, when forced, moderate.

(8) All the successful countries, but only some of the unsuccessful, have made substantial public investments in roads, communications, irrigation, drainage, market facilities, etc., in indirect support of farm production.

(9) None of the successful, but several of the unsuccessful, are characterized by fairly permanent public investment in direct agricultural production.

(10) All of the successful show a tendency to overinvest in direct production to the extent of expanding production so as to put adverse pressure on farm product prices and returns on investment. The unsuccessful do not show this tendency; consequently food prices are high, but there is little evidence of high returns on investment.

(11) In successful countries, when investment in direct farm production has proven inadequate, individual farmers have been helped. In the unsuccessful, on the other hand, little help has been given individual farmers in similar circumstances.

(12) Among both the successful and unsuccessful there are countries that have benefited from substantial foreign markets and countries that have not.

(13) Among both successful and unsuccessful countries, some have received foreign aid and some have not.

Role of management

Our analysis of the performance of different economies in creating and using agricultural capital suggests that management—private and public—is a crucial variable. Publicly managed farm economies tend to underinvest in direct agricultural production while capital formation tends to lag. On the other hand, privately managed farm economies tend to overinvest. While many privately managed agricultural economies have substantial programs for public investment in the education of farmers and in the development of technology, it appears that both kinds of economies tend to underinvest in public facilities, the privately managed less so, however, than the publicly managed. The economies placing high reliance on private managers for direct-investment decisions are of two kinds: those characterized by rapid technological, economic, and institutional change; and those characterized by low-level technology, with few advances in technology, education, and institutions. The latter have tended to reach equilibriums not characterized by substantial capital accumulation.

The above observations raise the question: What is the role of management in the development of these tendencies in the use of capital?

Managers, private or public, make decisions. Decisions are made in order to obtain objectives that are private as well as public—even in the case of public managers, because private success, as a public servant, is also an objective for a public decision maker. Private interests of public decision makers do not coincide entirely with high output and rapid capital formation. There is little incentive, for example, for the public servant managing an agricultural unit to pay attention to biological and agronomic problems: the small details of insect, pest, and disease infestations, and the variations of land with respect to fertility, drainage, soil structure, etc. Instead, the public servant often finds it advantageous to concern himself with the politics of his governmental unit. Skill applied in “managing” bureaucratic details is often likely to increase the public manager’s remuneration more than skill applied to the details of biological production problems.

The private agricultural manager, on the other hand, maximizes his personal gain by close attention to biological and agronomic detail if the market pays enough to provide the motivation. The requirement of “pay to motivate” explains why direct attempts to transfer capital from agriculture to industry by taxation and confiscatory methods often retard both production and capital formation in agriculture.

There is a tendency for private managers to exhaust possibilities for gain. This explains why traditional farm societies not subject to technical, social, political, and economic change are so organized that it is difficult to improve income by better economic adjustment of their operation under the existing technology and the existing socioeconomic and political system. When, however, rapid changes take place in technology, human skills, and tastes as a result of public investment in research, agricultural extension, and general education, many opportunities develop for advantageous changes provided the gains are not taxed away or confiscated.

In the case of heavy taxation or confiscation, expansion in farm output and farm capital formation is retarded. Examples here include rice production in Thailand and oil-palm production in Nigeria. In these instances, public investment in research and education results in little expansion of production and little capital formation, given restrictive assessments which absorb 40 to 50 per cent of world prices for rice and oil-palm produce. On the other hand, just the opposite situation exists with respect to untaxed commodities in the same two countries. From 1944 to 1962, for example, in the absence of assessments and with publicly supported research and extension programs, swamp rice acreage in Nigeria expanded from virtually none to 85,000 acres. In Thailand, corn production expanded rapidly in the absence of restrictions and in the presence of publicly supported research and extension. In both countries, with expansion in production has come substantial formation of capital both in agriculture and in related supporting activities.

The tendency of private managers to overinvest in direct production remains to be discussed. As agricultural production requires space, transportation costs introduce large differences between the acquisition costs and salvage values of durable items of capital. This difference between acquisition costs and salvage values makes it difficult to correct mistakes of overinvestment and contributes to the high level of fixed costs in agricultural production. Private managers find it difficult to foresee the increase in total production and fall in prices which take place when many farmers respond to favorable changes in technology, human skill, or economic conditions. It is difficult to correct the overinvestment because of the transportation and other costs of disinvestment. If, on the other hand, mistakes of underinvestment are made, they are easy to correct as it will still be advantageous and easy to expand production. The result is a tendency toward overinvestment in those privately managed agricultural economies which are characterized by rapid technological change, improvements in the human agent, and unrestricted prices (Johnson 1958; Johnson et al. 1961).

The tendency toward overinvestment in privately managed farm economies results in some waste of capital relative to a possible optimum. But capital formation, farm output, and lower food prices (benefiting consumers) appear to be almost uniformly superior in privately managed, unrestricted farm economies to those achieved in either publicly managed or severely taxed, privately managed farm economies.

The tendency of both privately and publicly managed farm economies to underinvest in research, education, farm services, roads, and the like now needs to be considered. There seems to be fair evidence that this tendency to underinvestment is less pronounced in privately managed than in publicly managed farm economies attempting development. The tendency of public managers to pursue private ends has been used to explain underinvestment in farm production when such managers operate farms directly. The same argument applies to public managers of investments in public facilities, whether those facilities serve publicly or privately managed farms. The somewhat lesser tendency to underinvest in public facilities serving adequately motivated privately (as contrasted to publicly) managed farm economies can be explained by (1) the pressure that rather wellto-do farmers can put on public managers and (2) the higher rate of capital formation in such economies.

In summary we may make the following observations suggested by empirical findings:

(1) Farm capital formation takes place rapidly when farmers are in a position to gain from reinvesting part of their income and when they have major responsibility for investment in direct farm production. Public investment in direct farm production has rarely proven as effective as private investment.

(2) Rapid capital formation occurs when the public makes substantial investments in both the general and technical education of farmers, in improved technology for farming, and in its extension to farmers. Investments of this kind, however, have not been effective unless substantial incentives are given to private farm managers.

(3) Formation of farm capital is accelerated when the transfer of capital from the farm to the nonfarm sector is left to voluntary processes, including transfers in the form of inherited monetary capital as well as training received by farm children who migrate to nonfarm occupations. On the other hand, programs designed to force income out of agriculture make private agricultural investment unattractive; this leads to low capital formation, retarded farm production, high real farm-product prices, and a lack of income to transfer to the nonfarm economy.

(4) Lagging farm capital formation can be stimulated with favorable price programs and credit assistance to individual farmers.

(5) However, privately managed farm economies subject to price incentives tend to overinvest in direct farm production in the presence of favorable changes in technology, human skills, human tastes, and the economic environment. Publicly managed farm economies underinvest in direct farm production, even given similar changes in technology, human skills, and tastes.

(6) Privately managed farm economies move into a stagnant equilibrium in the absence of changes introduced by publicly supported research, technical extension, and general education.

(7) Both publicly and privately managed systems of direct agricultural production tend to be characterized by underinvestment in public facilities for agricultural research and extension and in general education, roads, and other public facilities.


[See alsoAgriculture, article ondeveloping countries; Credit, article onagricultural credit.]


Barger, harold; and Lansberg, hans H. 1942 American Agriculture, 1899–1939: A Study of Output, Employment and Productivity. New York: National Bureau of Economic Research.

Johnson, Glenn L. 1955 Agriculture’s Technological Revolution. Pages 27–44 in The American Assembly, United States Agriculture: Perspectives and Prospects. New York: The Assembly.

Johnson, Glenn L. 1958 Supply Function: Some Facts and Notions. Pages 74–93 in Agricultural Adjustment Problems in a Growing Economy. Edited by Earl D. Heady et al. Ames: Iowa State College Press.

Johnson, Glenn L. 1964 A Note on Nonconventional Inputs and Conventional Production Functions. Pages 120–124 in Carl Eicher and Lawrence Witt (editors), Agriculture in Economic Development. New York: McGraw-Hill.

Johnson, Glenn L. et al. 1961 Implication of the IMS for Study of Responses to Price. Pages 150–169 in A Study of Managerial Processes of Mid-western Farmers. Edited by G. L. Johnson et al. Ames: Iowa State Univ. Press.

Schultz, Theodore W. 1963 The Economic Value of Education. New York: Columbia Univ. Press.

Schultz, Theodore W. 1964 Transforming Traditional Agriculture. New Haven: Yale Univ. Press.

Strauss, Frederick; and Bean, Louis H. 1940 Gross Farm Income and Indices of Farm Production and Prices in the United States: 1869–1937. U.S. Department of Agriculture, Technical Bulletin No. 703. Washington: Government Printing Office.

Tostlebe, Alvin S. 1957 Capital in Agriculture: Its Formation and Financing Since 1870. Princeton Univ. Press.

U.S. Department of Agriculture, Agriculture History Branch 1963 Century of Service: The First Hundred Years of the United States Department of Agriculture, by Gladys Baker et al. Washington: Government Printing Office.


This article is concerned with farm labor, both self-employed operator families and hired workers, in the more highly industrialized countries. It centers principally on the United States, with comparative references to other industrial economies, mainly European. In all industrial countries, agriculture is becoming predominantly commercial, not only in the sale of output but in the purchase of production materials and services. Subsistence production (autoconsumption) is rapidly disappearing. Within each national system of agriculture one finds a complex of government actions and interventions mixed with components of competitive market forces. In their diverse effects these complexes of economic and political forces tend simultaneously to promote the absorption of agriculture into the industrial sphere and to perpetuate its insulation. These forces profoundly affect farm occupations and at the same time determine the efficiency with which the productive resources associated with farming are utilized in the various national economies.

This essay seeks to develop two perspectives: (a) an examination of the characteristics and composition of the farm labor forces and their employment from the standpoint of manpower utilization; and (b) an examination of the occupational categories of agriculture in terms of their opportunities, requirements, and rewards. For both perspectives, the essence is change and transition. Consequently, one can scarcely avoid being challenged to try to understand the forces that appear to be shaping the future. At the risk of neglecting an adequate survey of the contemporary situation in farm labor, the motivation underlying this essay is concern with future trends and prospects.

Off-farm migration and national policy

With varying degrees of awareness, with mixed feelings of satisfaction and regret, and with ambivalences of political posture and policy, the industrial nations have been witnessing the rapid decline of their farm populations. Those who view this with regret are mainly agrarian fundamentalists who see in migration off farms an erosion of cherished values; those who view it with satisfaction include industrial employers interested in filling job vacancies and the many persons who believe that farm incomes would improve if fewer people were engaged in agriculture.

In most of the industrial nations, postwar rates of off-farm migration have been so high that, if sustained for another two decades, they will virtually eliminate the farm population. National governments have not usually (with the principal exceptions of Austria and Switzerland) tried to restrain off-farm migration nor have many governments (excepting Italy and Sweden) taken direct action to accelerate it. Indirectly, through other interventions, governments typically have followed a complex of practices that have had the effect of simultaneously aiding and retarding occupational adjustments out of agriculture. The clash has come mainly between policies designed for the protection of agriculture in general and those aimed at structural renovation. Most countries have officially acknowledged the comparatively poor income position of farm people and have invoked protective measures, such as import restrictions, price supports, and various subsidies. Governments have also acknowledged that one of the main reasons for low farm income is low agricultural efficiency. With exceptions, they have also recognized that larger and (in Europe) less fragmented farms are an essential step in achieving the efficiency that would lead to more satisfactory incomes. Most countries have both protective and “structural” policies. Although the protective measures have long traditions, they are now usually viewed as transitional to achieving structural renovation. This relationship is explicit in Swedish law, and it is at least implicit in German law. Similarly, “agricultural adjustment,” as well as income improvement, was implied in the United States Agricultural Adjustment Act of 1933 and its numerous subsequent amendments.

The dilemma is that policies of transitional protection and policies of renovation and adjustment have not demonstrated compatibility. Protective measures, including subsidies, have a here-andnow quality that gives them considerably more political appeal than do the uncertain future prospects of structural transformation. Accordingly, national governments in their current budgetary and administrative actions are prone to give greater emphasis to protection and thereby to impede adjustments that would raise the efficiency of farm labor.

Yet in environments favorable to off-farm employment, as in the industrial countries in the postwar years, the magnitudes of occupational movement out of agriculture have been unparalleled in modern history.

For comparison of the differential effects of national policy and off-farm employment opportunity, we may look at what has happened in West Germany, Sweden, and the United States. West Germany has had overfull employment; labor has been imported in substantial volume for industry and construction; no significant effort has been made to facilitate the transfer of farm people into nonfarm employment; German agricultural policy is one of the world’s most highly protective. Sweden has had more than full employment; its agricultural policy is protective and yet designed to achieve structural rationalization; it has an affirmative manpower policy, which includes state support for relocation of the farm labor force. The United States had a favorable level of employment until 1958 but thereafter a high unemployment level ranging from 5 to 7 per cent; its agricultural policy is protective but less so than that of Germany, and it lacks structural objectives; until 1962 it had no cohesive national manpower policy; farm people seeking an occupational adjustment have had to depend upon their own resourcefulness.

The effects of these differing combinations of state policy and prosperity are reflected in the average annual rates of decrease in the farm labor force during the decade 1950-1960: Germany, 2.25 per cent; Sweden, 3.5 per cent; United States, 2.5 per cent.

These results suggest two generalizations of considerable significance: (a) policies of agricultural protectionism may have retarded the migration out of agriculture but have not effectively obstructed it; (b) farm people aspire to more satisfactory levels of income and, given a reasonable opportunity to achieve an improvement, are quite ready to give up whatever they may hold to be the cherished values of farm life.

Structural adjustments have accompanied outmigration. The number of farms has declined, though not as rapidly as the active farm population. The reduction in farm numbers has been achieved mainly by the amalgamation of small farms. Only in Sweden has the discontinuance of farms been significant, which is a reflection of a rationalization policy that includes eliminating farms in areas not well suited to agriculture. Amalgamation has typically not involved the very tiny farm to the same extent as the larger-sized small farm. In Germany and Sweden the decline was principally in the 2-2.5 hectare category, while the principal gain was in the 10-20 hectare size. The persistence of the very small farm is explained by the growing practice of part-time farming and off-farm employment.

Partial and provisional out-movements. Part-time farming appears to be on the increase in all industrial countries. This may be interpreted as a form of partial and provisional movement out of agriculture. A related practice is for farmers to discontinue operation while retaining ownership of their farms and leasing them to farmers who have other land. These partial occupational adjustments may imply a feeling of uncertainty about off-farm employment prospects and the desire to maintain some provision against this uncertainty. Since land values and rents are rising sharply in all industrial countries, there may also be the motivation to retain landownership as a source of income and of capital gain; for many it also provides a place to live.

Even if the opportunities for the provisional and partial forms of occupational adjustment should decline, agriculture will apparently continue in its traditional role as a reservoir of industrial manpower, but on a diminishing scale. For the immediate future, this potential is reduced somewhat by the tendency of off-farm migration to leave behind persons in older age categories. Even if farm policies continue to have a restraining effect on mobility, which appears likely, off-farm movement will probably continue to draw off significant numbers of people. In the European economies off-farm migration will apparently rest heavily on the “pull” factor, that is, on whether full and overfull employment can be maintained. In the United States, where a high rate of off-farm migration has continued despite substantial unemployment, it appears that a combination of “push” forces will sustain off-farm migration even without a climate of favorable opportunity. This expectation is supported by the fact that agricultural transformation in the United States is financial and managerial as well as technological. For example, efficient farmers are motivated to enlarge their operations and consequently to offer other farmers a price or a rent for their land that is persuasively attractive. The demand for land for enlargement is brisk, and so long as there are attractive opportunities to sell or rent, off-farm employment need not always offer a full replacement of the income to be realized from continuing to operate the farm.

The most likely future for the industrial countries is that the farm proportion of all gainfully occupied will decline to as little as one-half or perhaps even one-fourth of its present size. National governments almost universally are committed to the maintenance of high levels of economic growth. These policies should continue to provide off-farm opportunities. Even if political devotion to agricultural fundamentalism continues to nurture highly protective programs for farmers, such programs are not more likely in the future than in the past to generate satisfactory levels of income for all farmers. Consequently, it may be expected that individuals on their own initiative will continue to seek more favorable situations. Whether or not national policies to sustain growth and full employment are fully successful will make little difference to the older-age farm people, for their prospect is retirement. The critical question is whether the level of off-farm employment, together with manpower policies, including those for basic education and occupational training, will provide a favorable climate for the release of farm youth.

Although the farm labor force component in industrial economies will probably drop to 4 or 5 per cent, or even lower, one can be quite certain that the base of agriculture as a political interest will remain substantially larger. Farm landowners have as keen an interest in agricultural prosperity as do their tenants. Moreover, the decline in the number of farmers has been considerably offset by the rising participation of off-farm industries and service agencies—those that supply machinery and production materials, those that process farm products, the banks, and other investors. All have a stake in farm affairs and will add significantly to the political base from which farm and manpower policies are fashioned.

Changes in and among farm occupations

Notwithstanding the great changes of recent years, the dominant form of engagement in agriculture is still that of self-employed owner-operator, whose labor is customarily supplemented by family members and frequently also by temporarily employed wageworkers. Deviations from the dominant form occur principally when: (a) the farm is rented, entirely or in part; (b) the farm is so large that hired workers do most or all of the work; (c) the land is in a large ownership, and its use is divided into controlled rental or sharecropper units; (d) the owner is an absentee investor who employs a manager who in turn hires a work force.

In some places one or another of these deviations becomes the dominant form. The United Kingdom has mainly tenant farming, and its work force is composed principally of hired men. California is notable for large-scale employment of seasonal and migratory workers. Sharecropping continues to be a prominent form in Italy.

The occupational category of hired farm worker is also heterogeneous, but its range of diversity is perhaps less. Both operators and hired workers are to be found at the minimum level of skill and capacity, and at this minimum level both are likely to live in a state of poverty. But at the upper ranges of skill, capacity, and standard of living there are only operators; the hired worker who seeks occupational advancement in agriculture must become a farm operator to do so. Hired workers fall into two broad categories: (a) permanent, or year-round; and (b) temporary, or seasonal. Migratory workers, a widely and dramatically known group, are one portion of the large total of temporarily hired workers, all of whom are confronted with irregularity, insufficiency, and uncertainty of employment.

Growing importance of management function. In traditional farming systems the farmer had few entrepreneurial decisions to make; his primary activity was as self-employed laborer. Farming was indeed an uncertain business in terms of the hazards of weather, disease, and crop failure, but it was mainly the input of self-employed labor that was being risked. Now, as the ratio of capital to labor has risen multifold and production requires large money outlays for commercial inputs, the capital-managing and decision-making functions of the farm operator have become far more prominent. It is not unusual now for the American family farm operator to have a highly mechanized farm representing a total investment of $100,000 to $250,000. Production outlays may run to $50,000 per year. Yet the total labor requirement for such an operation (if it is in livestock or general crops, as opposed to vegetables or fruit) is not likely to involve more than 100 to 200 man-days of hired labor per year. It is easily seen that the management capabilities of such a farmer are more critical to success than the willingness to work diligently.

The average (or typical) size of farm, measured either in acreage, investment, or value of output, has risen significantly in all industrial countries. The increase in scale has tended to be in proportion to the labor substitution effect of mechanization; had this not been true, hired labor employment per farm would have risen in proportion to the increase in farm size, which it has not. As it has developed, the farm operator and family members typically supply most of the labor needs of the highly mechanized and capital-intensive farms. Thus, while the farmer has had to become ever more a capitalist, risk taker, and decision maker, he nevertheless has continued the tradition of being also a workingman, with the supplemental participation of other members of the family.

Given an environment favorable to the development of entrepreneurial talent, offering at the minimum good basic education and a public advisory service, it seems reasonable to expect the occupational combination working-farmer-manager-decision-maker to continue even in the face of further advances in mechanization and technology. But will the minimum conditions for widespread development of entrepreneurial ability be met? And—an equally urgent question—in view of steeply mounting capital requirements, can the self-capitalizing role of the farmer be sustained? The answers to these questions are somewhat interrelated, as we shall see.

Traditionally, farm capital is operator owned and borrowed—it originates from individual savings and debt obligations. Equity share participation, the foundation of industrial capitalism, is rare in agriculture. Consequently, entry into farming is largely determined by inheritance or marriage. Otherwise, the capital requirements exceed the ability of individuals to accumulate sufficient savings even if they are willing to assume large debt obligations. In former times Americans spoke of the “agricultural ladder,” a concept implying that a person could commence as a hired hand and, with hard work and parsimony, advance to tenant and ultimately to owner-operator. It was a romantic idea which long ago—when land on the frontier was abundant and cheap—had prospect of realization.

The requirements of self-capitalization may operate as an obstruction to the entry of entrepreneurial talent. In the nonfarm population there undoubtedly are capable individuals interested in farming who are not able to enter agriculture through inheritance; if they do not possess considerable wealth or the willingness to commit themselves to a large debt obligation, they will find opportunities for entry severely restricted. The traditional system imposes an obligation to “live poor and die rich,” that is, to commit a substantial proportion of current income to an obligatory savings program through debt amortization—from which only inheritors may realize any substantial benefit. Agriculture long remained the major sector of the economy in which enterprises were small enough to permit self-employment, self-management, and self-capitalization. But that day appears to be approaching its end, with the pressure for division coming principally through the capital function.

The implications of this analysis are that a separation of farm occupational functions is likely to become a necessity and, moreover, that it may be desirable. There are indications that such a separation is already beginning to occur. It is appearing mainly in three forms: (a) increasing rental of land (ownership thereby becoming separated from operation); (b) contractual arrangements, usually called “vertical integration,” through which capital or supervision, or both, are supplied by an outside agency, usually a marketing or processing firm; (c) incorporation, with the ownership of shares distributed among several investors.

Ownership of farmland by nonfarm investors is occurring in two ways: direct investment in farms by outside individuals; and retention of ownership of land by discontinuing farmers. But this process is not reflected in increased numbers of tenant farmers; rather, the rental land is being taken up by owner-farmers who wish to expand. In United States statistics, this shows up in some rather dramatic, but little noticed, data on “part owner” farms. These combined ownership and rental units have been increasing and now incorporate far more acreage under lease than that held by tenant operators. With the present trend, more than half of United States farmland will very soon be operated by part owners. As this is a means of consolidating and enlarging operating units without entering into the land-purchase obligation, the practice can be expected to continue.

The vertical integration (contractual) arrangement has both a capital and a management rationale. In addition to advancing credit, the processing or marketing company provides guidance and supervision as well as the assurance of a marketing outlet. Some observers are apprehensive of this arrangement because of the constraints it imposes on the farmer’s freedom. However, it does serve a purpose, and unless the obstructions to capitalization and the entry of entrepreneurial ability are otherwise overcome, further such expansions may be expected.

Incorporation of farms with distributed ownership of shares also continues to occur. There is little knowledge of its extent or rate of development. It is a form of organization that facilitates consolidation of valuable landholdings and offers the usual tax, inheritance, and other advantages long enjoyed by large industrial corporations.

Farms do not need to become the counterparts of the large industrial corporations to achieve production efficiency. Nevertheless, there is ample evidence that the basic efficiencies required to produce an acceptable level of income require a great deal more enlargement than has yet occurred in most areas. One may roughly estimate the minimum capital required for an efficient commercial farm at around $100,000. Whereas the mechanisms for assembling multimillion dollar participating capitalizations are well perfected, those for assembling farm capital in the range of $100,000 to $250,000 are not. One may speculate, accordingly, that unless there emerge mechanisms and procedures for shared financial participation in the larger commercial family farms, the tendency for them to be absorbed into multimillion-dollar corporate ownership is likely to accelerate.

Declining position of hired labor. Only exceptionally has farm work represented more than the residual chance for those unable to obtain more desirable employment. Recent years of economic growth have brought advances in welfare to many, but few to the farm worker. These generalizations have their greatest validity in the United States; perhaps Holland stands out as nearest to being exceptional. Whereas the Dutch farm worker is regarded as an integral part of the national occupational structure and is included in all social legislation, the American farm worker is regarded as, in effect, outside the national occupational structure and generally is excluded from such social measures as minimum wage requirements, unemployment insurance, and protection of the right to unionize.

In the United States the number of persons who do some farm work for wages has remained substantially constant throughout the postwar years, whereas the self-employed have declined sharply. But while the number of hired workers has been maintained, the proportion having only short-term, seasonal employment has risen. This development reflects the persistently slack nonfarm demand for the occupationally ill-prepared, whether the general level of unemployment is low or high. It also reflects a change in farm labor demand.

This trend toward less regular and more casual employment for farm workers is also observed in most European countries. In West Germany, for example, the prewar ratio of regular to temporary hired workers was 2:1; by 1962-1963 the proportions were approximately equal. Underlying the shift away from regular employment of hired workers is the change in labor requirements associated with technological change. Tractors eliminate the need to care for work stock and to raise their feed and mend their harnesses. Commercial fertilizers eliminate the necessity of handling barnyard manure; milking machines replace hand milkers. Processing and hauling of products to market have been taken over by off-farm agencies. But many farmers who can handle their basic activities of land preparation and planting still are likely to need outside help at harvesttime, particularly if they produce fruits and vegetables or similar crops that are not yet harvested by machine.

Concurrently with mechanization and other forms of technological change there has occurred a tendency to reduce the diversification of production on individual farms. The resulting specialization means less spreading of labor requirements through the year. The combined effect of technological change and farm specialization has tended to convert the hired labor demands of agriculture into an aggregation of temporary seasonal needs, thereby rapidly reducing the few remaining opportunities for farm wagework to be an occupation or a career. Regularly employed workers are now found mainly in poultry or livestock raising and in specialist and supervisory categories on the largest farms.

Attempts have been made to improve the economic situation of hired farm workers through collective bargaining and legislation. These efforts have been successful in Holland and the Scandinavian countries; they have had limited success elsewhere in Europe and Great Britain; they have almost completely failed in the United States. The failure in the United States is basically attributable to the fact that farm work is regarded as transitional—a job to be gotten out of as soon as possible, rather than one to be protected and improved. This attitude, shared by the workers as well as the community at large, has obstructed the development of group consciousness and cohesiveness, as has the fact that the bulk of employment is geographically spread, fragmented into small units, and temporary. The many sporadic efforts to unionize, almost none of which have been initiated from within the farm-worker population, have been failures. With farm workers having no organizations to protect their own interests, other interest groups sympathetic to their needs have attempted to have them included in legislation on minimum wages, unemployment insurance, and protection of the right to organize. Against the opposition of well-organized farmers, these efforts have enjoyed only a pittance of success.

Farming occupations in the future

It is scarcely conceivable that commercial farming will not become ever more technologically intricate and capital intensive. Increases in farm size are necessarily associated with effective use of technology and capital. Nevertheless, technical efficiencies of scale can still apparently be realized, for most types of farming, on units that are not too large for the operator and his family to work. But such a farm is becoming increasingly difficult to finance, except by inheritance. Financial organization may therefore become a more influential determinant of farm size than the technical requirements of efficient production. Techniques and procedures of financial organization may become the deciding factor in whether commercial farms remain essentially family enterprises or become large-scale corporations. Outside financial participation is essential under either alternative. If farms can be efficiently financed within the range of family enterprise, the farmer will be able to retain the major part of his traditional role, that of the self-employed entrepreneur. If the capital solution favors large aggregations, the complex of activities that have traditionally been those of the farmer will likely be split in such a way as to leave the hired manager as his counterpart. In any realistic view of the future, the farmer is not likely to remain a self-capitalist to the same extent as in the past.

The economic future of the farm worker is quite uncertain. Some atractive full-time jobs will remain in family-scale farm enterprise, particularly where livestock are involved. However, in family units that need an additional man or two on a steady basis, partnerships are likely to be more frequently used. There is no promising future in agriculture for workers who are employed seasonally and casually, at least not for those who depend upon it as a full-time occupation. Mechanization of hand labor tasks will be developed and extended; seasonal activities will continue to become shorter in duration. Whether agriculture can offer a substantial and attractive occupational base for hired laborers depends mainly upon the evolving pattern of farm size, for only on the large farm does the labor of the hired worker become more than merely supplementary to that of self-employed members of the farm family.

Varden Fuller


Disparities in Pace and Form of Rural Development. 1964 International Journal of Agrarian Affairs 40, no. 3.

Dovring, Folke (1956) 1960 Land and Labor in Europe, 1900–1950: A Comparative Survey of Recent Agrarian History. 2d ed. The Hague: Nijhoff.

Hofstee, E. W. 1957 Rural Life and Rural Welfare in the Netherlands. The Hague: Government Printing and Publishing Office.

MÜller, Peter 1964 Recent Developments in Land Tenure and Land Policies in Germany. Land Economics 40:267–275.

U.S. Department of Agriculture 1963 Yearbook of Agriculture: A Place to Live. Washington: Government Printing Office.

wright, gordon 1964 Rural Revolution in France: The Peasantry in the Twentieth Century. Stanford (Calif.) Univ. Press.


Increase in productivity

Agricultural productivity in most economically advanced countries is now apparently growing at a much higher rate than was true in previous periods in history and, at least since World War II, at a much higher rate than productivity in other sectors of these economies (Fabricant 1959). In the northwest European countries “total factor productivity” in agriculture grew between 1950 and 1959 at the rate of 2.0 per cent per year, a rate that was slightly above the one achieved by U.S. agriculture during this same period (FAO 1962). Similarly high rates of growth are reported for the Soviet Union, although the margin of error in Soviet statistics is quite large (Johnson 1963). But neither northwest Europe nor the Soviet Union has had declines in labor used in agriculture comparable to those in the United States, although in both areas the agricultural labor force has begun to decline. In this respect, the recent United States and Canadian experience is almost unique.

As Table 1 shows, agricultural output in the United States grew at the approximate rate of 1.8 per cent per year during the 1949-1963 period. At the same time, man-hours used in agriculture were declining at the rate of 4.5 per cent per year. As the result of these trends, output per man-hour in agriculture rose at the astonishing rate of 6.3 per cent per year. While the use of purchased inputs such as fertilizer and machinery also increased at a relatively rapid rate, conventional measures of total input use in agriculture (which combine all the standard categories into one over-all input index) changed very little, leaving almost all of the observed growth in output to be explained by growth in total factor productivity or technical change (USARS 1963).

Historically, the recently observed rate of growth in U.S. agricultural output is not particularly high. During the 30-year period from 1880 to 1910, U.S. farm output grew at an average rate of 1.6 per cent per year. During that same period, however, most of the growth in output could be accounted for by comparable growth in inputs used, mainly land, labor, and machinery, leaving only a small fraction of the total growth (0.2 per cent per year) to be explained by growth in “total factor productivity” (Loomis & Barton 1961). What is unique about the recent experience of U.S. (and Canadian) agriculture is the almost complete stability in the conventional total inputs index.

This growth in output, which cannot be explained by comparable growth in inputs as conventionally measured (and that is what an increase in “total factor productivity” actually means), raises several interesting questions: (1) What were the actual sources of this growth? (2) What were the economic factors that determined the date and rate at which these various sources became operative? (3) Is it possible to improve the methodological framework for asking such questions so that at the end one does not remain with “productivity” ac-counting for most of the observed growth without productivity itself being accounted for in turn by other known factors?

Table 1 — Average annual rates of growth of agricultural output and productivity, selected countries and periods
  OutputLabour productivityTotal factor productivityApproximate per cent of output growth accounted for by growth in conventional inputs
  (Per cent per year) 
Sources: U.S. Agricultural Research Service 1963; Loomis & Barton 1961; Food and Agriculture Organization of the United Nations 1962; Johnson 1963; Lok 1961; Mundlak 1964.
United States:1880-19101.60.60.288
Northwest Europe:1950-19592.74.62.026
Soviet Union:1950-19594.95.73.328

Sources of the increase

Since the acreage of land used in agriculture in the United States has changed very little during the last twenty years, one can view the growth in output per man-hour in agriculture as the approximate sum of two components: the increase in yield per acre and the decline in labor used in agriculture. Because of the particular technological conditions of production in agriculture these two components of growth are somewhat independent, at least over a certain range, and can be discussed separately. The major sources of increases in yield per acre have been biological improvements in varieties (mainly hybrid corn and sorghums), increased applications of plant nutrients (fertilizers) and water (irrigation), improved cultural practices such as chemical weed control and denser plantings, shifts of crops to areas of higher comparative advantage (the localization of corn in the corn belt and the move of cotton into the western and southwestern states), and the introduction of crops that are higher yielding and more valuable, such as soybeans. Much of the growth in yields during the 1938-1949 period was due to hybrid corn and other similar biological developments. In the postwar period, the single most important influence on yields has been the rapid growth in the application of fertilizers, particularly of nitrogen materials, which more than tripled between 1949 and 1962. Varietal improvements were still important (as, for example, in hybrid sorghum) but affected a much smaller portion of the aggregate (Durost & Barton 1960; Johnson & Gustafson 1962).

The decline in labor in agriculture was made possible by the substitution of mechanical power and by a rise in the rate of utilization and in the quality of the remaining labor force. While the mechanization of U.S. agriculture was proceeding at a rapid pace in the 1920s, and even earlier, the substitution that was occurring at that time was mainly one of machines for horses and mules and not one of machines for human power. This substitution of mechanical for animal power actually had an important output-raising effect of its own. It released for human consumption a substantial amount of grain previously used by horses and mules. Labor use in agriculture did not begin to decline at a rapid rate until the early 1940s, when the increase in the demand for labor in the rest of the economy began to pull substantial amounts of labor out of agriculture. At the same time, farm machinery began to change from a substitute for animal power into a substitute for manpower. This process was aided by the increase in the effective size of farm machinery and by the rapid growth in the availability of various “attachments,” increasing the versatility of farm machinery and allowing one man to do a much wider variety of tasks with the same machine.

The impact of an approximate halving of the farm labor force between 1940 and 1962 was mitigated by the increased efficiency with which family labor was being used, mainly as the result of the very rapid increase in the average size of commercial farms and by the improved quality of the remaining labor force. Measured by an index of formal schooling per man, the average quality of the agricultural labor force increased by 15 to 20 per cent between 1940 and 1960.

Adoption of new techniques

There were many different economic forces behind these changes. Much of the original inventive effort occurred outside of agriculture. Agriculture benefited from general developments in genetics and chemical technology and from the decline in the real price, per horsepower-hour, of mechanical power. Economic incentives played a crucial role in determining the responsiveness of the farm sector to these developments. When the superiority of a particular new technique was clear and substantial, as was the case for hybrid corn in the corn belt, it was adopted relatively rapidly. It took only about four years for Iowa farmers to switch from mainly open-pollinated varieties of corn to almost entirely (90 per cent) hybrid varieties. In the southern United States the spread of hybrid corn lagged initially because no varieties adaptable to southern conditions were available until much later in the period. This lag in “availability” was largely due to the reluctance of private (and public) seed companies to enter into a substantially smaller and poorer market for their product. Furthermore, once they did enter the South, their product was accepted at a slower rate because the absolute profitability of the shift to hybrids was much smaller in the South, generally owing to the originally lower yield levels (Griliches 1960).

The rate of acceptance by farmers of new, superior techniques is largely determined by the absolute profitability of the shift to these techniques. On the other hand, the rate of adoption of more established techniques, such as fertilization, depends more on the rate at which their price (cost) declines relative to product and other factor prices. In either case, the crucial factor is the existence and magnitude of the economic incentive for the move. The use of fertilizers in U.S. agriculture, which has more than quadrupled since 1940, was greatly stimulated by the approximate halving of fertilizer prices (from their pre-World War II levels) relative to both farm product and other input prices. This fall was due to a series of developments in the nonfarm sector: the decline in the real price of energy, a main input in the production of synthetic nitrogen; the breakup of the nitrogen cartel as the result of government construction of new nitrogen plants during the war and their subsequent resale to new entrants into the industry; and the savings in transportation and handling costs, both at the manufacturing and retail levels, as the result of a continuous shift toward stronger mixtures. Similarly, the substitution of mechanical power for human labor was induced by the rising price of labor, which was due to the higher wages in the rest of the economy, and the resulting outmigration of farmers, and the decline in the real price of machinery, which was mainly the result of the decline in the real price of horsepower with the development of higher-compression engines.

Problems of measuring productivity

Given all the specific sources of output growth, why are they not reflected in the conventional productivity measures? The answer to this question lies in the way inputs are usually measured and combined to give “total factor productivity.” Most input measures make no, or only inadequate, allowances for quality change. In some cases the inputs are just counted, as if a ditchdigger’s and an agronomer’s man-year were equivalent. Many input series are constructed by “deflating” value series by some corresponding price index. This just pushes the problem of quality change back one step, to the question of how much price has really risen per constant-quality unit. Most price indexes are not very good at keeping the quality of the commodity price constant, but input price indexes are especially suspect. This is partly a reflection of the amount of resources spent (usually very small) on collecting input data compared to the resources spent on the collection of product data. The Consumer Price Index and its components are of more general interest, and much more money is spent on collecting data for them and on investigating their validity. While not perfect, they are thus much less subject to a secular upward drift caused by unmeasured improvements in the quality of the goods they price. By comparison, input price indexes are orphans in the world of social statistics and hence, because of poor measurement procedures and inadequate adjustments for quality change, have a much more pronounced tendency to drift upward. [seeindex numbers, article onpractical applications.]

In some cases, no direct price information is used at all. For example, the indexes used to deflate construction expenditures use input prices instead of product prices. The price of a well-specified house or structure is not collected; instead, the wages of construction labor, the price of lumber, etc., are averaged to arrive at an index of construction cost rather than an index of the price of construction. The difference between these two concepts is exactly equal to productivity growth in the construction industry. Using cost indexes instead of price indexes to deflate construction expenditures assumes that there were no improvements in productivity in the construction industry. This assumption leads to a very large downward bias in the resulting input series (the services of structures) and to the shifting of all the productivity growth in the construction sector to the productivity measures for sectors using its output.

In other cases, the commodity that is being priced may be quite complex, and it may be very hard to keep up with all the changes that are occurring in it. Some progress has been recently made in tackling this difficult problem through the use of statistical techniques. If one has an array of different models of a particular machine, differing widely in some important dimensions and consequently differing in price, it is possible to derive the implicit price per unit of a particular dimension (such as horsepower) and use this price to adjust for the change that has occurred in this dimension over time (Griliches 1964a). In principle, if we could measure inputs better, allowing for all the quality changes that have occurred, we should be able to account for a substantial fraction of what currently is attributed to “productivity.”

The usual total input indexes combine the various input series in proportion to the market price of these inputs in some base period or, what is almost the same thing, in proportion to the share of these inputs in total costs. This procedure assumes that market prices measure adequately the contribution of the individual inputs to the growth in output. For this to be true the relevant markets have to be in competitive equilibrium and there must be no economies of scale. But disequilibrium is the essence of change. It is quite likely that the contribution of those inputs whose use is growing is larger than would be measured by their market price. If this view is correct, then the standard measures may underestimate input growth in agriculture by overweighting declining inputs, such as labor, and underweighting growing inputs, such as fertilizer and machinery. The results of several statistical production function studies, which attempt to estimate directly the contribution of specific inputs in agriculture, seem to support this conjecture.

Similarly, the standard measures assume that no gain in efficiency can be had from increasing the scale of operations of a firm or farm. There is, however, a large body of evidence that points in the direction of substantial economies of scale in agriculture, at least in the size range where most farms are currently concentrated. The exact source of these economies is not very clear. One important source is the availability of larger and faster machines at lower prices per relevant work unit (horsepower-hour or acres plowed per hour). Another source is the possibility of more complete utilization of the available machine power and manpower on larger farms. The very substantial increase in the size of the average farm in the United States in recent years (over 50 per cent since 1950) seems to support the reality of these economies.

A recent study estimated the contribution of individual input categories by fitting a production function to data on agricultural output and input in 68 regions of the United States in 1949 (Griliches 1963). It found that the implied weights differed somewhat from the official ones in the conjectured direction (less weight given to labor and more to machinery), that differences in education per man did affect productivity, and that there was strong evidence of substantial economies of scale. In addition, on the basis of other studies and data, it concluded that the conventional measures of input change over time seriously underestimate the actual growth in inputs used in agriculture, in particular when the concept is broadened to include not only the growth in the quantity of inputs used but also the growth in their quality. Making a series of adjustments to correct for some of the biases in these conventional measures and combining the resulting adjusted input series by using the new weights, this study succeeded in explaining most of the growth in U.S. agricultural output between 1940 and 1960, leaving almost nothing to the residual “total factor productivity growth” category. The results of this study imply that (very) roughly about a third of the measured productivity increases are due to improvements in the quality of the inputs used (among which the rise in education per worker plays an important role), about a quarter to a half are due to a move toward the elimination of relative disequilibria, which were reflected in the overpricing of labor and the underpricing of capital services by conventional market measures, and that the rest are due to the expansion that occurred in the scale of the average farm enterprise.

A subsequent study reached similar conclusions (Griliches 1964b). That study, however, focused primarily on estimating the previously unmeasured contribution of public investments in agricultural research and extension services to the growth in aggregate output. It fitted an aggregate production function to state output and input data for 1949, 1954, and 1959, including an estimate of public expenditures on research and extension for each state (per farm, lagged) as an additional outputdetermining variable. The coefficients of this variable, which were relatively large and statistically significant, provided an estimate of the contribution of these expenditures to the observed increases in output and imply that about 30 per cent of the increase in the aggregate output of U.S. agriculture between 1949 and 1959 is attributed to the rise in public research and extension expenditures per farm. The rest of the accounting was similar to that arrived at in the previously quoted study (Griliches 1963), except that the later study attributed a somewhat smaller role in the total to economies of scale.

Such “complete” accounting for the observed productivity increases does not mean that there were no meaningful increases in agricultural productivity during these periods or that no important changes occurred in the techniques of production used in agriculture. It does, however, indicate a way of providing an explanation for what were previously unexplained increases in farm output.

Zvi Griliches

[See alsoProductivity.]


Durost, Donald D.; and barton, glen T. 1960 Changing Sources of Farm Output. U.S. Department of Agriculture, Production Research Report, No. 36. Washington: Government Printing Office.

Fabricant, Solomon 1959 Basic Facts on Productivity Change. New York: National Bureau of Economic Research.

Food and Agriculture organization of the united nations 1962 Agricultural Commodities: Projections for 1970. FAO Commodity Review, Special Supplement. Rome: United Nations.

Griliches, Zvi 1960 Hybrid Corn and the Economics of Innovation. Science New Series 132:275-280.

Griliches, Zvi 1963 The Sources of Measured Productivity Growth: United States Agriculture, 1940-1960. Journal of Political Economy 71:331-346.

Griliches, Zvi 1964a Notes on the Measurement of Price and Quality Changes. Pages 381-404 in Conference on Models of Income Determination, Chapel Hill, N.C., 1962, Models of Income Determination. Conference on Research in Income and Wealth, Studies in Income and Wealth, Vol. 28. Princeton (N.J.) Univ. Press.

Griliches, Zvi 1964k Research Expenditures, Education, and the Aggregate Agricultural Production Function. American Economic Review 54:961-974.

Johnson, D. Gale 1963 Agricultural Production. Pages 203-234 in Abram Bergson and Simon Kuznets (editors), Economic Trends in the Soviet Union. Cambridge, Mass.: Harvard Univ. Press.

Johnson, D. Gale; and Gustafson, Robert L. 1962 Grain Yields and the American Food Supply: An Analysis of Yield Changes and Possibilities. Univ. of Chicago Press.

Lok, Siepko H. 1961 An Enquiry Into the Relationships Between Changes in Over-all Productivity and Real Net Return Per Farm and Between Changes in Total Output and Real Gross Return: Canadian Agriculture, 1926-1957. Ottawa (Canada): Department of Agriculture, Economic Division.

Loomis, Ralph A.; and Barton, Glen T. 1961 Productivity of Agriculture: United States, 1870-1958. Technical Bulletin, No. 1238. Washington: U.S. Department of Agriculture.

Mundlak, Yair 1964 Long-term Projections of Supply and Demand for Agricultural Products in Israel. Volume 1: General View and Summary. With projections of population and income by Nadav Halevi. Jerusalem (Israel): Hebrew Univ., Faculty of Agriculture.

U.S. Agricultural Research Service, Farm Economics Research Division 1963 Changes in Farm Production and Efficiency: Summary Report, 1963. Statistical Bulletin, No. 233. Washington: U.S. Department of Agriculture.


Marketing, in the usage of agricultural economists, encompasses virtually all activities relating to agricultural commodities from sale by original producers to purchase by final users. It includes the physical operations of transportation, storage, processing, and related sorting, packaging, and other handling. It includes buying and selling and pricing, trading practices and organizational arrangements, and the competitive structure of markets. It includes such related activities as grading and standardization of products; provision of market information; financing of trade; the bearing and shifting of risks; merchandising, advertising, and promotion; and the development and market testing of product innovations. It also includes related governmental activities, such as those aimed at regulating and facilitating trade or intervening in pricing.

This usage is more comprehensive than that of general economists, who restrict marketing primarily to pricing and the activities involved in transfer of ownership. It differs also from the usage of business economists, whose focus is primarily upon policies of firms in planning their operations for most effective distribution of their products.

Marketing is, of course, the concomitant of specialization in production. In a truly subsistence economy there would be no marketing. In an economy in which trade occurred only between original producers and final users there would be no “marketing margin” between producer prices and consumer prices. Marketing costs would be borne directly by producers and users, and farmers would receive all of the “consumer’s dollar.”

Marketing becomes of distinct concern where there are intermediaries—“middlemen”—involved in the transfer of goods from specialized producers to final users, whose return comes from a margin between the price paid producers and that charged consumers. The “costs” of marketing then become evident as an offset to the benefits of specialization in production. These costs typically increase as the economy develops. It is not fortuitous that explicit concern with agricultural marketing developed in the United States at a time when agricultural production was becoming predominantly specialized and when the growth of cities was coming to require an elaborate and far-flung system of supply, the costliness of which was reflected in a substantial and widening margin between farm and retail prices.

Inherent complexities

Part of the costliness of marketing agricultural products arises from the dispersion of production and consumption. Farm production over most of the world is carried on by many small producers. Even where it is conducted on large, centrally managed plantations or collectives, it is necessarily spread out—it cannot be concentrated in factories, as can production in many other industries. Similarly at the consuming end, marketing must make products available in small quantities to meet the daily needs of individual families. Hence a widespread marketing system has a gross task of first assembling products and then redistributing them.

The biological production process in agriculture creates further problems in the marketing of its products. Production is seasonal; the whole year’s output of some crops is harvested in a few weeks. The production period is long; several months elapse from preparation for planting to time of harvest for most crops, and for tree crops and animals of long gestation the period is longer still. The products are perishable, many of them highly so. Output is uncertain; weather conditions, diseases, insect infestations, and the like affect both the quantity and the quality of product. And quality varies from unit to unit within a crop; the agricultural production process does not yield a standardized product.

These conditions of production have several consequences for marketing. The volume coming to market varies seasonally; for some commodities the seasonal peaks are very sharp. To avoid spoilage losses, perishables must be utilized quickly—either consumed or processed into storable form. Special handling is required for their protection. Processed products and the less perishable staple commodities must be stored to meet year-round consumption needs. Year-to-year variations in supply add to the uncertainties in marketing. Variability in product quality makes market valuation difficult and complicates processing.

Both the variability of supply of farm products and their perishability make marketing costly. They also make it risky, not only because of the danger of spoilage losses but also because of price uncertainty. Since food serves a satiable want, the demand for food commodities is typically inelastic at high levels of supply. Prices thus tend to be unstable. For perishables that must be disposed of before they spoil, a small oversupply can cause a drastic drop in price. And while sudden price decreases are less likely in storables, over the long period of storage they can suffice to cause substantial losses, especially in view of the large investment where the year’s supply must be held from harvest to harvest.

The long production period of agricultural products is a further unstabilizing factor in marketing, since it delays the response of supply to price. Once the planting season of a crop is past, little can be done to increase the current season’s supply, and it can be decreased only by abandoning the investment already sunk in it, which will not be done so long as the prospective price gives hope of covering the remaining costs of carrying it through to market.

The organization of markets

The widening of markets, in addition to permitting specialization in production, also mitigates some of the problems just described, by diluting their effects. It is of interest, therefore, to review some prerequisites of a widely organized marketing system.

Even in relatively primitive economies, presumed to have only a “subsistence” agriculture, there is, typically, considerable marketing. Each community has its market where produce is exchanged on certain days. Even though trade is predominantly local, there are usually some persons who specialize in buying and selling and in such supporting activities as carrying. In such widely separate societies as Java, west Africa, and the Indian communities of Guatemala, women traditionally do much of the local marketing.

The local markets are often structured throughout an area, each operating on a different day of the week so that professional traders can carry wares from one to another. This encourages local specialization in production by providing an expanded market for local surpluses. Typically, a group of small markets is tributary to a central market where trade, on a larger scale, includes wholesale transactions with central markets of other areas. Thus a network of markets is built up throughout a region, which may tie in with other regional or international systems of trade.

This larger, longer-distance trade is more often carried on by men, and in many societies it is dominated by aliens—the Chinese in southeast Asia and Indonesia, the Indians in east Africa, and people of Levantine origin in west Africa. This has been explained by the freedom of such immigrants from the disapprobation that some indigenous groups attach to trade; also by the cohesiveness of alien minorities, which enables them to enforce codes of ethical trade conduct among their members over large areas.

The breadth of markets—and the kinds and degree of regional specialization in production that are possible—depend first of all upon the density of population and the means of transport available. Where transport is upon the backs of men or the heads of women or, at best, by oxcart, the area that a market can serve is limited and the individual lots traded are small. Marketing of perishables is restricted to the local area; for bulky staples, the cost in human time and effort is a barrier to intensive specialization in production for distant markets.

The technological basis for a widespread agricultural marketing system thus rests first of all upon rapid, low-cost transportation. It depends equally upon rapid, low-cost communication. Also important are efficient methods of storage, of processing, and of protecting products from spoilage and damage.

But the widening of markets also depends upon devising effective organizational arrangements for managing the movement of products and the flow of payments for them. There must be an “intelligence” system, providing the information needed for correct decision making. There must be arrangements for transfer of payments and for mobilization of capital funds to finance commodities in marketing channels, including the spreading of risks involved in interseasonal holding of commodities. Needed in support of all of these are standard measures of quantity and accepted methods for identification of quality of commodities in trade channels, as a basis for proper evaluation. Most important of all is the need for a framework of legal and ethical arrangements within which large-volume, long-distance transactions can be entered into rapidly with mutual confidence among the parties concerned.

In a marketing system coordinated through open, competitive markets, pricing is the heart of the coordinating system. Price theory and agricultural prices are discussed under other headings [seecompetitionanddemand and supply]. It suffices here to point out that effective coordination of agricultural markets requires rapid collection and dissemination of information on current and prospective supplies and movements of commodities and on prices throughout the market. In many countries the private communication between buyers and sellers and the brokers and other agents who represent them is supplemented by an extensive trade press and radio service that reports current market information and by publicly maintained crop-forecasting and market-reporting services. There is also public establishment of standard weights and measures, and of standards of quality for major commodities, and frequently public maintenance of an impartial inspection service for certifying the quality and condition of lots of commodities in trade channels. Flow of funds is provided by a widespread commercial banking system —both for facilitating payment in long-distance transactions and for making credit available for financing market operations.

Longer-term problems

The longer-range coordination of production and consumption of agricultural commodities presents more difficult problems because of characteristics previously pointed out: the long production cycle and consequent slowness of response of supply to price; and the uncontrollable variations in production, especially in the face of inelastic demands. Farmers cannot know at planting time what the prices of alternative crops will be at harvest time; they cannot even know what their own yields will be. Processors and distributors face corresponding uncertainties.

One response to this difficulty is the pressure for government intervention in markets to stabilize prices and manage supplies. Measures sometimes undertaken for this purpose include: year-to-year storage of staple crops, purchase and extracommercial distribution of price-depressing surpluses, the setting of quotas limiting the acreages that farmers may plant to certain crops, price fixing, subsidies to producers and low-income consumers, collective-bargaining schemes, the sponsoring of marketing boards or marketing agreements or quasi-public corporations with varying degrees of monopoly powers in the management of supplies, discriminative pricing schemes for diverting surpluses to secondary uses, and the many devices used for controlling or managing foreign trade in agricultural commodities. Various such measures are discussed under other headings [see particularlyagriculture, article onprice and income policies].

Forward contracting. A variety of private devices are also used to improve longer-term coordination. One is vertical integration, in which several of the stages between farm production and retail distribution are brought under single ownership and management. Similar results are achieved in part by forward contracting. A feeder may contract with a cattle raiser for future delivery of feeder stock. A distributor may contract with a processor in advance of the packing season. In turn, the processor may contract with growers for specified acreages of canning crops. Such contracts give buyers assurance of future supplies and give growers assurance of an outlet for their produce. Futures trading [seespeculation, hedging, and arbitrage] is, of course, a highly organized form of forward contracting in which the contracts themselves are negotiable in trade.

Forward contracting has been encouraged by the increasingly close technological relation between farm production and processing. For example, processors contract with raisers of broiler chickens in order to be able to schedule the flow of raw materials to the processing plants. Contracts likewise facilitate quality control, as when a contract for a canning crop specifies the variety of seed to be sown and gives the canner supervision over spraying and other cultural practices and over the maturity of crop at harvest.

Such vertical “contract integration” reduces market uncertainties for the parties engaging in it. Because it bypasses the open market, however, it reduces the coordinating role of the price mechanism of that market.

The lengthening of marketing channels in a highly developed economy, and especially the increased processing to which modern technology has given rise, creates a further problem of vertical coordination. The wide separation of consumers from original producers attenuates the effectiveness of consumer demand as a guide to production. This is reflected in the increasing emphasis upon research into consumer preferences and buying behavior and the increasing use of advertising promotions and other merchandising schemes to manipulate final demand.

A further consequence of modern technology (including in this term techniques of management organization), coupled with the growth in scope of markets, is that economies of scale lead to the growth of very large enterprises. In the United States, some food processors are among the largest corporations, as are some chain-store food distributors. This need not indicate monopolistic concentration, for monopoly must be defined in terms of the size of the market: a small firm may enjoy a monopoly position in an isolated local market, and giant corporations may compete intensively in a market of nationwide scope. Growth in size of enterprises in the food industries nevertheless constitutes a change in market structure whose consequences have been inadequately analyzed. An enduring policy problem is how to retain the efficiencies of large-scale operations, yet prevent abuses of the market power that may be associated with them.

Farmers have attempted to secure advantages of size through cooperative marketing associations, a number of which in the United States are significant in the national market. Encouragement of farmer cooperatives is public policy in many countries. Their management presents unique problems if the farmer members are to retain effective control, yet permit flexible and progressive operation. They can, however, strengthen the market position of farmers vis-à-vis proprietary firms. Typically, their major advantage has been found to arise not simply from their activity as bargaining organizations but from efficient performance of processing or other marketing functions on a scale beyond the resources of individual members.

Government interest

Because agricultural marketing plays so important a role in supplying foods and other essentials to consumers as well as in determining the incomes of the farm population, it has traditionally been a subject of public concern. In economies that have developed under a predominantly laissez-faire philosophy, this concern has expressed itself chiefly in regulation to restrain abuses, in public provision of services that private trade cannot readily provide, and in intervention where free markets give unsatisfactory results.

In the United States agricultural marketing was recognized as a distinct area of study in the U.S. Department of Agriculture by 1913. The early concern was with the apparently disadvantageous market position of farmers; with things farmers might do to improve their position, either individually, as by better sorting and packing of products and better selection of market outlets, or jointly through cooperative marketing associations; and with the need for public action to curb abuses in marketing and to provide such services as market reporting, promulgation of grade standards, and product inspection.

The collapse of farm prices following World War I and the extreme deterioration of markets during the depression of the 1930s brought great interest in schemes for stabilizing and supporting farm prices, controlling market supplies, and subsidizing both domestic consumption and exports. During World War II price guaranties were used to encourage increased production of farm products; and price controls, allocation orders, and consumer rationing were part of a wide-reaching program for wartime management of supplies of foods and other essential commodities.

At the close of the war, concern lest markets might again collapse led to substantial expansion of agricultural marketing research. Special emphasis was placed upon increasing the efficiency of physical handling of products at all stages of marketing in order to reduce marketing costs, and upon expansion of markets through study of consumer wants, preferences, and buying behavior, improvement of products and services, and more effective merchandising and promotion.

The chronic depression of prices for farm products during the 1950s and continuing into the 1960s, accompanied by the accumulation of large surpluses in government hands, led to renewed interest in pricing and the competitive structure of markets, and in schemes for using surplus commodities as a form of aid to developing countries.

At the same time, the extension of technical aid to these countries opened the eyes of agricultural economists to the importance of marketing in facilitating or hampering the transition to commercial agriculture. In agricultural development in such countries, primary emphasis is usually placed upon increasing production. But there is need for simultaneous planning of market development, not only to assure the most effective use of increased commercial supplies but to provide adequate incentives to farmers to produce for the market in the first place.

At the same time, the intricacy of activities involved in a widespread, flexibly operating, efficient marketing system strongly recommends much decentralization of decision making. The need is for the kind of entrepreneurship by which many individuals will make decisions on their own initiative and use ingenuity in devising improved methods and meeting emergent needs. In this way, market development can proceed autonomously, with minimum burden upon the scarce resources of central government management. How to encourage this within a planned economy presents a most interesting problem.

Agricultural marketing, in short, encompasses the system of managing a country’s supplies of food and other essential commodities. Upon the efficiency of this system depends the possibility of maintaining an urban industrial population. The system thus plays a vital role in economic progress.

Herman M. Southworth


Much marketing research is reported in the U.S. Department of Agriculture’s Marketing Research Reports and in bulletins of state agricultural experiment stations.

Abbott, John C. 1962 The Role of Marketing in the Development of Backward Agricultural Economies. Journal of Farm Economics 44:349-362.

Abbott, John C. et al. 1962 Marketing: Its Role in Increasing Productivity. Freedom from Hunger Campaign, Basic Study No. 4. Rome: FAO.

Bauer, Pèter T. (1954) 1963 West African Trade: A Study of Competition, Oligopoly and Monopoly in a Changing Economy. London: Routledge.

Bohannan, Paul; and Dalton, George (editors) 1962 Markets in Africa. Northwestern University Africa Studies, No. 9. Evanston, 111.: Northwestern Univ. Press.

Bowring, James R.; Southworth, Herman M.; and Waugh, Frederick V. 1960 Marketing Policies for Agriculture. Englewood Cliffs, N.J.: Prentice-Hall.

Clodius, Robert L.; and Mueller, Willard F. 1961 Market Structure Analysis as an Orientation for Research in Agricultural Economics. Journal of Farm Economics 43:515-553.

Collins, Norman R.; and Holton, R. H. 1963 Programming Changes in Marketing in Planned Economic Development. Kyklos 16:123-136.

Dewey, alice G. 1962 Peasant Marketing in Java. New York: Free Press.

Hoffman, Austin C. 1940 Large-scale Organization in the Food Industries. U.S. Temporary National Economic Committee, Monograph No. 35. Washington: Government Printing Office.

Irwin, harold S. 1954 Evolution of Futures Trading. Madison, Wise.: Mimir Publishers.

Irwin, Harold S. 1962 The Intangible Side of Agricultural Marketing: A Neglected Area of Research. Journal of Farm Economics 44:808-819.

Kohls, Richard L. (1955) 1961 Marketing of Agricultural Products. 2d ed. New York: Macmillan.

Marketing Evolution and Innovation. 1963 Journal of Farm Economics 45:1243-1271. → A symposium.

Market Organization and Economic Development. 1959 Journal of Farm Economics 41:1307-1331. → A symposium.

Mighell, Ronald L.; and Jones, Lawrence A. 1963 Vertical Coordination in Agriculture. Agricultural Economic Report No. 19. Washington: U.S. Department of Agriculture, Economic Research Service.

Nicholls, William H. 1941 A Theoretical Analysis of Imperfect Competition With Special Application to Agricultural Industries. Ames: Iowa State College Press.

Shepherd, Geoffrey S. (1946) 1962 Marketing Farm Products: Economic Analysis. 4th ed. Ames: Iowa State Univ. Press.

Skinner, George 1964-1965 Marketing and Social Structure in Rural China. Journal of Asian Studies 24:3-43, 195-228, 363-399.

Tax, Sol (1953) 1963 Penny Capitalism: A Guatemalan Indian Economy. Univ. of Chicago Press.

U.S. Departmentof Agriculture 1954 Yearbook of Agriculture: Marketing. Washington: Government Printing Office.

U.S. Farmer Cooperative service (1948) 1965 Farmer Cooperatives in the United States. Rev. ed. FCS Bulletin No. 1. Washington: U.S. Farmer Cooperative Service.

Waugh, Frederick V. (editor) 1954 Readings on Agricultural Marketing. Ames: Iowa State Univ. Press.


Agricultural price and income policies involve the use of governmental authority to increase and/or stabilize agricultural prices and incomes. The measures used to stabilize prices include stock acquisitions, control of domestic and foreign supplies, price supports, and direct subsidies. Programs to increase prices have used similar methods; in fact, most programs to stabilize prices have involved efforts to achieve a long-run average level of prices in excess of what would have otherwise prevailed. The measures to increase the income of farmers have included research to improve farm production methods, farm management advisory services, low-cost credit, aids to farm consolidation and off-farm migration, direct subsidies, control of output or marketings, and price supports.

Historical development

Governmental interference with, or regulation of, the prices of farm products can be found throughout recorded history. An example, more than three millenniums ago, was Joseph’s granaries in Egypt. During the mercantilist period, most of the advanced nations of the world regulated the trade in certain agricultural products. The most famous of the regulations in modern history were the British corn laws, whose beginnings can be traced to 1463. The British corn laws were in existence for approximately four centuries and included many of the devices for influencing price and trade that are now used. These included prohibitions on exports (unless the domestic price was below some given level), export taxes, export bounties or subsidies, and import duties that varied with the domestic price. From 1796 through 1810, bounties were paid in most years to encourage the importation of grain; during some of the same years, export bounties were also paid. Furthermore, in 1623 a proclamation was issued authorizing the construction of public granaries for keeping the surplus of one year to offset the poor crops of another year; apparently none were built.

It can be said that the corn laws had two basic purposes: (1) to maintain the price of grains at a level that would encourage domestic production and (2) to moderate the variability in the price of grain. Until 1814, when export bounties were abandoned, these two objectives were to be achieved by a sliding scale of import duties, which were prohibitive at low grain prices and nominal when grain prices were high, and a bounty on exports when the grain price fell below a specified level. It is reasonably clear that the corn laws were ineffective in stabilizing grain prices; a moderately short crop tended to force the price of grain to the maximum at which almost free importation was permitted, and an above average crop forced prices down to the point at which exportation was permitted and, if the prices were still lower, subsidized.

The effect of the corn laws upon the price of grain has never been adequately determined and probably cannot be from the available data. From 1697 through 1792, exports were substantially larger than imports; during this period, the export bounty was perhaps 5 per cent to 10 per cent of the domestic price. After 1792, England was generally a net importer of grain and the export bounty was of little significance. Under the schedule of import duties that became effective in 1828 and which remained unchanged until 1842, the duty was nominal when the British grain price was 73 shillings per quarter but increased to about 50 per cent of the c.i.f. price when the domestic wheat price was 65 shillings. Most wheat imports were made when the tariff duty was low and the domestic price quite high. However, from 1828 through 1840, almost a tenth of all wheat imported paid a duty of £1 or more, which was equal to a duty rate of 30 per cent or greater. Thus it is fairly clear that the corn laws had the effect of increasing grain prices during this period, but it is not possible to estimate the magnitude of the increase. The very substantial increase in imports following the reduction of the duties in 1842 and their elimination in 1846 also supports the contention that grain prices were increased significantly by the corn laws.

If we exclude the many governmental monopolies that have been established for centuries for various agricultural products, such as tobacco, opium, and alcohol, the first use of the modern technique of price support was probably the Brazilian coffee valorization scheme, which had its beginnings in 1902. The coffee scheme involved government loans to coffee producers, enabling them to hold stocks and thus reduce the quantity marketed, and prohibitions on further planting of coffee trees. Other early examples of price supports include a loan and storage program for currants, established in Greece in 1905; a program for controlling the types, acreages cultivated, and purchase prices of tobacco, established in Japan in 1905; and, in Great Britain during World War I, minimum or guaranteed prices for grains.

General adoption of price and income measures is largely a phenomenon of the past three decades. In the United States, the Federal Farm Board was established in 1929 to provide loans to hold farm commodities off the market in the face of the rapid decline of farm prices during the early years of the great depression. Within a period of little more than two years, the financial resources available to the Federal Farm Board were largely exhausted and the decline in farm prices had been little affected by its actions. It was argued that a primary reason for the failure of the Federal Farm Board was that it did not have authority to limit production to the amount that could be sold at reasonable prices. The Agricultural Adjustment Act of 1933 provided for a wide variety of measures to improve farm prices and incomes—acreage or output limitations, price supports, processing taxes, and subsidies. Significant parts of this act were declared unconstitutional in 1936; however, except for the processing taxes (which had an adverse effect on farm prices in any case), all of the major features of the act, plus other extensions of authority, were re-enacted by Congress between 1936 and 1938. Except for some changes in emphasis, the farm legislation of the period from 1933 through 1938 is still the basis of current farm income and price programs in the United States.

The farm price and income problem

Government action in agriculture has been based on one or both of two assumptions: (1) farm prices and incomes are too variable over time, and (2) the returns to farm resources are too low. The rather substantial variability of farm prices and incomes from crops and from a number of livestock products has been substantiated. The extensive work done by T. W. Schultz (1945) may be noted. In the absence of government programs, farm prices have varied over time as a result of changes in the level of business activity, variations in the output of individual crops, and substantial annual variations in the output produced on individual farms. For many farm products the intrayear variations in prices have also been very large.

The basic sources of the instability of farm prices and incomes can be briefly noted. First, the price elasticity of demand for farm products is low. Thus, for any given demand situation, a small variation in the quantity supplied can result in a much larger and opposite variation in price. Second, in the short run, the elasticity of supply of farm products is very low. In any given country, crops are produced in a given season and the output available for sale for the entire year is determined in a relatively short period of time. Consequently, most of the effect of a change in demand will be felt in price changes, rather than in changes in the quantity offered for sale. Third, production decisions often must be made several months or a year before the product is available for sale. If the price expectations underlying the production decisions turn out to be inaccurate, large changes in prices and income may result. Finally, many farmers live in areas where there are substantial year-to-year climatic variations—the Great Plains of North America, for example. The yield of a given crop on a farm may vary from nothing to two or three times the long-run average yield. At least for the major industrial countries, it appears that instability of demand has been much less important as a source of price instability since World War II than in the years before.

In an economy with rising per capita incomes, it is almost certain that the return to farm labor will be less than the return to comparable labor elsewhere in the economy. In such an economy, a transfer of labor resources from agricultural to nonagricultural occupations is almost certain to occur. The transfer will occur if two phenomena exist: (1) if the income elasticity of demand for farm products is less than unity, and (2) if technological change or other forces result in rising output per unit of labor and land engaged in agriculture.

The existence of the required transfer and its magnitude depend upon the income elasticity of demand for farm products and the relative rate of change in productivity in agriculture compared to the rest of the economy. After an economy has reached a level of per capita income approximating $100 (United States), the income elasticity of demand for farm products is significantly less than unity. Thus the demand for farm products will increase less rapidly than the demand for nonfarm products, since the income elasticity of demand for all output is unity. If it were not possible to increase resource productivity in agriculture, resource transfers out of agriculture would not be necessary, since, with a positive income elasticity of demand, the absolute demand for farm products would grow with rising per capita income. However, the history of the industrial nations indicates that technological and other changes that increase productivity are of roughly the same significance in agriculture as in the rest of the economy.

No nation that has had significant increases in real per capita income has been able to avoid a decline in the share of its total labor force engaged in agriculture. In the past century, the percentage of all workers engaged in agriculture in the United States has declined from about 60 per cent to about 8 per cent; since 1940, farm employment has decreased from 9.4 million to 5.0 million. Since the end of World War II, farm employment has declined by approximately 30 per cent in western Europe.

A decline in the percentage of the labor force engaged in agriculture is one of the adjustments required as a result of increasing real incomes. It is a reflection of the fact that as people become richer they desire to spend a smaller fraction of their income for food and other farm products. It is also an indication that the forces that make it possible for the economy as a whole to enjoy higher incomes—increased capital, new knowledge, and a better educated labor force—are also operative in agriculture.

But, as noted above, one of the consequences of the forces that caused the decline in the relative and absolute employment in agriculture is that the return to farm labor is less than the return to comparable labor elsewhere in the economy. Thus, there is an incentive for young people born on farms to choose another occupation; for most farm youth, this implies leaving the home community and migrating to an urban community.

The size of the differential in income associated with the transfer of labor from agriculture to the rest of the economy appears to vary a great deal from country to country. It appears to be quite large in the United States and Canada—perhaps as much as a quarter or a third—and substantially smaller in France and England.

Remedial techniques

Price and income policies generally have one of two objectives, although sometimes both objectives are pursued simultaneously. One objective is the stabilization of the level of farm prices or incomes; the other objective is the increasing of the level of farm prices or incomes. The latter objective may also seek to increase output, or the end may be primarily the improvement of the income position of farm families, with any output effects being unintended. The price and income policies followed in Great Britain since the end of World War II have had the increasing of output as one of their major objectives. Over the same period of time, the policies in the United States have attempted to use price and income measures as a means of increasing farm incomes, and programs were devised to offset the output effects of the higher prices and incomes.

The techniques that have been used to increase or stabilize farm prices fall into a number of categories; frequently several techniques may be used in combination. The principal techniques include output control, storage financed by loans or government purchase, deficiency payments, import controls, and export subsidies. The main features of the wheat program of the United States in 1963 were approximately the same as the programs followed for several major crops during the previous decade and may be used as an example. The total area sown to wheat was limited to fifty million acres; each farmer who grew wheat was allocated a specific acreage based upon previous area seeded. When the wheat was harvested the farmer had the choice of selling his wheat on the market or of obtaining a nonrecourse loan from the Commodity Credit Corporation. The meaning of the term “nonrecourse loan” is that the farmer could deliver his wheat in full payment of the loan even if the market price of the wheat were below the amount loaned to him. The general idea of this loan program was that enough farmers would place their wheat in storage to increase the market price to approximately the loan rate, which was $2.00 per bushel in 1963.

The production of wheat in the United States in recent years has been approximately double the domestic use for food, feed, and seed. As the domestic price averaged about $0.65 per bushel more than the price received by exporters abroad, any sales of wheat in foreign markets required an export subsidy of about that amount. However, even with an export subsidy, sales in regular commercial export markets were equal to about half the excess of production over domestic use. The remainder of the wheat, plus some additional amount to reduce the relatively large stocks held by the Commodity Credit Corporation, was disposed of as a part of the United States foreign economic assistance program. The wheat was sold for local currencies, with no anticipation that payment would be made later in dollars. Most of the local currencies have been, or will be, returned to the nations receiving the wheat, although some have been used to cover United States expenditures in the recipient nations.

One consequence of the price support programs that resulted in domestic prices in excess of world market prices has been the necessity to control the importation of the farm products involved. Again using wheat as an example, for almost three decades there has been an import quota that prohibits the importation of more than a few thousand bushels of wheat or its equivalent in flour.

In the United Kingdom, which is an important importer of wheat, price supports for wheat have been maintained by deficiency payments. The deficiency payment to the farmer represents the difference between the guaranteed price and the average market price for the year. In this system, imports are allowed to enter the country freely; and because there is no tariff on wheat, the price paid by consumers represents the lowest price at which wheat is available from anywhere in the world.

In West Germany, which also imports wheat, the government establishes a target price for wheat. The target price is a threshold price at the major ports (the target price minus transport costs to the major interior markets). On any wheat that is imported from outside the European Economic Community, a variable levy is imposed, equal to the difference between the threshold price and the average price of wheat offered for sale by exporters. Thus, the price at which imported wheat is available to German millers does not vary; a decline in the exporter’s offering price is offset by an equal increase in the variable levy. The variable levy, which is a major instrument of the common agricultural policy of the European Economic Community, is a modern version of the English corn laws of the early nineteenth century.

The price and income programs of most nations have included measures other than increasing the prices received by farmers. In the United States, various payments are made directly to farmers for carrying out certain farm practices, such as terracing, tiling, liming, and the planting of cover crops. Substantial payments have also been made for diverting land from productive use. In the United Kingdom, subsidies have been paid for the use of fertilizers and limes, for drainage, for the ploughing up of land, and for the production of cattle in hill regions. In West Germany, payments have been made for reduction of fertilizer prices, for improvement of farm buildings, and for land consolidation and enlargement of farms.

Determination of price support levels

The determination of the price support level varies from country to country. In the United States, an attempt was made in the Agricultural Adjustment Act of 1933 to specify an objective criterion. This criterion was called the parity price, which was the price of an agricultural commodity that would give the same purchasing power, in terms of the goods and services purchased by the farmer for production and living, that the commodity had in 1910-1914. Thus the price received per bushel of wheat during 1910-1914 was 88 cents; if prices paid by farmers doubled, the parity price would be $1.76 per bushel. Price supports, however, were never established at 100 per cent of parity. During the 1930s, support prices were established in the general range of 50 per cent to 70 per cent of parity; it was not until World War II that price supports were established at 90 per cent of parity.

The specific definition of parity was changed on several occasions; for example, property taxes and wage rates for hired workers were added to the prices-paid index. One serious objection to the concept was that demand and supply conditions change over time and that the relative prices of agricultural products that prevailed in 1910-1914 did not fit the circumstances four decades later. An important modification was introduced in 1948, when the relative parity prices were determined by the average prices received by farmers during the previous ten years. However, since the revision in the formula resulted in the reduction of parity prices for “politically important crops,” primarily wheat and corn, the revised formula did not become fully effective for certain crops for almost a decade.

Other nations have not adopted such specific and rigid concepts as parity prices to define their farm price objectives. In the United Kingdom, the price objective was defined in the Agriculture Act of 1947 as “promoting and maintaining a stable and efficient agricultural industry capable of producing such part of the nation’s food and other agricultural produce as in the national interest it is desirable to produce in the United Kingdom, and of producing it at minimum prices consistent with proper remuneration and living conditions for farmers and workers in agriculture and an adequate return on capital invested in the industry.” In West Germany, the Agricultural Act of 1955 had the objective of providing the same return to agricultural labor on properly managed holdings of average production conditions as to wage earners in comparable nonagricultural occupations in rural areas; additional criteria included adequate reward to managerial activity and capital in agriculture.

Effects of price and income policies

The agricultural price and income measures of the industrial countries have a number of consequences, some intended and some unintended, that merit examination. The major intended effect is to increase the level of return to resources engaged in agriculture. Other important areas of effect are output consequences, cost to consumers, cost to taxpayers, and international trade.

Resource and output effects. Of the various effects, the one that is subject to the most dispute is the return to resources engaged in agriculture. The intent of the governments that enact and administer agricultural price and income measures is to increase the return to farm labor, land, and capital. There is considerable dispute among economists about the effects of higher prices and other income measures upon the return to farm labor. One school of thought argues that the increase in net income resulting from an increase in farm product prices is of almost the same absolute size as the increase in gross farm income. Another school of thought argues that the effect of a given increase in product prices upon the average return to farm resources depends on the characteristics of the production function and the elasticity of supply of the various farm resources.

The basic assumption of the first school is that farmers do not adjust the level of output in response to changes in the average level of all product prices. Following an increase in product prices, production expenditures, except for purchases from other farms, remain essentially the same. Since production expenses in modern agriculture constitute half or more of gross income, a change in gross income of 10 per cent would result in a change of net farm income of more than 20 per cent, if the stated assumption were correct.

The above approach to the effects of changes in product prices upon the returns to farm resources is inconsistent with the expected result derived from the application of modern price and production theory, unless the elasticity of supply of agricultural output is, in fact, zero.

In brief summary, price and production theory implies the following consequences from an increase in farm product prices: (1) farm output would increase; (2) more inputs or resources would be used; (3) total payments to nonfarm resources—fertilizer, gasoline, feed supplements, machinery—would increase; and (4) the relative increase in factor prices will vary inversely with their elasticities of supply. Whether the increase in the return to farmer-owned resources—the labor of the operator and his family and his owned capital and land—will increase more than, the same as, or less than the increase in product prices depends upon the conditions of production and the elasticities of factor supply.

Some of the above implications are directly derivable from the formula [l/(s+l)][l+e], in which s is the elasticity of supply for a factor and e is the elasticity of supply of output. The above formula is based upon the assumption that the elasticity of substitution among inputs is unity; if the elasticity of substitution varies between 0.5 and 2.0, the results are affected only slightly.

The implications of the formula can be illustrated by assuming that government action results in an increase of product price by 10 per cent. Let us assume that the elasticity of supply of output is 0.1. If the elasticity of factor supply is zero, which, in the short run, may be approximately true of land, the return to land (rent) will increase by 11 per cent. If the elasticity of supply for an input is 10, which might be the case for fertilizer, the increase in price would be about 1 per cent. If the elasticity of factor supply is 0.25, which might represent all labor used in agriculture, the increase in the return to labor would be 9 per cent. If the elasticity of factor supply is unity, the increase in factor price would be between 5 per cent and 6 per cent. If the elasticity of factor supply is equal, or greater than, the output elasticity, the increase in factor price will be less than the increase in product price.

It is almost certain that land will be the input that will gain most from an increase in product price due to government action. It is also most unlikely that the increase in the return to labor will be greater than the increase in product price.

The above results can be put differently. A significant fraction of the cost of the higher prices will be required to pay for additional inputs; of the increase in net returns to farm resources, the largest percentage increase will go to the owners of land.

The effects of changes in product prices upon the return to resources are affected only slightly if output is controlled by reducing the quantity of one of the inputs, such as land. The major effect of limiting the quantity of one of the inputs that may be used is to reduce the level of output somewhat and thus perhaps to reduce the governmental costs of the effort to increase product prices.

In the short run, the formula given above may not apply. This is true because the change in prices may not be fully anticipated or, if anticipated, complete adjustment is not possible. For example, in the United States between 1948 and 1949, farm prices received decreased by 12.5 per cent, and net farm income per capita declined 22.5 per cent; between 1950 and 1951, prices increased by 6 per cent, and net farm income per capita increased 11 per cent. However, if periods of somewhat greater length are compared, the formula appears to be supported by changes that can be observed in prices and incomes. Between 1945-1948 and 1949-1953, farm prices decreased by 11 per cent and farm income per capita by 10.5 per cent; between 1949-1953 and 1954-1958, farm prices decreased by 13 per cent and farm income per capita by 5 per cent.

The United States has been the only major industrial country that has followed a conscious policy of attempting to restrict farm production. However, the effectiveness of the programs followed—restriction of land cultivated for certain crops—is subject to debate. First, it is possible to substitute other inputs for land—more fertilizer, labor, machinery, herbicides, and insecticides. The higher prices that have been associated with the reduction in land cultivated have encouraged such substitutions. Second, the relative importance of land, as a factor of production, is relatively small in modern agriculture. In the United States, at present, land, including buildings used for production, accounts for about 15 per cent of all farm resources. If the elasticity of substitution between land and all other inputs is unity, a 20 per cent reduction in land use (which has never been achieved in the United States) would cause farm output to decline no more than 4 per cent or 5 per cent. Third, while the United States has attempted to reduce farm output by reducing cultivated land, it has simultaneously had subsidized farm credit. In addition, there has been an effective research and education program to improve farm efficiency and, thus, production. On balance, it appears most unlikely that the United States has reduced farm production by government programs, and it is probable that the higher prices have resulted in an increase in the level of production.

Costs of programs. The total costs of efforts to increase farm prices as a means of increasing farm incomes have proven to be very substantial in the major industrial nations. These costs take several forms, depending upon the particular methods adopted for increasing returns to farmers. In the United Kingdom, where the policy has been to allow prices in consumer markets to clear the markets, the major costs have represented subsidies paid to farmers. These subsidies have taken two forms: (1) a payment to farmers equal to the difference between the guaranteed price and the market price, and (2) production subsidies for such items as fertilizer and lime or for improvements of buildings and other structures. In West Germany, the costs have included relatively high prices for consumers, payments for improving the quality and marketing of milk, payments for enlargement of farms and improvement of farm buildings, and subsidies to reduce the cost of certain farm inputs (principally fertilizer and petroleum products).

In the United States, the cost of the farm price programs have included payments to induce farmers to withdraw part of their land from cultivation, payments for land improvements, export subsidies to compensate for the difference in domestic and foreign prices, and storage costs—as well as higher prices to domestic consumers. In the United States, storage costs of commodities acquired by the government in its efforts to maintain market prices near some specified level have been a significant element in the total costs of the farm price support program. In recent years, for example, if the cost of storage for wheat owned by the government is calculated on a first-in-first-out basis, the cost of accumulated storage is greater than the amount received by the farmer for the wheat.

International trade effects. The efforts on the part of governments to increase farm prices and incomes have major implications for international trade in farm products. The nations that increase prices to consumers restrict consumption of farm products. If the nations are importers of farm products, the volume and value of imports are reduced. If the nations are exporters, the quantity of products available for export is increased, and export subsidies are often used to increase the quantity of farm products exported. Equally important, the methods used to increase farm incomes—higher prices and production subsidies— also increase farm production in the industrial countries. In a nation that normally imports part of its food supply, the net effect is to reduce the demand for imports. An exporting country is faced with the necessity of increasing exports.

One of the important, but often ignored, consequences of the farm income programs of the industrial nations is the effects upon the export possibilities of underdeveloped areas. By reducing consumption through higher prices to consumers and by increasing farm output by higher prices and various subsidies, the industrial nations have reduced the export potentials of underdeveloped areas. While it is true that many of the tropical farm products produced by underdeveloped areas are not produced in the industrial countries, there is competition at both the production and consumption level. In production, the industrial countries compete in rice, fats and oils, and sugar. In addition, subsidized exports, often under the guise of foreign aid, reduce the market for domestically produced food products, especially the grains, in the recipient countries.


The price and income policies described above have numerous and serious disadvantages, higher prices to consumers, large treasury costs, increased farm output, and restraint on the potential gains from international specialization; but perhaps the most serious limitation is that there is no evidence that the income gaps that exist between farm and nonfarm families have narrowed as a result of these programs. At best, it can be argued that the income differentials are generally narrower than would have been the case if the various nations had not pursued these policies. But this proposition has not been demonstrated in any systematic way, despite the billions of dollars spent each year on these programs by the industrial nations.

One of the consequences of economic growth is a decline in farm employment, first relatively and later absolutely. A major factor, although not the only one, in the observed differences in the incomes of farm and nonfarm workers is that many farm people must continually shift to nonfarm jobs. No developing country has been able to avoid this transfer. Yet there are very few instances where the necessity for the labor transfer has been recognized as an element that needed to be considered in developing agricultural income programs.

While it is probably true that the policies followed by the industrial nations have not held a significant amount of labor in agriculture—in most countries significant income differentials have persisted—the programs can be criticized on two grounds. First, most countries have had programs that have encouraged farmers to make additional investments in land improvements, buildings, fertilizer, and machinery. These increased investments, where not justified by their returns, have reduced the demand for farm labor and depressed the returns to farm labor. Second, the programs have failed to aid farm people in making the adjustment that economic growth required, namely the transfer from farm to nonfarm occupations. If the funds invested in farm price supports and production and investment subsidies had been used for rural education, training of adult farm workers for nonfarm jobs, improving employment information, and subsidies for labor transfers, the returns to farm resources would be no lower than they now are. Furthermore, the adjustments that the agricultures of all industrial nations face would by now be much smaller in magnitude.

The transfer of workers from agriculture to the rest of the economy is influenced, of course, by the state of employment in the economy as a whole. If there is an active labor market, the transfer can occur more rapidly and more easily than if there is serious unemployment. With some exception for Canada and the United States, most of the major industrial countries have not had high unemployment rates for the past two decades. In the United States, during the years 1960-1962, when unemployment rates averaged almost 6 per cent, the annual migration from the farms averaged 5 per cent of the farm population. And this was in a setting in which little was done by government to aid the transfer and employment opportunities were relatively limited.

I should note that there is not general agreement among agricultural economists that it is possible to remove the disequilibria in agriculture by assisting the transfer of labor out of agriculture. Heady (1962) has argued that while it is desirable to do all that can be done to make the elasticity of supply of farm labor as large as possible, technological change and the substitution of other inputs for labor will make it difficult, if not impossible, to increase the returns to farm labor to a satisfactory level, unless the amount of land used in agriculture is also reduced. Heady’s conclusion implies that the long-run elasticity of substitution between labor and other inputs, given the existing supply of land, is very high, and large changes in the quantity of labor will not have much influence upon the marginal returns to labor. However, if the elasticity of substitution between land and purchased inputs is also very great, reducing the amount of land used in agriculture would also have little effect upon output, product prices, or the marginal return to labor.

The questions posed by the previous paragraph are questions of fact. Unfortunately, we do not yet have the research that could clearly substantiate one view or the other.

D. Gale Johnson


Benedict, Murray R. 1953 Farm Policies of the United States, 1790-1950: A Study of Their Origins and Development. New York: Twentieth Century Fund.

Benedict, Murray R.; and Stine, Oscar C. 1956 The Agricultural Commodity Programs: Two Decades of Experience. New York: Twentieth Century Fund.

Cochrane, Willard W. 1965 The City Man’s Guide to the Farm Problem. Minneapolis: Univ. of Minnesota Press.

Hathaway, Dale E. 1963 Government and Agriculture: Public Policy in a Democratic Society. New York: Macmillan.

Heady, Earl O. 1962 Agricultural Policy Under Economic Development. Ames: Iowa State Univ. Press.

Johnson, D. gale 1947 Forward Prices for Agriculture.Univ. of Chicago Press.

Mccrone, Gavin 1962 The Economics of Subsidizing Agriculture: A Study of British Policy. London: Allen & Unwin. Nicholson, Joseph S. 1904 The History of the English Corn Laws. New York: Scribner.

Organizationfor European Economic Cooperation 1961 Trends in Agricultural Policies Since 1955. Fifth Report on Agricultural Policies in Europe and North America. Paris: The Organization.

Schultz, Theodore W. 1945 Agriculture in an Unstable Economy. New York: McGraw-Hill.

Tontz, Robert L. (editor) 1966 Foreign Agricultural Trade: Selected Readings. Ames: Iowa State Univ. Press.

Tracy, Michael 1964 Agriculture in Western Europe. London: Cape; New York: Praeger.


Most typically, agricultural activity in developing countries is carried on by persons who combine in a single household the functions of managing and providing labor for a settled farm. This type of agriculture may be called peasant farming. The definition includes a vast number of farmers who have very similar economic problems and who produce much of the world’s food and fiber. The definition excludes both the farm laborer who has virtually no decision-making power and the specialized farm manager who does little or no manual labor. It also excludes large corporate, state, and collectivized farms, as well as plantations. (The latter, in particular, are important in a number of developing nations.) On such farms the functional division into manager and laborer is usually accompanied by sharp social distinctions as well. The practitioner of shifting cultivation is also excluded from this definition of peasantry. Shifting cultivation occupies a large area in many developing countries, but because of its extensive nature, it accounts for only a small proportion of agricultural production. [seeagriculture, article onproduction; COMMUNISM, Economic organization of, article onagriculture; plantations. For discussion of shifting agriculture, seeagriculture, article oncomparative technology; andasian society, article onsoutheast asia.]

The peasant farmer occupies an intermediate position on the continuum between agricultural laborer and specialized manager. Thus, the definition of a peasant farmer is necessarily arbitrary at its edges. On the one hand, farm laborers may own small pieces of land which they till and about which they make management decisions. On the other hand, some peasants operate such large farms that they in fact participate little in laboring and serve largely as specialized managers. Nevertheless, there is sufficient homogeneity of economic problems and decision-making responsibility included in this definition to make it operationally useful.

Peasant farming includes a wide range of economic conditions, since both the largely subsistence farmer characteristic of much of Asia and the highly commercialized family farmer of North America combine the farm-labor and farm-management functions in the same household. The peasant or family farm in the dynamic high-income economies is discussed in other articles in this group. The emphasis of this article will be on the peasant farmer in the context of a relatively traditional economy.

The complexity of executive management required and the necessity of day-to-day decisions under highly varied conditions give considerable advantage to the family-size farm and explain the dominance of the peasant farm in the world’s agriculture. Farms with large labor forces and a sharp division between management and labor are largely limited to special situations: where integrated operations offer special marketing advantages; where other services having major economies of scale, such as research, must be rendered on each individual farm; or where special problems of handling unskilled labor arise. Most of the farming in the United States is still basically family farming, even though the American farmer is competent in a highly advanced technology, is highly commercialized, and uses large amounts of capital and land.

As broadly defined, peasant agriculture dominates the low-income economies of much of Asia and to a large extent those of Africa and Latin America as well. In these areas peasant agriculture often produces over half of the national income and absorbs well over half of the nation’s population. The future course of food production for growing populations and, in early stages of development, the future rate of increase in per-capita national income itself depend in important part upon production trends in the dominant peasantfarming sector (Johnston & Mellor 1961). With recognition of the critical role of peasant agriculture in economic development, substantial research and policy attention is directed to analysis of the means of development of this sector of the economy.

Means of increasing production

Peasant agriculture has two characteristics that distinguish it sharply from other sectors of the economy in the development process.

First, early in development, peasant agriculture already commands the economy’s basic stock of land, labor, and capital, which it uses at low levels of productivity. Thus, for this sector the problem of development is not so much one of raising a large stock of new resources, as is the case for much new industry, but one of how to make the existing stock of resources more productive. Peasant agriculture thus offers substantial opportunity for rapid increase in production through increasing the productivity of existing resources, but concurrently it presents major problems of inertia in changing an existing system.

The second distinguishing characteristic of the peasant-farming sector is that it consists of a large number of heterogeneous small-scale units of production. This creates problems of communication and of rendering production-related services. Although the farming operation itself offers few economies of scale beyond a family-size operation, many of the services, such as research, education, transport, and so on, which are associated with high-productivity agriculture, do offer major economies of scale. If peasant agriculture is to develop, devices must be found for providing such services to literally millions of small-scale farming units. The problems to be met and the inertia in the existing system seriously retard the development process.

Four quite different approaches are currently proposed as means of increasing production in a peasant agriculture. They differ in the extent to which they require increased allocation of scarce resources from other sectors of the economy and in the implicit level of returns such resources are expected to receive from their use in agriculture.

First, it is argued that peasant farmers in traditional economies use the resources currently at their disposal inefficiently. It then follows that systematic study of resource utilization will provide the basis for reorganizing agriculture with a consequent increase in production. However, increasingly it is recognized that, given their environment, peasant farmers in fact operate rather efficiently and that major increases in production cannot be expected from this source (Schultz 1964).

Second, it is argued that traditional peasant agriculture contains a large stock of idle labor and even land resources that may be brought into production. However, it is now being recognized that although such idle stocks of resources do occur, their productivity, with current technology, is too low to make them meaningful to either individual peasants or to society as a whole (Mellor 1963).

Third, it is argued that increased production in peasant agriculture requires heavy input of capital and other resources of a largely traditional type in the form of land-reclamation schemes, major irrigation projects, and large-scale machinery. However, experience to date indicates that returns on this kind of investment in peasant agriculture are generally low unless major changes in technology occur simultaneously.

Fourth, it is argued that increased production may be achieved largely on the basis of the existing set of traditional resources through introducing technological change, which raises the productivity of existing resources and concurrently attracts idle resources into production. Such technological change, of course, has a cost and involves a number of planning problems. The approach has been successful in many high-income countries, including most notably Japan.

The relative merits of these several positions will become clearer in the succeeding discussion of the economics of traditional peasant agriculture and its modernization.

The resource base

The family labor force is the basic labor unit of peasant agriculture. Farms in the United States normally have a labor force equivalent to two full-time persons, and that typical size has not changed significantly for decades. The typical farm in India and Indonesia also has roughly a two-man labor force. Of course, the extent to which other resources are combined with labor, the extent to which the labor force is fully occupied, and the size of income accruing to that labor force differs greatly from one peasant agriculture to another.

Typically, in traditional economies there are large stocks of idle labor during much of the year, and in some peasant agricultures there is a stock of idle labor even at seasonal peaks of labor requirements. The productivity of labor in traditional peasant agricultures is low. Typically an increment of a man-day of labor in India provides the basis for only an additional 20 to 40 cents increment to production. Such a return provides little incentive for either full or efficient utilization of labor.

The size of the land resource per peasant family differs greatly from one situation to another. In a high-income country the family farmer may command hundreds of acres of land. In India peasant farmers typically command only five or ten acres. In Japan peasant farms are even smaller, averaging only about two acres per farm.

As in the case of labor, there is great variability in the production that is drawn from an acre of land. Japanese farmers gain several times as much production per acre as do Indian farmers. And the differences are more matters of technological stage than inherent productivity of the land. Typically in peasant agricultures of low-income countries yields per acre are very low compared to what is expected from similar land in a high-income nation.

The capital resource per peasant family also ranges widely—from the tens of thousands of dollars of nonland capital of a family farm in the United States to the mere tens of dollars of capital of a peasant farm in a low-income country. In India nonland capital typically consists of a team of bullocks worth $100-$200 and perhaps only $50 worth of tools. In many low-income countries working livestock is not common, and nonland capital, therefore, includes only a few dollars’ worth of hand tools. In such agricultures the major opportunity for capital formation within agriculture is in the form of improvements to land, such as wells, land leveling, fencing, and so on. Since these forms of investment are largely a direct embodiment of labor, the returns on them tend also to be driven to low levels.

Technology in the form of improved plant and livestock varieties and advanced production practices is one of the most important resources of high-income peasant agricultures. The peasant agricultures of low-income parts of the world lack such technology, and its provision represents a key aspect of the process of modernization.

The economic efficiency of resource use

Resource productivity in the peasant agriculture of traditional economies tends to be low, in the sense that output per unit of input of resources is low. However, the economic efficiency with which resources are used in peasant agricultures is generally quite high, in the sense that with the given objectives of peasant farmers a simple reorganization of resources within the present environment will not provide a substantial increase in production. This distinction is important because if economic efficiency is already high, then an increase in productivity requires a change in the environment within which decisions are made, rather than just a process of education.

Carefully drawn empirical studies of resource efficiency, which recognize the objectives of peasant farming, generally show peasant farmers to be combining inputs and production objectives in close to an optimal pattern (Schultz 1964; Tax 1953; Jones 1960). The objectives of a family enterprise such as a peasant farm may be complex and may certainly include, in addition to money income, consideration of the value of family time for leisure and other nonmonetary uses. Peasant farmers are not alone in introducing broad objectives into their economizing decisions.

Peasant farmers face two basic types of management decisions: those concerned with factor combinations (the intensity with which factors of production are used) and those concerned with the combination of enterprises (the output mix).

No farmer faces a completely static environment, although in a traditional peasant agriculture the decision-making environment changes relatively slowly. Even in a traditional peasant agriculture, population growth increases the availability of labor and pressures on income, calling for adjustment of labor input and product output. Occasional changes in technology, such as cultivation practices, or in water availability provide opportunity for new combinations of input and output. Occasionally the physical environment itself changes, with new insect and disease problems changing factor costs and returns. And even if agriculture itself is not dynamic, changes in incomes and tastes in other sectors may bring about price changes, which in turn change the relative profitability of alternative cropping patterns. Particularly if incomes are already low, peasant farmers must adjust effectively to many of these changes.

As economic development and the modernization of agriculture occur, changes in the decision-making environment become more rapid, and the pressure on the decision-making ability of peasant farmers increases substantially. In a traditional agriculture peasants may maintain efficiency by slow evolution of a trial-and-error nature. With modernization, decision making must become much more systematic and rapid. Thus, the relatively high level of economic efficiency in traditional peasant economies probably shows more about the simplicity and static nature of their environment than about the excellence of their decision-making ability.

Three special features of peasant farming in low-income countries may give the appearance of economic inefficiency. They are discussed below:

Variability in economic efficiency. Studies that demonstrate peasant farmers to be, on the average, in good economic adjustment with their environment normally include considerable variability around that average. It is usually not clear to what extent such variability arises because many peasant farmers are not in optimal economic adjustment and to what extent the environment itself differs significantly from one farmer to another. Certainly the latter is true in part. Soils and other physical features differ widely even within small areas, so that the optimal organization and combination of factors will vary from one farm to another. A gross study is not likely to make the necessary adjustments in all the data. Perhaps even more important, costs of labor and capital differ substantially from one farm to another. Farms with relatively more land per family member may feel less pressure to squeeze the last bit of gross income out of the farm through more use of labor, and thus they in effect act as though labor were more expensive to them than to other farmers (Mellor 1963). Likewise, such farmers, because of their higher incomes, have effectively lower costs of capital. Such variation in labor and capital costs may be greater than in the high-income nation where resources may be more freely mobile. As a result, greater variability in farm organization and operation may occur in traditional, as compared to modern, peasant-type agricultures.

Peasant conservatism. Farmers in low-income countries tend to be conservative. That is, they weigh risks and uncertainty heavily in making decisions. In addition, certain types of risks may in fact be greater in a traditional agriculture. Judged by standards that presume no risk, farmers in such a situation may appear out of adjustment. Risks of importance occur in regard to weather, prices, and technology.

Because peasant farmers in low-income countries have low incomes and relatively fixed consumption patterns, they tend to attach a very high value to achieving the normal pattern of income and relatively less value to comparable increments in excess of the normal pattern. Thus, peasant farmers in a traditional agriculture often choose a cropping pattern that provides little variability in production over a wide range of weather conditions, even though it may provide somewhat less on the average or in total over a period of years. Such organization may appear inefficient if the peasant’s weighing of risk and uncertainty is not recognized. Peasants may react to new price relationships in the same manner. Even more important, peasant farmers may be slow to accept technological change because of the risks involved.

It should be clearly noted that in a traditional peasant agriculture, which does not have institutions for developing and testing innovation, long experience has shown that innovation generally does not pay. Conservatism in such a situation has important survival value, particularly if peasant farmers are living close to the subsistence margin. In such circumstances a society may institutionalize conservatism by placing decision-making power in the hands of the older members of the family and community who have learned from observation to move very cautiously into anything new. Such institutionalization of conservatism is valuable in a traditional economy. However, it slows progress toward a modern agriculture in which there are institutional means for developing and testing innovation so as to reduce its risk and increase its profitability. In any case, conservatism will in the short run cause farmers to be out of adjustment with a dynamic environment.

Subsistence-mindedness. Peasant farmers may be in significant part subsistence-minded—attaching special value to crops and livestock produced for home use relative to production for sale. Individual peasants may thus appear out of economic adjustment and unresponsive to price changes. In general, however, peasant farmers are not completely rigid in following production patterns that favor subsistence commodities. The apparent inflexibility arises from two sources, the first a matter of price relationships and the second a matter of risk and uncertainty.

In deciding upon relative emphasis on subsistence crops, farmers compare the farm price of crops they will sell and the retail price for crops they are to buy. Since marketing costs may provide a significant difference between these prices, there will be a range of prices within which individual farmers will not respond to changes in price. The effect of this will be to reduce the average extent of response of supply to changes in price relationships at retail.

This tendency will be increased by farmer reaction to risk and uncertainty. It is of great importance to peasant farmers that they be able to supply their subsistence needs. It happens that in most low-income countries there are great seasonal and year-to-year fluctuations in market prices and in market availability of food crops. As a result, farmers fear that if they produce certain crops for sale and then later buy subsistence crops on the market, they will be caught purchasing at a time of seasonally or cyclically high prices or low supply. This simply means that farmers would structure production to given price relationships if those prices were certain, but with price uncertainty they will give added favor to production for subsistence needs. Such behavior is inefficient only by the use of inappropriate measures.

Price responsiveness of peasant farmers. Given similar physical conditions, peasant farmers in a traditional agriculture tend to be as responsive to change in the relationship among farm prices as farmers in more modern agricultures, or even more so. This is documented by a number of careful studies of price behavior in peasant agricultures of Asia (Krishna 1963; Falcon 1964). This is not surprising, since peasant farmers in a traditional agriculture use forms of labor and capital which are quite flexible in production—in contrast with peasant farms in high-income agricultures, where capital tends to be highly specific in, say, cottonpicking machines, which will not harvest wheat, and in technical know-how regarding, say, onions, which is not transferable to beets. It is this flexibility of resource use in traditional agricultures that permits a substantial response to changes in price relationships.

On the other hand, peasant farmers in low-income economies tend to alter the aggregate level of agricultural production relatively little in response to price changes. This is because they operate in an agriculture using largely fixed resources, such as land and family labor, and use little of such purchased variable inputs as fertilizer. In addition, labor is relatively immobile, with little opportunity to move in and out of agriculture. Thus, there is little opportunity to vary the quantity of resources in production in response to change in the over-all level of prices for agricultural commodities. Occasionally, higher prices may pull additional labor into production from idle stocks. However, in a traditional agriculture the tendency for that to happen on some farms may be counterbalanced by the tendency on some other farms for income incentives to be satisfied with less work at higher prices, causing a perverse response of labor input to price.

Peasant response to new technology. There are many examples of peasant farmers in traditional agriculture who quickly adopt an innovation that is profitable under their conditions. Earlier exposition suggests that they may be cautious in decisions regarding change; but this is not because they are not economically motivated, but because they know from experience of the risks involved. However, even on this count the stereotype of peasant conservatism tends to be overstated. It must be remembered that there is normally considerable variability in size of farm and income among peasant farmers in a given community. The operators of the larger farms are well able to experiment and to accept some risk—and to a surprising extent experimentation does occur. All too often what is interpreted as a reluctance toward change is in fact no more than good sense on the part of peasants in rejecting innovation that under their conditions is unprofitable (Herdt & Mellor 1964).

The requisites for modernization

Modernization of peasant agriculture does not require change in its basic structure. Peasant agriculture is well suited to modernization, and peasant farmers are already reacting in an economically rational way to their environment. What is needed to bring about decisions that will increase production and incomes is to change the environment within which peasant farmers make decisions. That is largely a matter of institutional change. And although it is true that major increases in production require a complex reformation of institutions, it is often the case that only one or two sets of institutions are limiting at a specific time. The following sets of institutional changes are set forth in the order in which they are most likely to be limiting (Mellor 1963).

In some peasant agricultures land tenure and other arrangements may be repressive and hence discouraging to income-increasing innovation, because the landlords or others appropriate an undue proportion of gains, while letting the risk and uncertainty and the cost of added inputs fall on the peasant farmer. Land reform and related institutional changes may be needed [seeland tenure].

If efficiency is to increase, a prime requisite is new technology. This is rarely transferable directly from one region to another, hence peasant agriculture must be supported by a program of research. Research institutions need to be centrally provided. This is often the source of unfavorable contrast between peasant agriculture and plantations or other large-scale methods of farming. The latter tend to have their own experiment stations. Peasants in traditional agriculture do not. In high-income agricultures of Europe, North America, and Japan the state has provided such facilities to family farmers, with a salutary effect on production and incomes.

Much technological change is based on new forms of inputs, particularly improved seeds and fertilizers. These require new lines of production and distribution. Traditional peasant agriculture can improve very little until these lines are opened and developed.

As innovation becomes more complex, educational institutions are required to teach farmers to use complex innovation and to handle increasingly complex decisions more rapidly.

Eventually, improved credit facilities are needed. Initially this may be less important than is sometimes thought. Innovations in early stages of development normally have cash costs sufficiently low for current income to provide the basis for adequate capital formation, at least on the larger farms. As innovation requires more and more purchased inputs, credit problems may increase [seecredit, article onagricultural credit].

Likewise, increased marketing efficiency may be important in modernization, particularly when output combinations change or bulky perishable products are produced in much larger quantity.

The key to modernization of traditional peasant agricultures is to provide institutions for facilitating the development and application of technological advance, thereby increasing the productivity of the existing stock of resources. The economic returns to such an effort tend to be high.

John W. Mellor

[See alsoAgriculture, articles oncapital, labor, andmarketing. ]


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