AGRICULTURAL ECONOMICS. From the earliest times the art of husbandry has been not only the preoccupation of those who practise it, but also the subject of innumerable trea tises explaining its principles and suggesting methods for its im provement. Within the last century the application of the results of scientific investigation to the cultivation of the soil has been expounded with ever-increasing voluminousness. But the consid eration of farming as a business has been only recently recognized as a subject for systematic study. Farming in many countries is a means of subsistence, and can only be described as a business in a limited sense, but commercial agriculture is yearly becoming more widespread and more important.
Agricultural economics may be defined as the special application of the general principles of economics to the special conditions of the production and sale of agricultural products. It comprises therefore the consideration of the factors of production, the cost of production, and the disposal of the produce. It is not con cerned directly with the technique of farming but it assumes that experience, skill and energy in the use of the land will not suffice for commercial success without knowledge of the economic as well as the practical details of farm management. The subject of agricultural economics includes within its scope many subjects which are, so to speak, self-contained, such as farm accounts, farm valuations, and agricultural co-operation, which are consid ered under their separate headings.
In the United States, the systematic study of agricultural economics forms a part of the curriculum of State universities and agricultural colleges and of the larger endowed universities. A well equipped bureau of the U.S. Department of Agriculture has done admirable work in research and in expounding and popu larizing the subject. Its work covers a wide range of subjects: Land problems ; agricultural finance, including credit, insurance and taxation as they affect agriculture; farm management and cost of production; statistical and historical research on a wide range of subjects; co-operative marketing; foreign competition and demand, as affecting agriculture; and other subjects. The State agricultural experiment stations, supported by State and Federal funds, conduct research on various phases of agricultural eco nomics. In 1925 Congress passed the Purnell Act, under which Federal support to each State for agricultural research will reach the maximum of $6o,000 a year in 1929, in addition to the $30,000 available under earlier acts of Congress. The Purnell Act specifies that a part of the funds shall be used for research in agricultural economics, home economics and rural sociology. Among the privately supported institutions conducting research in this field are : The Institute for Research in Land and Public Utility Eco nomics (Northwestern university) established under the direction of Dr. Richard T. Ely, and the Food Research institute of Leland Stanford university. The field of research in agricultural eco nomics in the U.S. may be divided into three general groups of problems: (I) Problems which may be dealt with mainly by individual effort. These include farm management, embodying the organization of the factors of production on the individual farm and the adjustment of farming according to changes in costs of production and in prices of farm products. (2) Problems that may be solved by joint effort of farmers acting through co operative organizations or other associations. In 1926 Congress created the Division of Agricultural Co-operation in the Bureau of Agricultural Economics, to conduct research and to render services to farmers on all phases of co-operation. Legislation to remove legal obstacles to co-operative organizations, notably the Capper Volstead Act, has been passed in recent years. (3) Economic problems of agriculture that may be dealt with by governmental policy expressed through laws and public institutions. This group includes agricultural credit, land policies, public expenditures and taxation as they affect agriculture, regulation of transportation systems in their relation to agriculture, tariff problems and other phases of public policy. In addition to these groups of problems, research is also concerned with the functions of private agencies in merchandising, transporting and processing farm products.
In Great Britain the subject was taken up by the agricul tural department (Board of Agriculture and Fisheries), but with very limited resources, shortly before the war, and with assistance from the Development Fund, and from the University of Oxford an institute of agricultural economics was established at Oxford. Its activities were at first mainly directed to the improvement of farm accounts, especially by the adoption of the cost accounting system, but as further resources became available its scope was widened and it has made a number of important investigations into the economic conditions of different areas. At Cambridge, also, the farm economics branch of the department of agriculture of the university has, more recently, vigorously taken up the work. Throughout the country an agricultural economist is now a recog nized and important member of the staff of all institutions which are concerned in the development of agricultural education. Factors of Production.—The primary factors of agricultural production are land, labour and capital.
The utility of land for producing crops depends on soil, climate, situation and aspect. Nearly all kinds of soil are actually or potentially fertile, although over large areas the fertility is dormant by reason of the lack of some constituent essential to plant growth. The deficient constituent is frequently water, but in many cases it is some ingredient which may be identified by chemical analysis and conceivably supplied by man. Climate is in a large degree a matter of situation. The tropics and the tem perate zone comprise all land suitable for productive use, but advantages of situation depend not only on latitude but also on altitude. By aspect is meant in a hilly country the relation of the land to the sun, as, for example, whether it lies on a northern or on a southern slope.
For the purpose of agricultural use the farmer must have ex clusive control of the land. If he does not acquire its ownership the form and terms of tenure will materially affect the economic possibilities of his enterprise. From an economic point of view, holdings are of three classes : viz. (I) those which are occupied by persons who do not depend on them for their livelihood; (2) those which are cultivated for subsistence by the occupier and his family without extraneous labour (sometimes termed "family farms") ; and (3) those on which hired labour is regularly employed. It is with the third class "commercial farms," that the subject of agricultural economics is mainly concerned.
In considering the capital employed in agricultural production, that which is invested in the acquisition of the land may be disre garded. In many new countries free grants of land are made to settlers. In countries where agriculture has been long established, the capital value of a holding includes its equipment as a farm and the proportion which represents the bare land may be com paratively small. The capital employed in working a farm in Great Britain, where holdings are more commonly rented than owned by the occupiers, is termed "tenant's capital." It con sists of the amount invested in machinery, implements and other movable equipment of the farm, in the horses and other live stock, and in the seed, fertilizers and labour for growing crops. The amount varies greatly, but on an average farm in Great Britain it probably ranges from about L io to I 2 per acre. On specialized farms, such as those devoted to fruit or vegetables, the amount may be 14o or even more per acre.
Labour as a factor of production includes not only the manual work and skill of hired labourers but also that of the farmer, whether employing labourers or not (see AGRICULTURAL LA BOURER), and animal and mechanical energy applied to the proc esses of the farm partly in supplement of, and partly in substitu tion for, human energy. Oxen are the most widely used animals for farm work, but in Great Britain they have been replaced by horses during the last 200 years, although they were still in use in some districts up to the latter part of the i9th century. In those countries, such as the United States and the Dominions, where systematic agriculture has been recently established, horses were from the first generally used. Mechanical labour includes not only motive power, such as steam or other engines, but also ma chines and implements such as thrashers, reapers, haymakers, ploughs, etc., which either economize human energy or enable it to be more effectively applied in the operations of the farm.
Costs of production may be divided into two classes, viz., fixed charges and current expenses. The ordinary tenant farmer regards rent as ranking foremost in his costs of production, but strictly speaking only that part of it which represents interest on capital spent in equipping the farm can be so described. The interest on capital expended on equipment, whether permanent or temporary, is a fixed charge and so also are rates and (where they exist) land tax and tithe-rent charges. Current expenses include outlay on seed, fertilizers and feeding stuffs, fuel for engines and repairs. The payment of wages is a current expense, but it might also be described as a fixed charge, though of a variable amount. Where the occupier himself cultivates his holding it is evident that the remuneration of his labour is a fixed charge without which there would be no produce from the land. Where he employs labour his "wages of management," and such other wages as are neces sary for production, may similarly be regarded as a fixed charge on the land. In all farming operations the turnover is slow, as compared with other forms of productive enterprise. This "eco nomic lag" has been investigated on the basis of the accounts of two farms by Mr. Dampier Whetham. It was found to be greatest in the case of cattle, where the average "lag" was 18 months, and least in the case of poultry and eggs, where it was three months.
Disposal of Produce.—The simplest method by which the cultivator of the soil can dispose of its products is to consume them in his own household, but even in "subsistence" or "family" farming there is usually some surplus for sale. There are three methods by which farm products may be sold: viz., (r) by direct sale to the consumer, (2) through intermediaries, (3) by co operative association. Direct sale is usually adopted by "small scale" producers and ,f or "minor" products, such as eggs, poultry, fruit and vegetables, but "large scale" producers may also adopt the method by opening a shop in an adjacent town or establishing a "milk round." Direct sale of fat stock by farmers to butchers was very common in Great Britain, but it is now generally re placed by the auction system. The bulk of agricultural produce is sold through intermediaries. The commercial organization of the distribution of the main products is elaborate. Where the products are the subject of international trade, as in the case, notably, of wheat and meat, the system by which they are col lected, shipped and distributed is remarkably efficient. But where the producer, as in Great Britain, sells his products in his own country, the distributive system is, from his point of view, unsat isfactory. The difference between an export and an inland trade accounts in a large degree for the difference in the machinery of distribution. For an export trade collection of bulk consignments at fixed points f or shipment is imperative. The producer has no other outlet except under these conditions. In an internal trade producers usually have a choice of alternative markets, and are not compelled to adopt a uniform method of sale. The result is that imported produce, with its highly efficient distributive or ganization, tends more and more to dominate the wholesale trade, and the home producer finds that his natural advantages of prox imity to markets, and, generally, of superior quality, are not suffi cient to enable him to maintain his position. The adoption by British farmers of a system of "orderly," or organized, marketing has been vigorously advocated (see AGRICULTURAL CO-OPERA noN). The term "marketing" is now commonly used as synony mous with sale, but it perpetuates the fact that in old countries the sale of commodities, and particularly of food, was permissible only in duly constituted markets. Many of these remain, but in Great Britain they have long lost the monopoly which they once possessed, although market tolls and regulations still survive in many towns. For information on various American aspects and applications of this subject see AGRICULTURE: Agriculture in the United States. See also AGRICULTURAL CREDIT and AGRICULTURAL INSURANCE.
BIBLIOGRAPHY.-J. A. Venn, M.A., Foundations of Agricultural EcoBibliography.-J. A. Venn, M.A., Foundations of Agricultural Eco- nomics (1923) ; H. C. Taylor, Ph.D., Agricultural Economics; Lewis Cecil Gray, Ph.D., Introduction to Agricultural Economics (i924) ; Richard Ely, Ph.D. and Edward W. Morehouse, M.A., Elements of Land Economics (1924); Lord Ernle, The Land and its People, and English Farming, Past and Present; Lewis Cecil Gray, Ph.D., Intro duction to Agricultural Economics (1924); Sir Henry Rew, A Primer of Agricultural Economics (1927); H. C. Taylor, Outlines of Agricul tural Economics; J. A. Venn, M.A., Foundations of Agricultural Eco nomics. These all give a general survey of the subject, and form an introduction to further study. C. S. Orwin, M.A., Farm Accounts (1914), and The Determination of Farming Costs (1917) contain in structions as to the best methods of keeping farm accounts, and explain and advocate the system of cost accounting. Economic Series, pub lished by the Ministry of Agriculture and Fisheries (1925-27), are reports or monographs dealing mainly with agricultural co-operation and the marketing of farm products.
For various aspects of agricultural economics in the United States see E. L. Bogart, Economic History of American Agriculture (Chicago, 1923) ; T. N. Carver, Elements of Rural Economics (Boston, 1924) ; R. C. Engberg, Industrial Prosperity and the Farmer (1927); B. H. Hibbard, Ph.D., Marketing Farm Products (1921), and A History of the Public Land Policies (1g24) ; C. L. King (Ed.), "The Agricultural Situation in the United States" ; E. G. Nourse, Ph.D., American Agri culture and the European Market (1924) ; Am. Acad. Pol. and Soc. Science Annals, Vol. cxvii. (1925) ; H. W. Hawthorne, The Family Living from the Home (1925) ; Farm Living and Farm Life, a sym posium (Chicago, 1927). Bulletins and other publications by the United States Department of Agriculture and by the State experiment stations cover a wide range of topics in this field. Journal of Farm Economics, a quarterly published by the American Farm Economics Association, carries articles on various phases of the subject and reviews of books. (R. H. R.)