1. Agricultural Innovation
Brian Wright and Tiffany Shih
UC Berkeley, Agriculture and Resource Economics
Accelerating Energy Innovation: Lessons from Multiple Sectors
Sponsored by the National Bureau of Economic Research
Washington, D.C.
Oct. 23, 2009

2. Agricultural Innovation: A Context
Impressive history of achievement through public investments
Estimated rates of return to U.S. public investment ( ): 45-60% (Evenson, 2001)
Increases in rates of food supply outpaced population and consumption growth,
leading to better nutrition, longer life expectancies, increased labor productivity

3. Agricultural Innovation: A Context
Rate of Return on investment in agricultural research is large in the U.S.: 40-60% per annum
Benefit-cost ratio of U.S. research expenditures:
National: 32:1
Within-state: 21:1
Between-state: 11:1
But lag time between
Picture info: Northern Flint (Longfellow, left), Southern Dent (Gourdseed, right), and an example of a Corn Belt Dent (middle) (University of Nebraska-Lincoln, 2004)
investment and return is about 24 years
(Pardey, personal communication; image from University of Nebraska-Lincoln, Plant and Soil Sciences e-Library:

4. Agricultural Innovation: A Context
Production and consumption of agricultural resources are geographically dispersed, with spillovers
Environmental variation shapes research activities
Total developing country public investments overtook total developed country public investments for the first time in the 1990s

5. Agricultural R&D Expenditures: Uniquely Diverse

6. Agricultural Research Investments
Research investments as % of agricultural output value:
Devel’d Countries: 2.64
Brazil:
China:
India:
All LDCs:
(Pardey, personal communication)
China: recent growth in agricultural biotech spending:
$17M in 1986 to nearly $200M by 2003
(Huang et al, 2002; Huang et al, 2005)
Much higher now

7. Agricultural Research Investments
Research investment levels and directions tend to fluctuate inversely with food prices
Brian, is this statistic what Phil Pardey told you for the U.S.? Or for the world?
U.S. public agricultural research expenditures:
57% on product development, 43% on environment and other
Growth in spending down to 1% from 2% between
World Bank agricultural lending:
Big reverse:
$1.5 B in 2002
average of $4.6 B/yr between

8. Agricultural Research Investments
Investment levels and directions tend to fluctuate with food prices
Consultative Group on International Agricultural Research (CGIAR)
Trend to shift research focus away from yield enhancement
Investments dropped between , rose after prices rose

9. Agricultural Research Investments
Public sector produces basic research that private sector relies upon to do focused applied research
Final users
General and pre-invention sciences
Innovation products
Technology invention
Public investment
Private investment
(adapted from Huffman and Evenson, 2006)

10. Intellectual Property (IP) Outcomes
Privatizing innovation increases private investment, but does not substitute for public investment
Private investment responded to biotech revolution, and IPRs:
Amount comparable to public investment currently
CAVEAT:
Investments mostly on inputs and processing
Focuses on a few commercially important crops (corn, soybean, cotton, and canola)
Highly efficient in development and delivery of technology packages (e.g. Monsanto’s Roundup Ready)

11. Importance of Public Investments
President Obama, speech at Hudson Valley Community College, Troy, New York
“We also have to strengthen our commitment to research, including basic research, which has been badly neglected for decades. That's always been one of the secrets of America's success…
The fact is, though, basic research doesn't always pay off immediately. It may not pay off for years. When it does, the rewards are often broadly shared,
That's why the private sector generally under-invests in basic science. That's why the public sector must invest instead. While the risks may be large, so are the rewards for our economy and our society…”
September 21, 2009
Speech by Obama:

12. Importance of Public Investments
“That's why the public sector must invest instead.”
President Obama, September 21, 2009
Key question:
-Can the public sector still support the necessary persistent commitment , in agriculture or in energy?
Speech by Obama:

13. History of Sustained U.S. Public Agricultural Support
Early historical influences
Europe, esp. Germany, established role of science in agriculture
Prioritization by important U.S. leaders, Washington, Franklin, Jefferson, and Ellsworth
Importance of locally adaptive research and large buildup of research capital stock for innovation
Institutional innovations: land grant colleges and local research stations with long term committed funding source (federal land grants)
Hybrid corn in the U.S.
Private interests influence public research funding

14. Conclusions
Public investment in agricultural research has had extremely high rates of return, in farm income and cheap food:
Future success will require continued sustained investments
However, long lag times and high rates of return make this need difficult to for the public to understand
Geographic dispersion of activities is appropriate for agriculture
Picture: Peter H. Quail of the University of California at Berkeley inspects mutant Arabidopsis plants at the Plant Gene Expression Center in Albany, California. Quail is research director of the center, a joint venture of the university and the USDA .
Photo by Jack Dykinga.

15. Conclusion
Leading private firms, motivated by IPRs, are efficient in developing, promoting and disseminating commercial technology packages
Has this come at the expense of small-firm entry?

16. Conclusion
Need for local adaptive technology motivates global dispersion of research efforts and support
Upstream research are still dominated by public institutions and nonprofits
High historic rates of return accrued to public ag research in U.S. via sustained federal-state investment oriented by a clear mission
Is this still politically possible, in agriculture or energy, or will investment follow the crises?