1. Agricultural Research and Extension Activities Chapter 18 Adam Tipton & Josh Thurman

2. Arguments for Agricultural Research  Reduced the price of fresh, frozen, and processed food products.  Expanded the range and scope of food products.  Everyone benefits from this research.

3. Arguments Against Agricultural Research  New technology has destroyed the family farm.  Research has reduced the farm labor force.  New food technology may be harmful to people and/or the environment.

4. History of Agricultural Research  1862 – USDA was created  1862 – Morrill Act – Established agricultural and mechanical colleges.  1887 – Hatch Act – Initiated state agricultural experiment stations.  1914 – Smith Lever Act – Agricultural extension begun.  1917 – Smith Hughes Act – Established Vocational Agriculture in public schools.

5. USDA changes  USDA began as a scientific and statistical agency.  Research was conducted for cost- reducing methods of producing and marketing agricultural products.  However, during New Deal era USDA started more programs such as price supports, subsidized credit, crop insurance, and food assistance.

6. Effects of Agricultural Research  Consumers benefit from lower prices which stem from larger supplies and cheaper input costs.  Innovative farmers benefit from research because of lower inputs and higher outputs.  However, after the technological innovation is in place, producers lose because supply increases and prices remain the same.

7. Private Funding  Public and private sectors contribute $7 billion annually to research.  Private-sector funding is now more than government funding.  Advantages in genetic engineering and intellectual property have been closely linked to vertical integration.  The chance for vertical integration pushes many private companies to fund research.

8. Public Funding  Public funding of research can be justified because food is a public good.  However, less research is now available to the public. e.g. – Patents, copyrights, admission fees for lectures, etc. make most research not attainable by the public.

9. “Spillover” Effect  Research done in one state may spillover to another state.  As states allocate funds for research they do not think about the spillover effects their funding could have on the nation.

10. Complementarity of Research and Higher Education  Research, Extension, and Teaching all complement each other at land-grant universities.  Each of these activities helps in strengthening the other’s effectivesness.

11. Bureaucracy of Ag Research  Rates of Return On Public Ag Research are very high.  The rates of return on public research are not comparable with private research because of tax considerations.  They are also not comparable because the estimates do not consider cost associated with misallocation of resources resulting from taxation.

12. Bureaucracy continued…  Thirdly, there is a problem of specifying appropriate costs and returns when there is no market measure of opportunity cost.  Fourth, the cost of undesirable spillovers associated with new technology are not taken into account.

13.  Finally, returns from publicly financed ag research are unlikely to be much higher than privately funded research, as the rate of return estimates suggest, because returns from private research and education activities can be appropriated by private developer through fees, patents, copyrights, and so on.

14. The End