Good morning to all,
I bought a copy of Clark and Haswell's Economics of Subsistence Agriculture and he makes a few, somewhat assumptions that I would like you fellow economists to take a stance on. Some excerpts:
page 147:
“Analysis shows that wages are, as theory predicts, determined by the money value of the marginal product, and that the fluctuations mostly arise in the price of cotton, not maize.
Page 158:
“At present the Cobb-Douglas function is the one generally used. This may be formulated as follows:
Let P be production, L the input of labor, A the area of land used.
Then P=L^A*A^L
Even in the most primitive agriculture, however, it is not entirely true to say that land and labor are the sole factors of production.”
Is there any way of measuring productivity by including more inputs?
Page 183-184:
“The income elasticity of demand, we have seen, is the best measure to use when we are examining consumption of such objects as food and clothing, which are consumed in substantial quantities at every level of income. When, however, we are dealing with such objects as savings, which may be zero or even negative, or even if we are dealing with a commodity whose consumption is very small at the lower income levels, the method of logarithmic plotting becomes impracticable.
Page 185:
“As Keynes' idea got into circulation in the 1930's, many of his followers, particularly in the United States, set out to measure marginal propensity to save by simple comparisons, over a limited number of years, of income and savings data....Other economists, vaguely suspicious of this simple analysis of time series, set out to compare savings by family at widely different income rates.
This defect in both these methods of analysis was shown by Friedman. (1) People do not immediately adjust their expenditure, either upwards or downwards, in response to changes in income. They tend to spend in accordance with what they regard as their probable average income. Friedman went on to show that, in fact, a weighted average of their incomes in recent past years, with weights exponentially diminishing as we go further back into the past, gives a good approximation to their estimates of their 'permanent' income, in accordance with which they control their spending.”
Page 188 he gives an equation for the percentage of total expenditure on a specified commodity:
Percentage=a+b log (subscript 10) x+c(log subscript 10 x)^2
Page 208-209:
“In West Africa, where road transport costs in general are considerably lower, Pedler (Economic geography of West Africa) puts the savings from bituminization at 18 per cent. Conversion from an unmade road to an 'earth track capable of carrying 15-ton lorries' according to Pedler, saved 25 per cent of transportation costs. The costs recorded for short-distance road transport in Syria had recently been reduced by 30 per cent through the surfacing of the first 8 km. Of earth road leading to the main road. Reviewing the available evidence, Hawkins suggests that when traffic reaches 300 vehicles/day, bituminization becomes worth while.
A much lower estimate of only 100,000 tons of freight annually was made (Soberman, The cost of road transportation in Venezuela) for the point at which it became economical to construct a paved road, on the assumption that large trucks were used; but the equilibrium point was probably 200,000 tons/year with medium-sized truck. The calculations were made at costs of 1961, and assumed a 10 per cent interest rate. The bolivar is worth 21.8 American cents or 3.1 kg of grain.
Page 209:
“Each km. Of road built, Sargent estimates, has the effect of opening some 60 ha. Of new agricultural land. He estimates further that each pound spent on road building has the effect of permanently raising gross agricultural production in Borneo by as much as 4 Euros/year....
It has been estimated (Owen, Strategy for mobility p. 7) that a traffic of 500,000 tons/year will justify building a railway, even under North American conditions; a traffic less than 250,000 tons/year, on the other hand, will justify the abandonment of an existing railway. Under European conditions it is estimated to be worthwhile building a railway for a traffic of 350,000 tons/year.”
Page 216:
“certain discrepancies were noticed in countries having large exports of minerals or forest products. It became clear that such exports can directly 'substitute' for agricultural products in purchasing required imports, thus setting more of the agricultural production free to feed industrial workers in the country, or for other purposes.”
Page 220:
“The best method of measuring the growth of non-agricultural occupations therefore, in the first instance, is to measure the number of non-agricultural workers as a percentage of the total population. We then assume that each non-agricultural workers has on the average 1.5 dependants (something like this ratio is found in nearly all countries for which we have information). By deducting the non-agricultural workers and their presumed dependents from the total population, we are left with an estimate of 'agricultural production'. We can then use this as a divisor for figures of 'exportable product'.
Page 225, 227:
“It was found that changes in the logarithm of the volume of imports were well explained by 0.74 times the logarithm of real national income plus 0.279 times the logarith of the terms of trade. The coefficient of 0.74 agrees well with that estimated from inter-country comparisons.
For the subsistence agricultural countries, however, the income elasticity of demand for imports appears to be higher than the figure of approximately three-quarters deduced from the richer countries.
Page 235:
“From the relationship between the logarithm of agricultural productivity, and the number of non-agricultural workers as a proportion of the population, we can do some interesting algebra relating the rate of improvement of agricultural productivity, the rate of growth of population as a whole, and the absolute increase or decrease of agricultural population. During the period of the msot rapid increase of Japanese agricultural productivity, between 1900 and 1925, agricultural production per head of rural population was rising at about 3.5 per cent per year; and agricultural population was about stationary. Rural population having been about 60 per cent of the whole at the beginning of the period, it can be shown that this stationariness of the absolute number of rural population would not have been compatible with a rate of general population growth much higher than 1 per cent per annum. In other words, the rates of population growth in the neighborhood of 2 per cent per annum or more now prevailing in many parts of the world are not compatible with stationary or declining absolute numbers of agricultural population, except in countries where the agricultural population is already a small proportion of the whole. Where it is 30 per cent or more, as it is in all the subsistence agriculture countries, further increases in the absolute numbers of people engaged in agriculture must be expected for a long period to come, however high the rates at which agricultural productivity is increasing.”
Do Clark and Haswell follow sound economic principles? Is it mandatory to consider the land theories of Malthus and Ricardo here?
Warm Regards, Matt
"Analysis shows that wages are, as theory predicts, determined by the money value of the marginal product, and that the fluctuations mostly arise in the price of cotton, not maize."
Thats not how wages are determined. Wages are determined by supply and demand. Marginal products do not have money values, but are valued subjectively.
"At present the Cobb-Douglas function is the one generally used. This may be formulated as follows:
Is there any way of measuring productivity by including more inputs?"
Sorry, but its not possible to objectively measure productivity with an objective equation, especially when it comes to farming. If that equation were true, then someone could hire a particular number of workers, have a particular area of land, and put it to work and automatically get production in a specific time. At best, numbers from past records can be fudged to try to "prove" this equation, or a farmer can observe that a particular change makes his farm more productive. Several reasons (and there are many more):
1. The land is unspecified and general. But not all land patches are equal when it comes to growing one particular crop.
2. Same thing with labor. People are different, and some farmers may be more helpful than others.
3. The equation lacks a discussion of technology. Certainly using a plow is going to be faster then trying to dig the earth by hand, but by how much?
4. A big reason, is that there is uncertainty with how the crops will turn out. Weather can easily influence how much crops grow. Technology can depreciate and break. Events may come up for people working the fields. Disease can decimate the field. The farm owner might not be able to finish the project due to lack of funding. Etc. etc.
5. Also, this neglects time, and how that factors into choices. While 12000 crops after every 2 years might seem like a better deal than 5000 crops every year if we are objectively measuring production. People might prefer the latter due to time preference.
sorry I am exhausted of this
Schools are labour camps.
Hello eliotn,
Thanks for the reply. Apparently forum members aren't into agriculture, so you answer was very insightful. When you're not so tired later, could you expand on how supply and demand/subjectivity determines wages?
Warm Regards,
Matt