Exhaustible resources and technological change in the United States agriculture, 1940-1969
Authors:   , Chin Sean Bun 
Published: May 2024

Technological progress has played an important role in American agriculture since the beginning of World War II. The rapid rate of growth of population and industrialization in the U.S. has to be met by a rapid rate of growth of food and fiber. Failure to achieve rapid growth in the agricultural sector would slow down the rate of growth of the whole economy, because agricultural industry would drain productive resources from other sectors of the economy and it would put pressure on foreign exchange of the country. Production of goods and services requires two major kinds of inputs: 1. replenishable inputs, and 2. non-replenishable inputs. Inputs that go into agricultural production are mostly gifted from nature. They are fixed in quantities, irreplaceable, and are subject to exhaustion. The quantity of inputs, except land and labor, that are necessary for the production of farm output has increased steadily. This study attempted to determine the effect of seven explanatory variables on aggregate farm output in the U.S. agriculture from 1940 to 1969. There were, in addition to the evaluation of these factors, two other objectives; (1) the derivation of the rate of technological progress during this period, and (2) the projection of the total quantities of the non-renewable resources used in agricultural production from 1972 to year 2000. The aggregate production function technique was employed in this study. The type of input-output functional relationship employed was the unrestricted Cobb-Douglas (CD) production function due to its relative simplicity and its popularity in production economics literature. However the constant elasticity of substitution (CES) production function was selected to estimate the relationship between inputs and output prior to the estimation of Cobb-Douglas type function. The test evinced the insignificancy between the CES and CD functions. Nonexperimental time series data were used to estimate the aggregate production function. Factors of production that entered the equations were in crude physical form. This enabled researchers to explore the physical effect of inputs on the agricultural production and to project the total physical quantities of the inputs consumed by agriculture. Ordinary least squares multiple regression was employed to estimate relationships between aggregate agricultural output and seven selected inputs: Xlt = total farm labor (persons) at time t X2t = acres of land used at time t X3t = tons of nitrogen at time t X4t = tons of phosphate at time t X5t = tons of potassium at time t X6t = gallons of petroleum (direct uses) at time t X7t = net tons of steel that were sold to the agricultural sector at time t. The rate of technological progress from 1940 to 1969 and the projected total quantities of non-renewable resources used in agriculture from 1972 to year 2000 were estimated from the functional relationship between inputs and output. The problem of multicollinearity prevented the usage of the ordinary least squares technique directly on the original predetermined variables. The set of explanatory variables was replaced by their proxy variables obtained from the principal component technique. Relatively high R values meant that much of the variation of the dependent variable was explained by exogeneous variables. Findings indicated that all seven predetermined variables had significant effect on dependent variables. The results of the estimated elasticities in this study were quite successful since their values came very close to those in the previous studies. The average yearly growth rate of the combined technological progress due to qualitative and nonqualitative technology was about 3.5 percent. The technological change due to qualitative technology had increased monotonically during the period between 1940 and 1969 while the non-qualitative technology had declined steadily from 1951 to 1969. It was predicted by year 2010 the source of technological progress in U.S. agriculture will come primarily from qualitative technology. The derived demand for nitrogen, phosphate and potassium was postulated as a function of technology and the primary demand for farm output. Furthermore farm output at the aggregate level was hypothesized as a function of disposable income and population. The estimated total quantities of inputs were therefore based on an assumed level of population and disposable income of the economy. The quantity of nitrogen, phosphate and potassium consumed by agricultural sector in year 2000 was projected to be about 40 percent more than the 1971 level. The most controversial finding in this study was the nature of the economies of scale in American agriculture. There was economies of scale when dependent variables in the regression equations were expressed in money incomes received by farmers. However there was diseconomies of scale when the endogeneous variables were deflated by indexes of prices received by farmers or when it was represented in index of physical output computed by the U.S.D.A. The indexes of prices received by farmers were the principal explanation of the diseconomies of scale in American agriculture.