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Population and Land Use in Developing Countries: Report of a Workshop 9 Population Growth, Environmental Change, and Innovation: Implications for Sustainable Growth in Agriculture Vernon W. Ruttan In this paper I explore a number of agricultural, resource, and environmental concerns that will condition the capacity of the agricultural sector to respond to the demands that population and income growth will place on the sector—particularly in the developing countries of Latin America, Asia, and Africa. CONCERNS ABOUT RESOURCES AND THE ENVIRONMENT I first place these concerns about the implications of natural resource availability and environmental change within a broader historical and theoretical context. We are now in the midst of the third wave of social concern since World War II about the implications of natural resource availability and environmental change for the sustainability of improvements in human well-being. The Three Waves of Concern The first wave of concern, in the late 1940s and early 1950s, focused primarily on the quantitative relationships between resource availability and economic growth—the adequacy of land, water, energy, and other natural resources to sustain growth. The reports of the President's Water Resources Policy Commission (1950) and the President's Materials Policy Commission (1952) were the landmarks of the early postwar resource assessment
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Population and Land Use in Developing Countries: Report of a Workshop studies generated in response to this wave of concern. The primary response to this first wave of concern was technical change. In retrospect it appears that a stretch of high prices has not yet failed to induce the new knowledge and new technologies needed to locate new deposits of natural resources, promote substitution, and enhance productivity. If the Materials Policy Commission were writing today, it would have to conclude that there has been abundant evidence of the nonevident becoming evident; the expensive cheap; and the inaccessible accessible (Barnett and Morse, 1963; Ausubel and Sladovich, 1989). The second wave of concern occurred in the late 1960s and early 1970s. The earlier concern with the potential ''limits to growth'' imposed by natural resource scarcity was supplemented by concern about the capacity of the environment to assimilate the multiple forms of pollution generated by growth. An intense conflict was emerging between the two major sources of demand for environmental services. One was the rising demand for environmental assimilations of residuals derived from growth in commodity production and consumption—asbestos in our insulation, pesticides in our food, smog in the air, and radioactive wastes in the biosphere. The second was the rapid growth in consumer demand for environmental amenities—for direct consumption of environmental services—arising out of rapid growth in per capita income and high-income elasticity of demand for such environmental services as access to natural environments and freedom from pollution and congestion (Ruttan, 1971). The response to these concerns, still incomplete, was the creation of local and regional institutions designed to force individual firms and other organizations to bear the costs arising from the externalities generated by commodity production. Since the mid-1980s these two earlier concerns have been supplemented by a third. These newer concerns center around the implications for environmental quality, food production, and human health of a series of environmental changes that are occurring on a transnational scale—issues such as global warming, ozone depletion, acid rain, and others (National Research Council, 1990, 1991). The institutional innovations needed to respond to these concerns will be more difficult to design. They will, like the sources of change, need to be transnational or international. Experience with attempts to design incentive-compatible transnational regimes, such as the Law of the Sea Convention, or even the somewhat more successful Montreal Protocol on reduction of CFC emissions, suggests that the difficulty of resolving free rider and distributional equity issues imposes a severe constraint on how rapidly effective transnational regimes to overcome these new environmental concerns can be put in place. It is of interest that, with each new wave of concern, the issues that dominated the earlier wave were recycled. The result is that while the intensity of earlier concerns has receded, in part due to the induced technical and institutional changes, the concerns about the relationships between
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Population and Land Use in Developing Countries: Report of a Workshop resource and environmental change and sustainable growth in agricultural production has broadened (Graham-Tomasi, 1991). Terms that had initially been introduced by the populist critics of agricultural research—such as alternative, low-input, regenerative, and sustainable agriculture—began to enter the vocabulary of those responsible for agricultural research resource allocation. The Agricultural Transformation In the closing years of the twentieth century we are completing one of the most remarkable transitions in the history of agriculture. Prior to this century almost all the increase in food production was obtained by bringing new land into production. There were only a few exceptions to this generalization—in limited areas of East Asia, the Middle East, and Western Europe (Hayami and Ruttan, 1985). By the first decade of the next century, almost all of the increases in world food production must come from higher yields—fr om increased output per hectare. In most of the world the transition from a resource-based to a science-based system of agriculture is occurring within a single century. Most of the countries of the developing world have been caught up in the transition only since midcentury. Among developing countries those countries of East, Southeast, and South Asia have proceeded further in this transition than have most countries in Latin America or Africa. Recent historical trends in production and consumption of the major food grains could easily be taken as evidence that one should not be excessively concerned about the capacity of the world's farmers to meet future food demands. World wheat prices, corrected for inflation, have declined since the middle of the last century. Rice prices have declined since the middle of this century (Edwards, 1988; Pingali, 1988). These trends suggest that productivity growth has been able to more than compensate for the rapid growth in demand, particularly during the decades since World War II. As we look toward the future, however, the sources of productivity growth are not as apparent as they were a quarter century ago. The demands that the developing economies will place on their agricultural producers from population growth and growth in per capita consumption arising out of higher income will be exceedingly high. Population growth rates are expected to decline substantially in most countries during the first quarter of the next century. But the absolute increases in population size will be large and increases in per capita incomes will add substantially to food demand. The effect of growth in per capita income will be more rapid growth in demand for animal proteins and for maize and other feed crops. During the next several decades growth in food and feed demand rising from growth in population and income will run upwards of 4.0 percent per
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Population and Land Use in Developing Countries: Report of a Workshop year in many countries. Many will experience more than a doubling of food demand before the end of the second decade of the next century. CHANGES INDUCED BY POPULATION GROWTH1 In the theory of induced innovation, changes in relative resource endowments, such as shifts in the ratio of agricultural labor to land, are viewed as directing technical change along a path that permits the substitution of relatively more abundant factors for the relatively scarce factors of production. Institutional changes are also viewed as induced by changes in relative resource endowments, by changes in cultural endowments, and by changes in technology. Induced Technical Change2 The process by which technical change is generated has traditionally been treated as exogenous to the economic system—as a product of autonomous advances in scientific and technical knowledge. Over the last several decades, advances in economic theory and the accumulation of empirical evidence have tended to confirm that the rate and direction of technical change can be interpreted as largely endogenous to the economic system—as induced by differences or changes in the conditions of factor supply and product demand. In agriculture, the constraints imposed on development by an inelastic supply of land may be offset by advances in biological technology; the constraints imposed by an inelastic supply of labor may be offset by advances in mechanical technology. In the dynamic process of economic development, changes in product demand and relative factor prices are inseparably related. For example, when food demand rises because of growth in population or per capita income, or both, the demand for factor inputs in food production increases more or less proportionally. When increases in factor demands are confronted with different elasticities in the supply of production factors, the effect is a change in relative factor prices. The different rates of change in factor prices result, in turn, in changes in the level of income and income distribution among factor owners, thereby affecting the aggregate product demand. 1 This section draws on two earlier papers in which Yujiro Hayami and I have used the induced innovation framework to explore the relationships among resource endowments, population change, and technical change (Hayami and Ruttan, 1987, 1991). Our work on induced technical change was first outlined in Hayami and Ruttan (1971). The concept of induced institutional innovation was developed more fully in Binswanger and Ruttan (1978), Hayami and Kikuchi (1981), Ruttan and Hayami (1984), and Hayami and Ruttan (1985). 2 The history of thought and current state of knowledge in the field of induced technical change is reviewed by Thirtle and Ruttan (1987).
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Population and Land Use in Developing Countries: Report of a Workshop The significance of the induced technical change hypothesis for economic development is that multiple paths of technical change are available to society. The ability of a society to achieve rapid growth in agricultural productivity and output seems to hinge on its ability to make efficient choices among alternative paths. There is substantial evidence that the direction of technical changes has been responsive to relative resource endowments in both the agricultural and nonagricultural sectors, in both traditional and modern societies (Thirtle and Ruttan, 1987). The initial tests of the induced-innovation hypothesis were against the experience of the United States and Japan for the period 1880–1960. Additional tests have been conducted against the experience of other developed and developing countries. The Japan-U.S. tests have now been extended from 1880–1960 to 1880–1980 (Hayami and Ruttan, 1985). In 1880, Japan and the United States were characterized by extreme differences in relative endowments of land and labor. These differences have widened over time. By 1980, total agricultural land area per male worker was more than 100 times as large and arable land area per male worker about 50 times as large in the United States as in Japan. The relative prices of land and labor also differed sharply in the two countries. In 1880, to buy a hectare of arable land, a Japanese hired farm worker would have had to work 8 times as many days as a U.S. farm worker. By 1960, a Japanese farm worker would have had to work 30 times as many days as a U.S. farm worker to buy one hectare of arable land. This gap was reduced after 1960, partly because of extremely rapid increases in wage rates in Japan. In the United States, land prices rose sharply in the postwar period. Yet in 1980, a Japanese farm worker still would have had to work 11 times as many days as a U.S. worker to buy one hectare of land. The relationships between relative factor prices and factor use portrayed in Figures 1.A and 1.B are clearly consistent with the hypothesis that the alternative paths of technical change followed by Japan and the United States have been induced by relative resource endowments interpreted through relative factor prices. When simple relationships emerge as powerfully as they do in Figures 1.A and 1.B, one is tempted to forego more formal tests. The intuitive implications of the data presented in these two figures have, however, been confirmed by more formal tests.3 The question is frequently raised as to whether advances in indigenous 3 A method for measuring biases of technical change with many factors of production was originally developed by Hans Binswanger (1974, 1978) using the transcendental logarithmic (translog) function. In our 1985 study, Hayami and I employed a two-level constant elasticity of substitution (CES) production function (Hayami and Ruttan, 1985, 1987). The results of the 1985 study were confirmed by Kawagoe et al. (1986) using a more general model. The Binswanger method was applied to Japanese agriculture by Kako (1978) and Nghiep (1979).
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Population and Land Use in Developing Countries: Report of a Workshop Figure 1.A Relationship between farm draft power per male worker and power-labor price ratio, the United States and Japan: quinquennial observations for 1880–1980. NOTE: Equals number of workdays that can be purchased by one horsepower of tractor or draft animal. SOURCE: Hayami and Ruttan (1985). Reprinted with permission. technology induced by population density, along the lines outlined by Boserup (1965) and more recently by Binswanger and several colleagues (Pingali et al., 1987) would be sufficient to sustain rising levels of per capita income and consumption (Robinson and Schutjer, 1984). A positive response would be excessively romantic. We agree with Boserup that in preindustrial societies, agricultural production often responded "far more generously to addi-
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Population and Land Use in Developing Countries: Report of a Workshop Figure 1.B Relationship between fertilizer input per hectare of arable and the fertilizer-arable land price ratio, the United States and Japan: quinquennial observations for 1880– 1980. NOTE: Equals hectares of arable land that can be purchased by one ton of N + P2Ot + K2O contained in commercial fertilizers. SOURCE: Hayami and Ruttan (1985). Reprinted with permission. tional inputs of labor than assumed by Neo-Malthusian authors" (Boserup, 1965:15). But Boserup herself argued that the transition to more intensive cultivation would be accompanied by a rise in the number of days worked per year and a decline in output per hour worked (1965:30). And we should not ignore the findings of Ronald Lee that in preindustrial England, annual
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Population and Land Use in Developing Countries: Report of a Workshop population growth rates beyond 0.4 percent had "dramatic consequences." The effect of more rapid population growth rates was to raise rents and turn the domestic terms of trade against the agricultural sector (Lee, 1980:547).4 Under preindustrial conditions, growth in output per hectare was typically accompanied by reductions in output per unit of labor input. However, a decline in labor productivity, measured in terms of output per hour or per day, if accompanied by an increase in the number of hours or days worked per year, is not incompatible with a rise in annual output or income per worker. This is the classic pattern followed on the wet rice cultivation areas of East Asia during the shift from upland to rainfed rice production, and then from rainfed to irrigated rice production. It is the pattern described by Binswanger and his colleagues in the transition in farming systems and technology from forest fallow to multiple cropping. In the long run, however, even with relatively slow growth in population or labor force, output per worker per year tends to stagnate or decline as the response of indigenous technical change to population growth declines. The higher rates of growth in agricultural production, and in output per hectare and per worker, that are consistent with modern population and income growth rates, have required institutionalization of capacity to supplement indigenous knowledge with science-based knowledge and craft-generated technology with industrial inputs that embody advances in scientific and technical knowledge. It also requires institutionalization of the capacity to deliver the new knowledge and the new technology to farm people and higher levels of investment in human capital in rural areas if the new technical opportunities are to be effectively exploited. Induced Institutional Change In the previous section, a model was outlined in which technical change was treated as largely endogenous to the economic system. But the success of the theory of induced technical change gives rise to the need for a more adequate understanding of the sources of institutional change. Institutions are the rules of society, or of organizations, that facilitate coordination among people by helping them form expectations that each person can reasonably hold in dealing with others. They reflect the conventions that have evolved in different societies regarding the behavior of individuals and groups relative to their own behavior and the behavior of others. In the area of economic relations, they have a crucial role in establishing expectations about the rights to use resources in economic activities and about the parti- 4 There is not, however, complete consensus on Lee's results; see Weir (1991).
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Population and Land Use in Developing Countries: Report of a Workshop tioning of the income streams resulting from economic activity (Runge, 1981a:xvi, 1981b; Sen, 1967).5 The sources of demand for technical and institutional change can be viewed as being essentially similar. A rise in the price of land (or natural resources) in relation to the price of labor induces technical changes that release the constraints on production from an inelastic supply of land, and, at the same time, induces institutional change that leads to greater precision in the definition and allocation of property rights in land. A rise in the price of labor relative to land (or natural resources) induces technical changes that permit the substitution of capital for labor and at the same time induces institutional changes that enhance the productivity of the human agent and increase workers' control over the conditions of employment. The new income streams generated by technical change and by institutional efficiency induce changes in the relative demand for products and open up new and more profitable opportunities for product innovations. Shifts in the supply of technical and institutional change may also be generated by similar forces. Advances in knowledge in science and technology reduce the cost of the new income streams that are generated by technical change. Advances in knowledge in the social sciences and related professions reduce the cost of the new income streams that are generated by gains in institutional innovation and improvements in institutional performance. Collective action leading to changes in the supply of institutional innovations often involves severe stress among the interest groups and communities that stand to gain or lose from the changes. The rate and direction of institutional change depends critically on cultural traditions and ideology that influence the cost or acceptability of changes in institutional arrangements and on the power balance among interest groups. Education, both general and technical, that facilitates a better understanding among people of their common interests can reduce the cost of institutional innovation. We illustrate, in Figure 2, the elements of a model that maps the general equilibrium relationships among resource endowments, cultural endowments, technologies, and institutions. The model goes beyond the conven- 5 There is considerable disagreement regarding the meaning of the term institution. A distinction is often made between the concepts of institution and organization. The broad view that includes both concepts is most useful for our purpose and is consistent with the view expressed by both Commons (1950) and Knight (1952). Our definition also encompasses the classification employed by Davis and North (1971:8–9). We employ the more inclusive definition so as to be able to consider changes in the rules or conventions that govern behavior (a) within economic units such as families, firms, and bureaucracies; (b) among economic units, as in the cases of the rules that govern market relationships; and (c) between economic units, as in the case of the relationship between a firm and a regulatory agency.
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Population and Land Use in Developing Countries: Report of a Workshop Figure 2 Interrelationships between changes in resource endowments, cultural endowments, technology, and institutions. SOURCE: Hayami and Ruttan (1985). Reprinted with permission. tional general equilibrium model in which resource endowments, technologies, institutions, and culture (conventionally designated as tastes) are given.6 In the study of long-term social and economic change, the relationships among the several variables must be treated as recursive. The formal microeconomic models that are employed to analyze the supply and demand for technical and institutional change can be thought of as "nested" within the general equilibrium framework of Figure 2. One advantage of the "pattern model" outlined in Figure 2 is that it helps to identify areas of ignorance. Our capacity to model and test the relationships between resource endowments and technical change is relatively strong. Our capacity to model and test the relationships between cultural endowments and either technical or institutional change is relatively weak. A second advantage of the model is that it is useful in identifying the components that enter into other attempts to account for secular 6 In economics the concept of cultural endowments is usually subsumed under the concept of tastes, which are regarded as given, that is, not subject to economic analysis. Our use of the term culture is consistent with the definition suggested by White: "When things and events are considered in the context of their relation to the human organism, they constitute behavior,
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Population and Land Use in Developing Countries: Report of a Workshop economic and social change. Failure to analyze historical change in a general equilibrium context tends to result in a unidimensional perspective on the relationships bearing on technical and institutional change. For example, historians working within the Marxist tradition often tend to view technical change as dominating both institutional and cultural change. In his book Oriental Despotism, Karl Wittfogel views the irrigation technology used in wet rice cultivation in East Asia as determining as political organization (Wittfogel, 1957). As applied to Figure 2, his primary emphasis was on the impact of resources and technology on institutions (B) and (C). A serious misunderstanding can be observed in neo-Marxian critiques of the green revolution. These criticisms have focused attention almost entirely on the impact of technical change on labor and land tenure relations. Both the radical and populist critics have emphasized relation (B). But they have tended to ignore relationships (A) and (C). This bias has led to repeated failure to identify effectively the separate effects of population growth and technical change on the growth and distribution of income (Cleaver, 1972; Griffin, 1974). Armen Alchian and Harold Demsetz identify a primary function of property rights as guiding incentives to achieve greater internalization of externalities (Alchian and Demsetz, 1973; Demsetz, 1967). They consider that the clear specifications of property rights reduces transaction costs in the face of growing competition for the use of scarce resources as a result of population growth and/or growth in production demand. North and Thomas (1970), building on the Alchian-Demsetz paradigm, attempted to explain the economic growth of western Europe between 00 and 1700 primarily in terms of changes in property institutions.7 During the eleventh and thirteenth centuries the pressure of population against increasingly scarce land resources induced innovations in property rights that in turn created profitable opportunities for the generation and adoption of labor-intensive technical changes in agriculture (line C). In a more recent work, Mancur Olson has emphasized the proliferation of institutions as a source of economic decline (Olson, 1982).8 He also when they are considered . . . in their relationship to one another, they become culture" (1974:1152). We use the term cultural endowments to capture those dimensions of culture that have been transmitted from the past. Contemporary changes in resource endowments, technology, and institutions can be expected to result in changes in cultural endowments. For a discussion of attempts to employ the concept of culture by development economists, see Ruttan (1988a). 7 For a critical review of the North-Thomas model, see Field (1981). Field is critical of attempts by North and Thomas to treat institutional change as endogenous. For criticism of the Hayami-Ruttan approach to induced institutional change, see Koppel and Oasa (1987); Burmeister (1987); and Bromley (1989). 8 For a critical review of the Olson work, see North (1983).
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Population and Land Use in Developing Countries: Report of a Workshop sustainable under conditions of slow growth in demand, has the capacity to respond to modern rates of growth in demand generated by some combination of rapid increase in population and in growth of income. Some traditional systems were able to sustain rates of growth in the 0.5–1.0 percent per year range. But modern rates of growth in demand are in the range of 1.0–2.0 percent per year in the developed countries. They often rise to the range of 3.0–5.0 percent per year in the less developed and newly industrializing countries. Rates of growth in demand in this range lie outside of the historical experience of the presently developed countries! In the presently developed countries the capacity to sustain the necessary increases in agricultural production will depend largely on our capacity for institutional innovation. If our capacity to sustain growth in agricultural production is lost, it will be a result of political and economic failures. It is quite clear, however, that the scientific and technical knowledge is not yet available that will enable farmers in most tropical countries to meet the current demand their societies are placing upon them nor to sustain the increases that are currently being achieved. Further, the research capacity has not yet been established that will be necessary to provide the knowledge and the technology needed to sustain and increase farm production. In these countries, achievement of sustainable agricultural surpluses is dependent on advances in scientific knowledge and on technical and institutional innovation (TAC/CGIAR, 1989). In attempting to design technologies and institutions that are capable of responding to contemporary concerns about sustainability we are confronted with three issues in which our lack of knowledge is fundamental. The Issue of Substitutability One area in which our knowledge is inadequate concerns the role of technology in widening the substitutability among natural resources and between natural resources and reproducible capital. Economists and technologists have traditionally viewed technical change as widening the possibility of substitution among resources—of fertilizer for land, for example (Solow, 1974; Goeller and Weinberg, 1976). The sustainability community rejects the "age of substitutability" argument. The loss of plant genetic resources is viewed as a permanent loss of capacity. The elasticity of substitution among natural factors and between natural and manmade factors is viewed as exceedingly low (James et al., 1989; Daly, 1991). This is an argument, in economists' language, over the form of the production function. While the argument is often cast in philosophical terms, empirical research should lead toward a convergence. If a combination of capital investment and technical change widens the opportunity for substitution, imposing constraints on present resource use could leave subsequent gen-
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Population and Land Use in Developing Countries: Report of a Workshop erations less well off. If on the other hand real output per unit of natural resource input is narrowly bounded—i.e., cannot exceed some upper limit that is not too far from where we are now—then catastrophe is unavoidable. Obligations Toward the Future The second issue is one that has divided traditional resource economists and the sustainability community. That is the issue of how to deal analytically with the obligations of the present generation toward future generations. The issue of intergenerational equity is at the center of the sustainability debate (Pearce et al., 1990; Solow, 1991). Environmentalists have been particularly critical of the approach used by resource and other economists in valuing future benefit and cost streams. The conventional approach involves the calculation of the "present value" of a resource development or protection project by discounting the cost and benefit stream by some "real" rate of interest—an interest rate adjusted to reflect the costs of inflation. It is World Bank policy (but not always the practice) to require a 10–15 percent rate of return on projects. These higher rates are set well above long-term real rates of interest (historically less than 4 percent) to reflect the effect of unanticipated inflation and other risks associated with project development and implementation. An attempt is made in this way to avoid unproductive projects. The critics insist that this approach results in a "dictatorship of the present" over the future. At conventional rates of interest the present value of a dollar of benefits 50 years into the future approaches zero. "Discounting can make molehills out of even the biggest mountain" (Batie, 1989:1092). If the marginal profit—marginal revenue less marginal cost—to resource owners rises slower than the rate of interest production is pushed nearer in time and the resource would be exhausted quickly (Solow, 1974:3; Lipton, 1991). As a result of the adoption of a widely held sustainability "ethic,'' one question has not been adequately answered: would market-determined discount rates decline toward the rate preferred by those advancing the sustainability agenda?11 Or will it be necessary to impose sumptuary regu- 11 The question of the impact of the use of a positive discount (or interest) rate on resource exploitation decisions is somewhat more complex than is often implied in the sustainability literature. Simply lowering the discount rate to favor the natural resource sector will not assure slower exploitation of natural resources if the market rate of interest remains high. Recipients of the lower interest rates may transfer the revenue from resource exploitation to investments that have higher rates of return rather than reinvesting to sustain the flow of resource benefits. Furthermore, high rates of resource exploitation can be consistent with either high or low interest rates. In the case of forest exploitation, for example, a low discount rate favors letting trees grow longer and the planting of trees that take longer to grow. On the
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Population and Land Use in Developing Countries: Report of a Workshop lations. in an effort to induce society to shift the income distribution more strongly toward future generations? It is clear, at least to me, that in most countries efforts to achieve sustainable growth in agricultural production must involve some combination of (a) higher contemporary rates of saving—that is deferring present in favor of future consumption—and (b) more rapid technical change—particularly the technical changes that will enhance resource productivity and widen the range of substitutability among resources. Incentive Compatible Institutional Design A third area in which knowledge needs to be advanced is on the design of institutions that are capable of internalizing—within individual households, private firms, and public organizations—the costs of actions that generate the negative spillover effects—the residuals—that are the source of environmental stress. Under present institutional arrangements important elements of the physical and social environment continue to be undervalued for purposes of both market and nonmarket transactions. The dynamic consequence of failure to internalize these costs are even more severe. In an environment characterized by rapid population and economic growth and changing relative factor prices, failure to internalize resource costs will bias the direction of technical change. The demand for a resource that is priced below its social cost will grow more rapidly than it would in a situation in which substitution possibilities are constrained by existing technology (Ruttan, 1971). As a result "open access" resources will undergo stress or depletion more rapidly than they would in a world characterized by a static technology or even by neutral (unbiased) technical change. The design of incentive-compatible institutions—institutions capable of achieving compatibility among individual, organizational, and social objectives—remains at this stage an art rather than a science. The incentive-compatibility problem has not been solved even at the most abstract theoretical level.12 This deficiency in institutional design capacity is evident in other hand, a low discount rate will make it profitable to invest in mineral exploitation, land and water development, or other investment projects that might otherwise be unprofitable. That is why, in the past, resource economists and environmentalists have argued in favor of higher interest rates on public water resource projects (Norgaard, 1991; Price, 1991; Graham-Tomasi, 1991). As an alternative to lower discount rates, Mikesell (1991) suggests taking resource depletion into account in project cost-benefit analysis. 12 The concept of incentive compatibility was introduced by Hurwicz (1972). In that paper he showed that it was not possible to specify an informationally decentralized mechanism for
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Population and Land Use in Developing Countries: Report of a Workshop our failure to design institutions capable of achieving contemporary distributional equity, either within countries or among rich and poor countries. It impinges with even greater force on our capacity to design institutions capable of achieving intergenerational equity. AN UNCERTAIN FUTURE In closing I would like to emphasize how far we are from being able to design either an adequate technological or institutional response to the issue of how to achieve sustainable growth in agricultural production—or in the sustainable growth of both the sustenance and the amenity components of consumption. At present there is no package of technology available to transfer to producers that can assure the sustainability of growth in agricultural production at a rate that will enable agriculture, particularly in the developing countries, to meet the demands that are being placed on it by rapid growth of population and income. Sustainability is appropriately viewed as a guide to future agricultural research agendas rather than as a guide to practice (Ruttan, 1988b; Graham-Tomasi, 1991). As a guide to research it seems useful to adhere to a definition that would include: (a) the development of technology and practices that maintain and/or advance the quality of land and water resources, and (b) improvement in the performance of plants and animals and advances in production practices that will facilitate the substitution of biological technology for chemical technology. The research agenda on sustainable agriculture needs to explore what is biologically feasible without being excessively limited by present economic constraints. At present the sustainability community has not been able to advance a program of institutional innovation or reform that can provide a credible guide to the organization of sustainable societies. We have yet to design the institutions that can assure intergenerational equity. Few would challenge the assertion that future generations have rights to levels of sustenance and amenities that are at least equal to those enjoyed (or suffered) by the present generation. They also should expect to inherit improvements in institutional capital—including scientific and cultural knowledge—needed to design more productive and healthy environments. My conclusion with respect to institutional design is similar to that which I have advanced for technology. Economists and other social scientists have made a good deal of progress in contributing the analysis needed resource allocation that simultaneously generates efficient resource allocation and incentives for consumers to honestly reveal their true preferences. For the current state of knowledge in this area, see Groves et al. (1987).
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Population and Land Use in Developing Countries: Report of a Workshop for "course correction." But capacity to contribute to institutional design remains limited. The fact that the problem of designing incentive-compatible institutions has not been solved at even the most abstract theoretical level means that institutional design proceeds in an ad hoc trial and error basis—and that the errors continue to be expensive. Institutional innovation and reform should represent a high-priority research agenda. Despite this litany of constraints, my own perspective on agricultural futures is cautiously optimistic. The challenges posed by the constraints on crop and animal productivity and by the resource, environmental, and health constraints on sustainability should not be interpreted as a completely pessimistic assessment. The global agricultural research system, the technology supply industry, and farmers are much better equipped to confront the challenges of the future than they were when confronted with the food crises of the past. It cannot be emphasized too strongly, however, that the challenges are both technical and institutional. The great institutional innovation of the nineteenth century was "the invention of the method of invention" (Whitehead, 1925:96). The modern industrial research laboratory, the agricultural experiment station, and the research university were a product of this institutional innovation. But it was not until well after midcentury that national and international agricultural research institutions became firmly established in most developing countries. The challenge to institutional innovation in the next century will be to design institutions that can ameliorate the negative spillover into the soil, the water, and the atmosphere of the residuals from agricultural and industrial intensification. The capacity to achieve sustainable growth in agricultural production and income will also depend on the changes that occur in the economic environment in which farmers in developing countries find themselves. The most favorable economic environment for releasing the constraints on crop and animal productivity and for achieving sustainable adaptation to the resource and environmental constraints that will impinge on agriculture in developing countries is one characterized by slow growth of population and by rapid growth of income and employment in the nonagricultural sector. Failure to achieve sustainable growth in the nonfarm sector could result in farmers in developing countries being able to make adequate food and fiber available to the nonfarm sector only at higher and higher prices—reversing the long-term trend—but with inadequate supplies of the resources needed to generate the investments in resource and technology development necessary to sustain growth. The importance of favorable growth in the nonfarm economy is particularly important for the landless and near-landless workers in the rainfed upland areas that have been left behind by the advances associated with the seed-fertilizer-water technology of the last quarter century. Rapid growth
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Population and Land Use in Developing Countries: Report of a Workshop in demand arising out of higher incomes, rather than from rapid population growth, can generate patterns of demand that permit farmers in these areas to diversify out of staple cereal production and into higher value crop and animal products. It may also permit the release of some of the more fragile lands from crop production to less intensive forms of land use. REFERENCES Alchain, A.A., and H. Demsetz 1973 The property rights paradigm. Journal of Economic History 33:16–77. Ausubet, J., and H.E. Sladovich, eds. 1989 Technology and the Environment. Washington, D.C.: National Academy Press. Barnett, H.J., and C. Morse 1963 Scarcity and Growth: The Economics of Natural Resource Availability. Baltimore: Johns Hopkins Press. Batie, S. 1989 Sustainable development: challenges to the profession of agricultural economics. American Journal of Agricultural Economics (December): 1085–1101. Binswanger, H. 1974 A microeconomic approach to induced innovation. Economic Journal 84(December):940–958. 1978 Induced technical change: evolution of thought. Pp. 13–43 in H.P. Binswanger and V.W. Ruttan, eds., Induced Innovation: Technology Institutions and Development. Baltimore: Johns Hopkins University Press. Binswanger, H., and V.W. Ruttan, eds. 1978 Induced Innovation: Technology Institutions and Development. Baltimore: Johns Hopkins University Press. Boserup, E. 1965 The Conditions of Agricultural Growth: The Economics of Agrarian Change Under Population Pressure. Chicago: Aldine. Boyce, J.K. 1987 Agrarian Impasse in Bengal: Institutional Constraints to Technological Change. Oxford: Oxford University Press. Bromley, D.W. 1989 Economic Interests and Institutions: The Conceptual Foundations of Public Policy. New York: Basil Blackwell. Burmeister, L.L. 1987 The South Korean green revolution: induced or directed innovation? Economic Development and Cultural Change 35:767–790. Buttel, F.H. 1988 Agricultural Research and Development and the Appropriation of Progressive Symbols: Some Observations on the Politics of Ecological Agriculture. Rural Sociology Bulletin No. 151. Ithaca, N.Y.: Cornell University. Cleaver, H.M., Jr. 1972 The contradiction of the green revolution. American Economic Review 62:177–186. Commons, J.R. 1950 The Economics of Collective Action. New York: MacMillan. Cummings, R.W. 1989 Modernizing Asia and the Near East: Agricultural Research in the 1990s. Mimeo.
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Representative terms from entire chapter: