Agricultural Research: Who Pays and Who Benefits?

John E. Lee, Jr., administrator, and Gary C. Taylor, agricultural economist, Economic Research Service.

The triumph of modern agriculture over the Malthusian threat of global starvation is well known.

Contrary to the forecasts of 18th century doomsdayers, agriculture production has increased faster than global population, to the extent that more of the past century has been characterized by food gluts than by food shortages, especially in the industrial economies.

Chronic food shortages, where they exist in the world, are now recognized to be matters of policy, economic development, and, perhaps, distributive equity, because resources and the technology to use them are known to be more than adequate to eliminate the shortages.

The dramatic technological transformation of agriculture in the past century has made it possible to meet the food and fiber needs of our society with a declining portion of our total resources, freeing the remaining resources to provide the goods and services that constitute our higher standard of living.

Research has made a major contribution to modern agricultural technology. In the United States, research together with the teaching and extension of agricultural sciences has enabled us to 1) produce and deliver to consumers a greater variety of higher quality products for a declining portion of their incomes; 2) improve food safety and quality; 3) reduce adverse effects of the food system on the environment; and 4) dramatically reduce human drudgery. In varying degrees, similar progress has been made in other countries, especially the developed countries.

Who Pays for Agricultural Research?

Agricultural research has been funded for well over a century by the Federal and State Governments and by privately owned companies who sell their products to food and fiber producers, processors, and consumers. So, the general answer to the question of who pays for agricultural research is fairly straightforward. The funding comes from Federal and State taxpayers and the incomes of agribusiness companies.

In the United States, there has long been a mixture of publicly funded and private research, but, until recent decades, publicly funded research was predominant. Public research funded by tax revenues is conducted in Federal agencies, State agencies, universities, and a host of other public and private institutions. Public funds spent on agricultural research increased persistently, especially after World War I, reaching about $2.1 billion by the mid-1980's.

Farmers and other agricultural interests, including researchers and their administrators, present the case for agricultural research before State and Federal legislatures and executive branches. Some might suggest that farmers basically pay for public research with their tax dollars. Since farmers, however, pay a relatively small part of total tax revenues, agricultural research is funded by the larger public.

Some agricultural research has always been privately funded and conducted, but in the past two decades research funded by private companies has increased dramatically, reaching an estimated $2.1 billion by the mid-1980's, equivalent to public expenditures.

Medical technologist inspects a veterinarian pathology slide at Montana State University.

Who Benefits from Agricultural Research?

The question of who benefits, directly and indirectly, is much more interesting and complex.

Farmers. Since farmers lobby for public research funds, one would suppose they are major beneficiaries. This is partly true. Technology stemming from research has greatly reduced farm drudgery. Labor-saving technology makes it possible for one farmer to manage a large enough set of resources to increase family incomes. Technology also has helped farmers cut costs and reduce losses from insects, disease, and spoilage.

The benefits of technology to producers are not distributed evenly. The initial gainers are the early adopters, usually the most progressive farmers. As adoption continues and the increased supplies lead prices to fall, the nonadopters are forced to adopt new technology to remain competitive, or they quickly become marginal operators and may drop out of farming.

At this point in the adoption of most new technologies, most of the benefits have been passed on to consumers as lower prices. The rapid development and adoption of new agricultural technology, especially since World War II, has meant relatively cheaper food and fiber for the consumer, and the disappearance of thousands of smaller farmers who were marginal producers unable or unwilling to adopt to maintain competitive costs of production and adequate family incomes.

Society Major Beneficiary.

The general society has been the major beneficiary of agricultural research. These benefits accrue in the forms of lower food and clothing costs, improved standards of living, economic growth, improved variety and quality of foods, and improved competitiveness of U.S. farm products in world markets.

The decline in the real price of food has been dramatic. Available data for the period 1888 to 1891 indicate that consumers spent an average of about 40 percent of their income for food.

From 1930 to 1960, the food expenditure proportion of consumer incomes ranged from 20 to 24 percent. In the seventies, the proportion of total disposable personal income spent for food dropped to a range of 16-17 percent. By the mid eighties, that proportion for the average family had dropped to a record low 15 percent.

The consumer benefits from lower food prices as new technologies help farmers cut costs and reduce losses.

Improved standards of living and economic growth result from research- generated technology because a declining portion of our Nation's resources are required to provide basic food and fiber needs. The excess resources are released to produce other goods and services that we associate with a rising standard of living. Their production has been a major source of economic growth.

Research has produced more sophisticated food processing methods and systems for protecting, preserving, and delivering our food. Today between 11,000 and 39,000 food items are available to consumers in typical supermarkets, compared with only 1,500 items as recently as 1941. Further, these food items have likely never been safer and more nutritious.

Research generates improved technology which, in turn improves the productivity (efficiency) of the farm sector, lowering costs and improving the competitive position of U.S. agricultural products in world markets. The standard of living improves for the overall society as the United States specializes in producing and exporting what it produces relatively more efficiently and imports what others produce best. Consumers have access to more goods with a given income.