Subsidizing Approved Farm Practices

One of the world's leading agricultural economists, T.W. Schultz, recently published an estimate of the effect of the adoption of new techniques on the efficiency of United States' agriculture. Schultz estimated the average increase in efficiency at from 0.8 per cent to 1.35 per cent per annum over the period 1910 to 1950, the rate of increase being even higher in recent years. The statistics available do not permit a similar calculation for Australia. However, the systems of agriculture and the types of technical advances made in Australia and the United States are not dissimilar, and it is known that increases in the productivity of labour in the two countries are roughly equivalent, so that an assumption of an annual one per cent increase in the efficiency of Australian agriculture seems reasonable. On this basis, it can be calculated that the adoption of improved techniques is currently adding about L11 million per annum to the net va1ue of Australian rural production. If an increase in efficiency of one per cent per annum is actually being achieved, there can be litt1e doubt that the potential increase physically possible is greater than one per cent. The slow and incomplete adoption of improved techniques in primary industry leaves a very large gap between potential and actual performance. The size of this gap is a problem for speculation rather than calculation. However, to put the problem into perspective, it is suggested that if the rate of adoption of improved methods could be doubled (as no doubt it could), the net value of Australian agricultural production would increase by an extra L11 million per annum. These estimates illustrate the great importance of both agricultural research and of measures designed to encourage the adoption of the results of that research. They point broadly to the conclusion that government investment for these purposes will yield excellent dividends.