Agriculture Reference
In-Depth Information
over extended seasons (often year round). This means that a large landowner can move specialized labor from plot
to plot. The fact that each stage has a great length means that there are large gains from specialization by learning
and intensive capital use. Similarly, the monitoring of labor under well-defined routine conditions is relatively
cheap, so moral hazard losses are smaller.
42. The survey asked the respondents to classify their farms as a family farm, partnership, corporate farm, or family
corporation. If a family corporation used no hired labor and contained only one family as a residual claimant, this
farm was also classified as a family farm (using other information on the survey).
43. For example, hay crops usually have three cycles per year, perhaps more under irrigation. Many nurseries and
greenhouses have almost continuous production during the year. Although fruit trees provide only one crop per
year, we classify them differently from grains because it takes several years for a tree to bear fruit and as the tree
ages radical pruning may prevent a crop in the following year. Hence, on average a fruit tree has less than one
cycle per year. We do not know, however, the number of cycles being used by the respondents to our survey.
44. Included in CYCLES
>
1 are hay crops, pasture, nursery crops, vegetables, and sugarcane (planted only once
every 3-5 years); included in CYCLES = 1 are annual grain and row crops such as barley, rice, soybeans, and
wheat; and included in CYCLES
<
1 are tree fruits, nuts, and timber.
45. Milk tanks must be cleaned by the farmer who might exploit this by adding water, stones (or other bulky items),
or milk from other farms to increase the reading on the outside of the tank in order to cheat the milk processor. The
processors test the milk constantly for foreign particles to police this, and thus simultaneously monitor workers
on the dairy farm.
46. The variable CAPITAL is not adjusted for the equity position of the farmer. Thus it is not the same as the
variable WEALTH used in chapter 8.
47. It may seem that equations (9.12 to 9.14) represent a simultaneous system but it is appropriate to estimate
9.14 using OLS because the equations are actually a recursive system in which capital levels depend only on farm
choice. As a check, we also estimated 9.14 using a two-stage method in which
F
i
was replaced by the predicted
value of the farm organization (from the logit model); this did not appreciably change the coefficient estimates.
48. This basic fact not only grinds against popular culture, which confuses the reduction in farmers with a reduction
in family farming, but is also inconsistent with an old prediction made by O. R. Johnson (1944). He argued that
“industrialization” of farming is inevitable except for livestock. In particular, he wrote: “Industrial techniques are
difficult to apply to this phase of agriculture [livestock production]” (535).
Chapter 10: Conclusion
1. As we noted in chapter 1, what we have been calling the transaction cost approach is related to what many are
recently calling “the New Institutional Economics.”
2. A similar sentiment is expressed by Gibbons (1998), who argues that agency theory “should become better
integrated with Coase-Williamson literature” (129).
3. Wing Suen has made this point to us. In Hong Kong many executives are called “7-11's” because they work
eleven hours a day, seven days a week. No doubt there is an agency problem with the executives, but it certainly
is not with the hours of work they put in.
4. Most of the criticisms that are directed at the Coase Theorem stem from this incomplete definition of transaction
costs. Using this definition, Usher (1998) easily shows that the Coase Theorem is “tautological, incoherent or
wrong.”
