Agriculture and the Secular Position of the U.S. Economy

Abstract

How MUCH DOES technological change in agriculture contribute to the nation's growth? How greatly will agriculture be affected by conditions making for growth in the national economy? Answers to questions like these pertaining to interactions between agriculture and the rest of the economy are needed perennially in formulating national economic policies and in formulating price support and other policies focusing on agriculture. Discussion of the questions has been fragmented, with not much attention to the overall set of relationships determining interactions between the two parts of the economy. The first contribution of the present study is to develop a model appropriate to explaining adjustments between agriculture and the rest of the economy implied by U.S. growth. We believe this study presents for the first time a formally complete model taking account of feedback effects involved in intersectoral equilibration and production function substitution between factors.' The model contains two sectors (agriculture and nonagriculture) and two productive factors (human resources and physical capital). Factor immobilities and other non-Pareto features are introduced, and there are special complications involving agriculture's purchased inputs which affect price measurement and production functions. Equilibrations determining prices and quantities of products and factors for each sector are explained within the model as responses to changes in the economy's major exogenous forces. These forces, reflected in the exogenous variables, include output per unit of input in the two sectors and total factor supplies available to the economy. The model permits quantitative estimates of how effects of changes in