There is a lot of economics to planting trees, particularly on the prairie where they don’t really want to grow. Doing so involves a lot of repetitive tasks that give one time to think, including musing over the economics of what you are doing.
Just twisting the barb of a little plastic device called an emitter into a plastic tube illustrated the ideas of Vernon Ruttan, who spent nearly four decades at the University of Minnesota. Vern, together with his colleague Yujiro Hayami, explored “induced innovation,” the factors that motivated the research, invention and development that brings us new ways to produce things. They did so in the context of the “Green Revolution” in agricultural technology that transformed food production in Asia and the rest of the developing world.
But the basic ideas apply broadly in every economy.
Ultimately, for people to have more goods and services to meet their needs and wants, each producer must be able to turn out more with the same amount of labor and land. Doing so requires better technology. But that is not a random process — an inventor such as Watt or Edison being driven by whimsy to turn an idea into something concrete. It is driven by economic forces, especially the changes in the relative prices of inputs that indicate some key commodity is becoming scarcer and hence more valuable.
Induced innovation initially was not the brainchild of Ruttan and Hayami. In a 1937 work on the determination of wages, British economist John Hicks noted increases in the price of labor provided an incentive to develop new technology that used less labor per unit of output. That is “induced innovation.” (Hicks won the Nobel in 1972 for his work in macroeconomics, particularly his development, together with South Dakota farm boy Alvin Hansen, of the formulation of John Maynard Keynes’ theory that had been used for 65 years.)
In Asia, land was the increasingly scarce factor in food production. Rising land prices relative to labor motivated the development and adoption of new technologies like short, stiff-strawed rice varieties that responded to fertilization without falling over.
In Israel, the scarcest resource was water. It was very limited in physical supply and fraught with conflicts with politically unfriendly neighbors in the same watersheds. Increasing supplies involved expensive measures, like desalinization of seawater.
That led Israeli farmers and engineers, working in the 1950s at the same time Ruttan was at the International Rice Research Center in the Philippines, to develop drip irrigation, a technology that doles out water drip by drip, precisely where the plant was rooted in the ground. It required a maze of small tubes and valves to precisely meter the drips. And these had to be relatively cheap.
All this means that 60 years later, I can lay out tubes and emitters, attach them to an electronic controller powered by two AAA batteries that I screw onto my farm hydrant, and be sure that each of my tender young trees will each get a half-gallon of water per hour for an hour or two a day, while I am at my home in St. Paul 197 miles away.
In my case, the scarce inputs are time and gasoline, not water. Indeed, as I worked my way down a row of willows and cottonwoods last night, laying an emitter at the base of each, right behind me I could hear the flow of Chanarambie Creek, a tributary of the Rock River that often has greater flows than the better-known Jordan River in Israel. But it was water scarcity in Israel that led to the marvels of a 21 cent piece of plastic that will dispense a half, one or two gallons per hour and a $43 electronic controller. Virtually all of the technology remains Israeli in design even if I get my supplies from California. (Purchased over the Internet without paying Minnesota sales taxes.)
It is still too expensive for corn or soybeans, but if land prices like the $21,900 per acre recently paid 50 miles southeast of our farm persist, look for that to change. If land gets more expensive relative to labor and to irrigation equipment, expect farmers to choose the cheapest route to get more bushels per extremely costly acre. Most of the soils in the Midwest get adequate rainfall for normal crops at current levels of input use, but high land prices induce efforts to make land yet more productive. Where it will end, I don’t know .
On a small scale, drip irrigation is labor intensive. It is taking me four times longer to install tubing, emitters and controls than it did to plant the trees themselves with a tractor-mounted tree planter. But on a larger commercial scale, especially in California fruit orchards and in high value vegetable crops, installation already is being mechanized. That also could be true for Midwestern row crops like corn and soybeans.
So don’t be surprised if the apparently ongoing farmland bubble induces new technology. What will happen to that technology when the bubble bursts is another question, Hundreds of tower silos and center-pivot irrigation systems erected in the go-go years of the 1970s now stand idle. We may see a burst of new technology and we may see a bust in farm prices and we may see both, The next few years will be an interesting ride.