University of Wisconsin - Madison

Before gong back to the Northland we are going to stop by the University of Wisconsin in Madison to see the campus. It is warming up in Wisconsin, the winter is almost over [knock on wood] - there is no snow on the ground any more. 

I learned today that eleven people, who have been affiliated to the UWM, have been Nobel laureates. The only name I recognized is that of Theodore Schultz, who got his PhD in agricultural economic from UWM. His Nobel Prize lecture has become a classic in the field of development economics: The Economics of Being Poor.

The main points of his lecture:

Most of the people in the world are poor, so if we knew the economics of being poor, we would know much of the economics that really matters. Most of the world's poor people earn their living from agriculture, so if we knew the economics of agriculture, we would know much of the economics of being poor.

The major mistake has been the presumption that standard economic theory is inadequate for understanding low income countries and that a separate economic theory is needed. 

Understanding the experience and achievements of poor people over the ages can contribute much to understanding the problems and possibilities of low income countries today. That kind of understanding is far more important than the most detailed and exact knowledge about the surface of the earth, or of ecology, or of tomorrow's technology.

I agree with Margaret Mead: "The future of mankind is open ended." Mankind's future is not foreordained by space, energy and cropland. It will be determined by the intelligent evolution of humanity.

What matters most in the case of farmland are the incentives and associated opportunities that farm people have to augment the effective supply of land by means of investments that include the contributions of agricultural research and the improvements of human skills.

The "reason" why governments tend to introduce distortions that discriminate against agriculture is that internal politics generally favor the urban population at the expense of rural people, despite the much greater size of the rural population.

Farmers the world over, in dealing with costs, returns and risks, are calculating economic agents. Within their small, individual, allocative domain they are fine-tuning entrepreneurs, tuning so subtly that many experts fail to recognize how efficient they are. 

Women are also entrepreneurs in allocating their own time and in using farm products and purchased goods in household production (Schultz, 1974). 

For want of profitable incentives, farmers have not made the necessary investments, including the purchase of superior inputs. Interventions by governments are currently the major cause of the lack of optimum economic incentives.

We in the high income countries have forgotten the wisdom of Alfred Marshall, when he wrote, "Knowledge is the most powerful engine of production; it enables us to subdue Nature and satisfy our wants."