Economics 2333: Agricultural/Environmental History

1. Economics 2333: Agricultural/Environmental History Professor Robert A. Margo Harvard University Spring 2014

2. Roadmap • Some basic long run statistics of US agriculture • Three papers • Rothenberg on “market capitalism” in early agriculture. • Olmstead and Rhode on productivity growth • Hornbeck on the Dust Bowl • If there is time, Rhode, et. al. on the Boll Weevil.

3. Long Run Trends in Agriculture: Labor and Land (1) • US begins as an agricultural economy; three-quarters or more of employment is in agriculture in 1800. • Long run decrease in agriculture’s LF share begins early, and is persistent • Absolute levels of farm population and employment peak between 1920 and 1940. Employment shifts away from family to hired labor. Note that # of farms follows same U-shaped but is more muted. • Land in farms rises steadily up to 1950 and has declined since. Same upward trend for cropland harvested but is flat since 1950.

4. Long Run Trends in Agriculture: Labor and Land (2): Implications • Most farms in C19 were family enterprises, relatively small. Not much evidence of economies of scale, except in slave agriculture. • In C20, especially post WW2, farms have gotten much larger in terms of land, and land/labor ratio. Distribution of farm sizes has become more unequal, suggesting economies of scale.

9. Long Run Trends in Agriculture: Crops and Livestock • Historically most cropland is used for domestic production but since WW2 there has been a shift towards export markets. • Substantial long run shifts in crop and livestock mix. Away from oats and cotton and towards soybeans and hay. Livestock shifts towards beef and pork. Figure does not include chickens, huge post-WW2 growth (historically, a luxury commodity).

11. Acreage of Major Crops (1)

12. Productivity Growth in Agriculture • Measure by partial productivity -- output per acre (yield), labor productivity – or TFP. • Conventional wisdom: (1) yields are relatively flat until post WW2 period (2) labor hours per unit of output declines significantly in C19, accelerates in C20. • Initially, share of AG in national income < shae of AG in labor force. National income share declines sharply from C19 to C20 BUT decline is not as steep as decrease in LF share. agriculture’s share of LF. Moral: output per hour of work in AG converges on non-ag.

14. Rothenberg, “The Market and Massachusetts Farmers” • In C19 output per worker in AG < (by much) output per worker in non-AG. Over time, gap closes. • Traditional history sees this as the consequence of a move away from “self-sufficient” family farms that were not especially interested in maximizing profits to “capitalistic” agriculture. Slave plantations are the major historical exception. • Rothenberg tries to operationalize this by studying various features of the economic behavior of Massachusetts agriculture prior to the Civil War. Creative and path-breaking (for the time) use of archival records (farm account books). • Assertion is that MA farmers were “market oriented” from the very beginning. Point is picked up later by Atack and Bateman in their study of agriculture in antebellum North.

15. Selected Evidence: Rothenberg • MA farmers made regular trips to markets. In eastern MA these were initially to Boston and Salem, but share to both towns declines over time. Destinations more diverse in western MA and takes somewhat longer for trips to become concentrated. • Transit costs per ton mile were very high and not decreasing over time (horse-drawn wagon) BUT Rothenberg’s estimates are lower than previous literature. Over time, farmers make more short-distance trips and frequency of very long trips seems to increase. • Not shown: (1) convergence in prices across market towns, quicker in East than in West (2) hog weights are significantly correlated with output and input (corn) prices. • Strongest evidence (IMHO): Index of prices received by farmers correlates very strongly with prices in NYC (Warren-Pearson) and Philadelphia (Benzanson).

22. Biology vs. Mechanization • Olmstead, Rhode “Red Queen” paper is important recent corrective to conventional wisdom. • Conventional wisdom: significant labor productivity growth in agricultural prior to WW2 due mostly to mechanization. This enables each worker to farm more acres. But the productivity of the land stayed the same until “scientific agriculture” ca. WW2. Very famous paper: Griliches on hybrid corn. • Olmstead, Rhode argue this is incorrect; there were many small innovations of a biological nature before 1940 that raised productivity in agriculture. Revise classic estimates of Parker and Klein. • Application to wheat farming. Developments in new varieties of wheat enabled farmers to expand on less desirable land. Advances in dealing with pests, weeds, etc. Not as effective as post-WW2 but economically significant.

23. Selection Bias and Long Run Trends in Yields • Figure 1 shows long run trends in yields. Little change until 20th century. Standard interpretation: not much happens until “scientific agriculture”. • Olmstead and Rhode point out a fundamental selection bias in this figure: land brought into production in the 19th century typically was lower yield BUT yields on average stayed the same. OR claim there were important biological innovations at this time which facilitated this. • Critical biological innovations (1) new strains of wheat that were better adapted to western lands (2) persistent attempts at combatting of insects/diseases. • Revise standard Parker-Klein estimates. Biological innovations account for 1/3-1/2 of pre-WWI gains in labor productivity in agriculture. “Scientific” agriculture speeds up this process.

35. Hornbeck on the Dust Bowl • JMP, examines impact of the Dust Bowl on labor and land allocation • Genre of studies in economic history and labor/macro that examine short and long run effects of geographic specific shocks • Other examples: California Gold Rush, Alaska Pipeline • Important related macro paper: Blanchard and Katz (1992)