Reflections on Agricultural R&D, Productivity, and the Data Constraint: Unfinished Business, Unsettled Issues

Sixty years ago, T.W. Schultz introduced the idea of the productivity “residual” to agricultural economics (1956). Schultz’s main message was that growth in conventional inputs accounted for little of the observed growth in agricultural output, and that there was work to be done by agricultural economists to understand and ultimately eliminate this unexplained residual called “productivity.” Thus was launched the economics of agricultural productivity as a sub-field within agricultural economics, along with the economics of agricultural R&D and innovation and related government policy. Much progress has been made in the decades since. Still, critical issues remain unresolved. This matters because agricultural innovation and productivity matter, and so do the related policies that rest to some extent on our established understanding of the economic relationships. In this paper I review some unsettled issues related to economic models and measures applied to agricultural R&D and productivity, and some unfinished business in terms of economic and policy questions that are not yet well answered. Before doing that, I present some evidence on agricultural productivity and why it matters. Next, with a nod to “factology,” I present available productivity measures from the U.S. Department of Agriculture (USDA) and International Science and Technology Practice and Policy (InSTePP) Center, and compare them in the context of translog cost function models. In subsequent sections I use these and other data to develop new evidence related to two contentious questions: (a) Do farmers benefit from public agricultural R&D? (b) Has U.S. agricultural productivity growth slowed in recent decades? The answers are revealed within.