There are many barriers to a perfectly free flow of goods among countries. These barriers result in trade diversion and increased transportation costs for the goods involved. This paper reports findings of a study on the ocean transportation cost of trade diversion for grains and meats in 1965-66 where diversion is defined as the difference between the least cost world trade pattern for these commodities as determined by linear programming (transportation model) and the actual trade patterns. The change in United States export patterns and shipping costs that would have resulted from a 10 percent decrease in United States outgoing ocean freight rates for grain and meat in 1965-66 was also calculated. This was done to show the effects of what some feel to be a rate pattern that discriminates against United States exports.

The European Economic Community (hereafter referred to as EEC) market for rice has been undergoing significant reorganization since the formation of the economic union in 1957, and the initiation of the common agricultural policy in 1962 in general and the common rice policy in particular, which became effective September, 1964. The rice trade policies of the EEC have continually influenced the domestic consumption demand, production, exports and imports of rice. Although the proportion of the EEC imports of rice from the United States increased from 28 percent in the pre-common rice policy period to 41 percent in the post-common rice policy period, the effects of these policies on rice imports into the EEC continue to concern exporters of rice.

If all feeder cattle were identical and if all relative prices were constant the feedlot manager would still have an important and difficult decision to make. The decision involves selecting the time at which to replace a pen of cattle on feed with a new pen of feeder cattle such that profit is maximized, over time, to the feeding operation as a whole. Of course, all cattle are far from identical and prices, even relative prices, are never constant. The decision that is not simple with identical cattle and constant prices becomes most difficult with consideration of different types of replacement cattle and varying prices.

Regional supply-adjustment studies are either underway or completed for milk, feed grain-livestock, wheat, rice, cotton, and beef. Other related studies take subsectors as units of analysis for studying markets for such inputs as labor and fertilizer, or for studying regional comparative advantage.

This paper reviews the specification of supply and demand for both kinds of studies and develops the concept of effective subsectoral demands and supplies from the standard Walrasian adjustment behavioral assumptions. These concepts are applied to both the input markets and the product markets. Two commonly used specifications of subsectoral functions: (1) the method of equal elasticity as the aggregate, and (2) the method of equal slope as the aggregate, are found to be incorrect specifications of subsectoral functions in perfectly competitive adjustment studies, except in very restrictive circumstances. The theoretically consistent specifications are developed and shown to be operationally useable for future studies.

Several methods are available to agricultural economists for appraising the income position of farm proprietors. However, most analyses concentrate on a single measure and give little attention to alternative techniques. We suggest that a better understanding of the income situation of a group can be gained by using a combination of techniques.

Income of farm proprietors is often compared with that of other broad industrial groups. Such a procedure can partly mask differences and similarities that exist between the farm sector and other businesses. In this paper we compare farm proprietor incomes with those of nonfarm proprietors.

Discussion of the possibility of a value added tax (VAT) has recently become a lively topic for the press, public, and politicians. The President's 1970 Task Force on Business Taxation recommended that the tax not be imposed immediately, but that the possibility of using the VAT in the future be given more exposure and discussion. A number of states have also considered enacting a VAT, and a few have done so.

Tax dollars the Government deliberately waives should be viewed as a form of expenditure and weighted against the priority of other expenditures. When the preference device provides more social benefit than Government collection and spending, that “incentive” should be expanded; when the preference is inefficient or subject to abuse, it should be ended.

Richard M. Nixon Message Regarding Tax Reform April 21, 1969

Money and capital markets exist to provide an exchange system for debt and equity instruments-money substitutes with time dimensions. This financial intermediation process is a two-way flow. The funds-flow originates with savers and terminates with the ultimate borrowers or users of the saved funds. The securities flow originates with ultimate borrowers and ends with primary savers. In addition to savers and borrowers, the principal participants are the financial intermediaries: those firms in which (a) claims on and to others dominate among assets and liabilities and (b) economic activities center upon the purchase and sale of such claims.

The past few decades have seen significant absolute and relative increases in numbers of urban residents. The process of city or community growth, however, has been exceedingly uneven in the sense that only a proportion of those villages and towns that stood on the threshold of urbanization and sustained population growth have emerged as cities. Some communities have experienced dramatic population increases while others have barely sustained themselves in terms of population, or at best have realized modest population gains. Finally, significant numbers of small communities have been faced with relatively large population declines.

The Agricultural Act of 1970 embodies a new approach to supply adjustment policy, swinging away from acreage allotment and diversion provisions of the previous Act. Employing a “set-aside” provision, cotton, feed grains or wheat land is diverted, or set aside, in order that producers may become eligible for support payments. The allotment no longer serves as an upper limit on the permitted acreage of these crops nor, cotton excepted, is planting of a specific crop necessary for a producer to become eligible for price support benefits. Flexibilities have been written into the program whereby the Secretary may make participation more or less attractive to the producer in accordance with needs.

The Agriculture Act of 1964 provided for the development of a special cotton research program designed to produce information which could be used to reduce the cost of producing upland cotton in the United States. Authorization of $10 million annually for the special program provided for the extensive collection of data and for an annual report to congressional committees by the Secretary of Agriculture on the progress of the program. Field surveys have been conducted for the 1964, 1965, 1966 and 1969 crop years on about 5,000 cotton farms across all production regions in the United States.

In recent years, considerable national attention has focused on the use of chemicals by the agriculture sector. Recent descriptive analyses have addressed the problem.of attempting to determine, or to describe, some of the social “costs” of chemicals used in agriculture which later move to non-agricultural areas. The primary effect of the attention on chemical use in agriculture has been legislative action relative to specific pesticides such as DDT and 2,4,5-T. These actions have made national news along with reports of measured residues of these pesticides in wildlife, fish and other forms of foodstuffs.

Farmers are continually faced with the necessity to make farm management decisions which have economic consequences. Often the situation occurs wherein the farmer has little information upon which to base a decision. The situation may be forced on the farmer so that a no action decision also has economic importance. Also, as is the case in a dynamic society, a decision made now can have repercussions in years to come.

For many years, some type of government farm program has been in effect for many farm commodities. Most of these programs have been designed so that a farmer's decision to participate could be made on a year to year basis. Production decisions could be made independently with a decision not to participate in a given year having no effect on the choice or level of participation available in subsequent years.

Economic analyses of firm behavior are typically based on the assumption of maximization or minimization of a single goal. While economists recognize that multiple goals are important in making business decisions, a single goal, such as profit maximization, is used because it is operational and it provides an analytical approximation of firm behavior. However, the reduction of year-to-year income variability, providing an acceptable family living level, increasing net worth, additional leisure time, and many other goals have been suggested as being important to some farm firms. Some analyses have considered two or more of these goals by maximizing one subject to a constraint on another. In other cases, a utility function has been estimated for an individual farmer incorporating both expected income and variability of income. Although these efforts have been useful, progress towards incorporating multiple goals into empirical models has been inhibited by the inability to correctly specify important goals and the difficulty of incorporating several goals into frequently-used models. The recent development of simulation routines for farm firm analyses provides an analytical procedure that is sufficiently flexible to incorporate multiple goals. While it may be difficult to provide all of the information that is needed concerning goals and their use in decision making, additional information indicating the ranking of goals and the manner in which this hierarchy differs for farmers under alternative economic and noneconomic conditions provides a better basis for the selection of organizational and financial strategies.

The number of Americans living in poverty increased by an estimated 1.2 million during 1969 and 1970, reversing the downward trend in numbers of poor registered through the 1960's. It seems a paradox that 12 percent of our citizens live in poverty in a trillion dollar economy. The grossly unequal distribution of income is illustrated by the fact that average annual after-tax personal income was $3,098 per person in 1970. Yet, 25 million lived below the 1970 poverty level, defined as $3,944 for a family of four. Roughly speaking, those living in poverty existed on incomes of less than one-third of the national per capita level. This paper is not concerned with the highly skewed distribution of personal income, but is directed to the effects on those living below or near the officially defined poverty level.

A disproportionately large share of our economic development problems, involving maldistributions of population, employment, and income, is found in rural areas. Although these problems directly affect the residents of rural areas, they are linked to economic problems in urban areas. Per capita income comparisons indicate the differential effects of economic development on the population. For example, per capita incomes of residents outside metropolitan areas are only about 71 percent of those in the orban-oriented ones. In addition, about one-third of all families live in nonmetropolitan areas, but over half of all low income families live there. Further, large geographic areas such as the Appalachian, Mississippi Delta, and Ozark regions are below the Nation as a whole in terms of the general level of economic development. Even in the urban centers of these rural regions, the average resident has not commensurately participated in the benefits derived from our Nation's economic development and growth. Comparisons of per capita income for different years show these maldistributions have persisted for decades.

Drs. Edwards and Coltrane show great courage in agreeing to discuss in one paper all of the variables, data, theories, models, and relationships that might be included according to the title. It was comforting to me to see that their very first endeavor was to set forth some definitions for some often used terms but terms whose meaning is seldom clearly stated by the user.

The authors distinguish between economic development and growth and suggest some alternative definitions for rural and rural development. Let us take a closer look at their efforts.