The Dynamics of Supply: Retrospect and Prospect

Abstract

Kellogg 50th Anniversary Lecture. Marc Nerlove is a professor in the Department of Economics at Northwestern University. This lecture was written during Nerlove's tenure as a scholarin-residence at the Bellagio Study and Conference Center of the Rockefeller Foundation and while a Fellow of the John Simon Guggenheim Memorial Foundation. The author is indebted to Rockefeller and Guggenheim Foundations for the environment in which, and the werewithal with which, to pursue this endeavor. Neither foundation is, of course, responsible for the opinions expressed. The author also gratefully acknowledges many helpful conversations with colleagues at the Bellagio Center, John W. Mellor, and Uma Lele. The discussion of perennial crops at the end of sect. 3 draws on correspondence with M. J. Hartley of the World Bank. The author's deepest intellectual debt is to T. W. Schultz and D. Gale Johnson who have, over the years since his initial work on the subject, continued to shape and influence his ideas concerning agricultural supply response. The author's errors are his own. He also should like to take this opportunity to thank B. F. Stanton and the Executive Board of the American Agricultural Economics Association for the honor and opportunity offered to him in their invitation to present this lecture. Often costs and returns which individual farmers confront are expressible in terms of market prices, although the risks they face are usually not so easily quantifiable. Whether such market forces, however, impinge directly and visibly on individual farm entrepreneurs, it will nonetheless be true, if we accept the presupposition of optimizing behavior, that shadow and opportunity costs are crucial determinants of agricultural supply. It follows that responses to changing prices for outputs and inputs, whether made visible by markets, must be a key element in our attempt to understand the agricultural production and food supply problems in low income and developing economies, as well as in the highly efficient and productive agricultural sectors of the developed and high income countries of the world In what follows I examine what has been