The Elasticity of Foreign Demand for U.S. Agricultural Products: Comment

Abstract

I greet with sincere approbation Johnson's to professional literature on elasticity of foreign demand for U.S. agricultural products. This elusive but highly important parameter has been neglected too long. Although his calculations lend credence to my estimate, I suggest caution in accepting our estimates as final or exact parameters to be used by profession. our efforts will motivate profession toward refinements in procedures and data to provide more reliable estimates of parameter. Despite this overall acclaim for Johnson's contribution, it necessary to clear up several misconceptions. He states, Tweeten . . . himself has defended estimate [of foreign demand elasticity] as a unique and important contribution (1977). I made no such assertion. Johnson apparently was referring to my statement that Perhaps most used, single parameter in our profession price elasticity of demand for farm output at farm level. Despite its central importance to farm policy, only one estimate exists of parameter to my knowledge (1975, p. 183). Here, I refer to importance of price elasticity of demand for farm output and not to of my specific estimate of that parameter. I state, the results are by no means exact and . . . a sizable upward bias could be present in export demand elasticity (1967, p. 365) and that elasticity of demand for farm output is highly sensitive to choice of export demand elasticities-parameters that are not known with much reliability (1967, p. 366). Later I write that exact magnitude of elasticity of demand for farm products unlikely ever to be known with a high degree of certainty, especially because of difficulties in estimating foreign demand. The above [my own] estimates are highly controversial (1970, p. 203). Johnson states, Unfortunately, his [Tweeten's] estimation technique for foreign (or excess) demand component substantially in (1977). The error to which Johnson refers my alleged failure to properly weight respective elasticities by country or region in summing them, where sum of weights equal to 1.0 (see Johnson 1970, p. 165). It instructive to derive my equation (see equation (2) in Johnson's note) for elasticity of demand for U.S. exports, leaving out Ei, which Johnson agrees to ignore. U.S. exports Oef are sum of excess of demand quantity Qdi over