Theoretical and Practical Considerations in Measuring Costs and Returns

Abstract

This chapter bypasses four areas needing further discussion: removing the indirect effects of government programs from cost estimates, estimating costs of land and water services, estimating the costs of capital services and estimating the costs of human capital inputs. The task is to review the current status of costs and returns (CAR) estimates for individual commodities in terms of the issues and opportunities that face us today. The chapter focuses on the data and methods used by the Economic Research Service to estimate the costs incurred and the returns generated in producing a commodity over geographic areas, such as states, regions and the US The chapter is concerned with the allocation procedures for fixed cash expenses and capital replacement is that certain categories of costs may be omitted from the calculations and that these omissions may be greater for some types and sizes of farms than others.