AGRICULTURE ECONOMICS

Assignments:
Ricardian Theory of Corn Rent & Green revolution

Submitted to Sir. Arshad Pervez

CONTENTS
Ricardian corn theory:
Introduction Explanation Rent Schedule Diagram Criticism Quasi rent Scarcity rent Differential rent

Green Revolution:
Introduction & and history Explanation Factors of green revolution Need for green revolution

RICARDIAN THEORY OF CORN RENT

Introduction: David Ricardo was the famous classical economist two centuries ago. In the regime of Ricardo the prices of corn (food stuff) had been off the charts, corn being the basic food item and increase in its prices caused major problems for wage earners, cost of living were increased many people died due to starvation. Employers unwillingly

raised the wages of workers, some of the economist were of the view that the major cause of increase in cost of corn is due to the collusive behaviour of land lords so that they can earn higher rents. Ricardo had different opinion he wrote a book named principals of practical economy and taxation in 1827 Ricardo was of the opinion that major increase in prices was due to the Napoleonic war (1804-15. The war created the shortage of

food and hence increased its prices in Europe, this war made the production of corn more profitable. On the other hand if the prices of corn decreases it will be less profitable to produce corn, therefore demand for land and its rent decreased. Explanation: David Ricardo has presented the theory of corn rent to reply how rent is paid. Definition: That portion of the produce of land which is paid by a tenant to his landlord on the accounts of the original and indestructible powers of the soils. As all the tracks of land differ in fertility and location with the same cost of production, there yield is different. This difference in yield of a superior and inferior land is called rent. Rent: According to Ricardo, rent is the surplus obtained after deducting to share of other three factors of production that are: i. ii. iii. Wage Interest Profit

From the total production of land. Ricardo has explained his theory with an example. Example: Suppose there are four types of land in a country: 1. A 2. B 3. C 4. D

The land A is the most fertile land as per say superior land, and land B is the second most fertile land and so on respectively making land D the least fertile land of all four. People will cultivate the land A first, let us suppose that $100 is the total cost of cultivation on land A, and the production to the result of this much cost of production is 50 tonnes of rice. This land just covers its cost of production by selling this rice about $100, now this land is marginal land or no rent land, its tenant will not pay any rent to its owner. With the increase in population and increase in the demand of corn (food), the next efficient land will be cultivated which is land B, if $100 are spent on the land B. its marginal output is 40 tonnes of rice, by selling this 40 tonnes of for $100 the cost of production of this land is covered and the land B is now the marginal or no rent land but land A will pay the difference that is between the output of both lands that 10 tonnes as rent, and so land A is now the land with rent and as the population further increases the land D will be brought under cultivation and the cost of production and the price of production will be the same so the land becomes marginal or no rent land, but the amount of production will decrease to20 tonnes of rice. Now land C will pay this difference of output as the rent. Mathematically: Rent of land A = A-D= 50- 20 =30 Rent of land B =B-D= 40-20 =20 Rent of land C =C-D= 30-20 =10 Rent of land D =D-D= 20-20 =0 (no rent land)

Table: Types of land A B C D Cost of production $100 $100 $100 $100 Production yield 50 tonnes 40 tonnes 30 tonnes 20 tonnes rent 50 40 30 20

Diagram:

Criticism: Ricardian theory of corn rent is based on wrong and unrealistic assumptions: i. Wrong concept about the use of more fertile land first: Ricardian theory says that people will first use the most fertile land which is wrong people always prefer to cultivate the land which is closest to them. The availability of land is not constant Rent zero or marginal land concept is wrong, it is not possible. Application of law of diminishing return can be controlled with the advancement of latest discoveries and latest technologies in agriculture sector instead of decreasing marginal output it can be increased.

ii. iii. iv.

Types of rent:

QUASI RENT
The concept of quasi rent was introduced by prof. Marshall, according to him rent is the reward of that factor of production whose supply is inelastic and constant forever (land). Quasi rent the temporary rent which arises due to the inelastic supply of any factor production other than land. Marshall says that in the short run, if the supply of some other factor of production other than land become constant its demand rises due to the scarcity of supply, the price level goes up the extra earned income is called Quasi rent for example: if mechanical fault occurs in a gas cylinder factory, its filling is stopped for the time being till the repairing or replacement of the plant, supply will remain the same the prices of gas cylinder will increase and the producer and sellers will get additional profit which is called Quasi rent.

Scarcity rent: That rent which arises due to the scarcity of land is called scarcity rent. We know that land is God gifted and God made not human made the total area (supply) of land is fixed with the increase in population, increase in food demand, housing and other purposes demand for land increases but its supply cannot be

increased. No adjustment is possible between demand and supply of land. In the modern age land is very scarce thing there is no concept of marginal land and no rent land all the lands are giving rent due to the shortage of land. Differential rent: That type of rent which arises due to the difference of fertility, productivity and location of lands is called differential rent. We know that all lands are not equal according to soil texture, location and productivity some land s are made from the fertile layer of mud, some are even and some are uneven, some are desert lands and some are barren lands, some lands are situated in the best locations like near main highway, cities canals but some are situated in far flung areas due to these differences the rent of land are different.

GREEN REVOLUTION
Introduction: Idea of green revolution gained popularity with the discovery of high yield variety seeds (miracle seeds) by DR. Norman Borlaug. DR. was of the opinion that for increasing agriculture output man should not totally rely on nature he should make hard effort to make innovation and inventions in the discovery on agriculture inputs to increase the output. During the decade of 1960s many countries like Pakistan, Sri

Lanka, Bangladesh, Philippines etc. has made remarkable enhancement in the production of wheat, rice, and maize etc. such a situation is called green revolution. Explanation: All because of green revolution the countries that use to import food became the countries that use to export food. These countries attain the level of self-sufficiency for example the production of rice in Sri Lanka increased by 34% in 1967-69. The production of wheat in Pakistan increased 60% in 1965-66. Green revolution took place due to agricultural discoveries innovations and inventions like HVY and chemical fertilizers, discoveries of new pesticides, improvement of water resources, irrigational channels tube wells and agricultural machineries, means of transport and communication, agriculture information and research changes in the conservative mind sets, storage facilities etc. green revolution became possible due to two factors. Factors of green revolution: i. ii. Biological changes Technological changes

All these improvements in agricultural inputs are effective only if they are all combined together. Need for green revolution: i. Rapid increase in population:

Green revolution is must for countries like Pakistan, as Pakistan is in 5th place in the world when it comes to the population. Annual increase in population is about 3-4 million with this increase in the number of people the amount of production must also be increased. Without green revolution there will be scarcity of food in UDCs and famine will strike and corpses will be found due to starvation. ii. Agriculture is the key sector of Pakistan:

Agriculture is the major contributor in out GDP and a lot of our employments relate to this sector it will only create the job opportunities for the people as well growth in the economy shall be observed through green revolution. iii. Foreign dependency:

As Pakistan achieves the green revolution the dependency on the foreign counties shall end and Pakistan will be a prosperous self-sufficient country.

iv.

Agriculture surplus:

Due to green revolution our output will increase making a remarkable positive change in our exports resulting us more money to circulate in our markets. v. Stability in agriculture prices:

One of the major effects of green revolution that it controls inflation in a country as the products are produced within the country so are sell to the natives at lower and cheaper rates.