JOURNAL OF AGRICULTURAL SCIENCE IN FINLAND Maataloustieteellinen A ikakauskirja Vol. 61: 501—508, 1989 Research on (he agricultural economics in the 1970 s and 1980s VILJO RYYNÄNEN The objective of this study is to examine the main lines of research on the agricultural economics in the 1970 s and 1980s. It is rea- sonable that the scope of this study also in- cludes theoretical-methodological research and research concerning the solving of prac- tical problems. The last-mentioned field is so extensive and has so many different levels that, in this work, it is possible to deal only with the key research topics still considered to be important. The purpose of the agricultural economics is to deal with the economic problems en- countered by people working in agriculture, the most common of which are problems of choice and the criteria used to make choices. A characteristic feature of economics is the at- tempt to develop models which can be used to compare the relationship between the ad- vantage (often also the disadvantage) result- ing from man’s actions and the sacrifice re- quired by such actions. These comparisons also involve problems concerning values. Choices are followed by decision-making. As human actions have become more complex, economists have had to pay more profound attention to the problems encountered in mak- ing decisions. Owing to economic systems and language areas, the taxonomy and terms applied in the agricultural economics are fairly heterogene- ous. Consequently, giving a systematic picture of agricultural economic research is highly de- pendent on the choice of taxonomy and terms. The Germanic tradition predominant in the Nordic countries up till the 1950 s has gradu- ally been replaced by the Anglo-Saxon tradi- tion. With only a few exceptions, the publi- cations dealing with economics published dur- ing the last twenty years have been in Finn- ish, Swedish or English. The scientific terms and classifications have thus been given an Anglo-Saxon, principally American, form. According to the old Germanic taxonomy, the agricultural economics comprised the busi- ness science of agriculture and agricultural policy. According to the Anglo-Saxon con- cept, the family is rather large. Modern mar- keting, the economics of land use, and rural sociology have been added to the business science of agriculture and agricultural policy. No doubt, the economics of land use and rural sociology cannot be considered solely as dimensions of the agricultural economics. In our hierarchy of science, the economics of land use is placed between the agricultural economics and forestry, on one hand, and environmental sciences, on the other. It is true that important aspects of the economics of land use and rural sociology are associated 501 with the agricultural economics and it is there- fore appropriate that they are examined to- gether with the traditional economic sciences. Marketing, management and decision-making apply behavioral sciences (psychology and sociology) in their research. Sociology, or what we call ‘rural sociology,’ is thus close to economic sciences. Scientific research is usually divided into ba- sic research and applied research. Another well-known division is made between research into the theory of science and applied research (Bonnen 1986, Johnson 1987). Both Bonnen and Johnson consider the theory of science, methodology and measurement techniques of basic phenomena to be part of disciplinary re- search, and they consider subject-matter and problem-solving research to be applied re- search. To a certain extent, this division helps in the classification of research findings, and therefore it is applied in this research on the agricultural economics which has produced numerous results in various disciplines during the last twenty years. Theory and methodology research curing the last twenty years, the demand for scientific knowledge has increased throughout the world, and at a very rapid pace. In a multitude of disciplines, science has been harnessed to serve practical life. In this development, economic sciences have not been the last in line. One consequence of this de- velopment has been that theory-oriented science has been given less attention. Owing to the small number of researchers, especial- ly agricultural economists in Finland have had to focus their research almost entirely on problem-solving studies. Dissertations for higher degrees, however, have always required development of theory, methodology and measurement technology. It has always been necessary for teaching and re- search at universities to include the theoreti- cal approach to their respective discipline. This has made it necessary for teachers to pro- duce literary material based on theory and methodology. Within the scope of the farm management, an important achievement having extensive practical implications was the importation and development of the new theory and methods for production planning (Westermarck and Melen 1962, Ryynänen and Pölkki 1973, Ryynänen and Ryhänen 1988). The planning systematics known as the gross margin method has completely replaced the earlier budget and relative calculation methods. The rapid ad- vancement of computer-based planning has been possible because a multidimensional, flexible and logical planning method has now been available. Today, computer-based appli- cations of the method are also used quite ex- tensively for production planning in agricul- ture and forestry (Weckman et al. 1981). When connected with other knowledge, com- puter-aided economicplanning will play a very important role in the planning and monitoring of future agricultural production activities. The theory and systematics of planning have also been developed for the purposes of planning regional and economic structures. Planning of villages, municipalities and re- gions has been a major object of interest in both the agricultural economics and in region- al geography (Hahtola 1977, Karlsson and Nevala 1979, Kettunen, L. 1981). The plan- ning methods for individual businesses and for regions (gross margin method, Markov’s chains, linear planning, Monte Carlo method) are well-known methods in market economy countries. Their further development and ap- plication to Finnish conditions and Finnish economic concepts have required much work and many different insights, in order for these methods to attain a form suitable for use here. Owing to, among others, natural condi- tions, historical and social developments and the economic policy prevalent at the time, agricultural price, income and subsidization policies have been developed and applied, in part, according to our own (Finnish) objec- tives of principle. This has required the de- velopment of a theory and the creation of 502 models (Suomela 1972, Ihamuotila 1977, Aaltonen 1982). With respect to price and subsidization policy, development has been made easier by the fact that Nordic countries and other European countries have had the- ories and models for solutions similar to those in Finland; development of theory inFinland has thus been able to draw heavily from work carried out elsewhere. Research on the input-output relationships in agriculture applying the production func- tion analysis, began after the Second World War. Advances in computer technology in the 1960 s made it possible to use this analysis to handle fairly large amounts of data. In Fin- land, production function analysis attained considerable importance in the ’7os and ’Bos, when computer capacity no longer markedly restricted the handling even of large number of data. Furthermore, the increased diversity and availability of data sets and the develop- ment of computer programs have brought about an appreciable increase in the applica- tion of this research method. A considerable number of production function analyses have been carried out for practical agricultural data (Ryynänen 1970, Ihamuotila 1972) and for specific purposes, using experimental data planned for that purpose (Siren 1978, Turkki 1978). Owing to its logical approach, production function analysis has made a noteworthy con- tribution to scientific research in its field. Traditional research on plant and animal pro- duction starts out from tests performed in precisely restricted conditions and involving a few factors at one. In practice, produc- tion occurs under many kinds of environmen- tal conditions with many, even dozens of factors affecting the results simultaneously. Production function analysis enables one to study these effects on practical materials be- ing affected by many factors at the same time and/or undergoing fluctuations in the produc- tion environment. Thus it has been possible to determine the partial effects of produc- tion factors, substitution ratios, optimums, minimums and maximums. Methodological development has proceeded far, but short- comings in the materials (lack of specific ob- servations, insufficiencies of indicators, defi- ciencies in measurements) restrict the reliabil- ity of research results, in particular, to prac- tical agriculture. Experimental livestock research with eco- nomic analysis has given a great contribution for solving practical problems in various fields, of the animal production. The corre- sponding achievements have not been reached in applying the experimental results of crop response to the practical crop production. In general, it is not possible in practical plant production to attain the same kind of exact application of experimental knowledge as is possible with livestock production. The het- erogeneousness of the soil, the unpredictable- ness of meteorological conditions, unexpected occurrences of plant diseases and pests, and differences in applications cause variations in the results of agriculture in practice that are of the type which cannot be explained on the basis of inputs. The gap between the model derived from experimental materials and the practical results is great. Their research re- quires closer cooperation between plant pro- duction and economic researchers. Trend-based and scenario-based predictions of the supply and demand of agricultural products, of food consumption, of the struc- ture of farms, and of the future development of rural areas have been the focus of both methodological research and problem-solving research, particularly in the 1980 s (Rouhiai- nen 1979, Kettunen, L. 1988, Kettunen, P. 1989, Suokko and Laaksonen 1981, Heikki- lä, T. 1982). Future phenomena of change are captivating research topics, but the results are highly uncertain. For this reason the tech- niques for compiling predictions are being de- veloped intensively, e.g. through international cooperation, in which Finnish researchers, too, have participated. A very significant number of agricultural policy decisions affect the economy of agriculture and rural areas for a long time in the future. Research aimed to- wards the future therefore has occupied a 503 prominent place in the economic sciences of agriculture. Expanding international contacts make it even more essential to increase re- search cooperation in this field. Research can deepen and expand only when based on sufficiently sound theoretical and methodological research. Such research in- creases the researcher’s capacity. On the oth- er hand, theoretical and methodological re- search is the most demanding aspect of re- search, however its influence on the develop- ment of science is of long duration. Small countries, in particular, must link such re- search to form international cooperation. In part, this has been the case in the economics of agriculture. In practice, cooperation has taken place by means of doctoral degree pro- grams, foreign lecturers, seminars, joint studies and international publication. Applied research The primary task of research on the agricul- tural economics in Finland has been applied research, mainly problem solving. The radi- cal change in our society, transformation an agrarian society into a post-industrial welfare society in the span of forty years, has meant an accumulation of continuously changing challenges for agricultural economists. Scarce resources have been used to a great extent to develop proposals to solve current practical problems. Clear evidence of this is the abun- dance of reports by numerous agricultural committees and working groups. Much exper- tise in the agricultural economics has been ex- pended for these reports; very often the senior researchers in the field have had to act as com- mittee chairmen, secretaries and expert mem- bers (Maatalouden rakennepoliittisen toimi- kunnan mietintö 1980, Maataloustuotteiden tuotantokustannuksia ja viljelijäväestön tu- lotason kehitystä selvittelevän toimikunnan mietintö 1975, Maatalous 2000, 1987). Com- mittee work has formed a significant basis for legislation and for the agricultural policy im- plemented by society. Development of agricultural income and subsidy systems, completion of calculations and income level studies have been important components of researchers, work (Siltanen 1984, Laaksonen 1984, Kettunen, L. 1989, Puuronen 1987). ‘Solidary’ earnings and in- come policy and the development of social security systems have called for considerable research input from agricultural economists. Throughout the post-war period, the struc- tural development of farms and the location of production have been topics of intense re- search and lively debate. Research has deviat- ed little from the idea of family farms. The superiority of family farms and their capaci- ty for development vis ä vis other forms of enterprise have been emphasized in many studies (Torvela and Mäki 1974, Ryynänen and Pyykkönen 1988). Study of other or- ganizational forms in Finnish conditions would, in fact, have been purely theoretical, because these have hardly to exist in Finnish agriculture. Studies of family farms have focused on agricultural business strategies, on the farm management, on the optimum size of farms (Heikkilä 1987), and on the farm family’s role in communities (Köppä 1979). Another important object of study has been the role of the farmer’s wife, her contribution to agricultural firm, and her role in the commu- nity and in the family (Siiskonen et ai. 1982). The effects of technological development on the structure of the family farm, on rural areas and on the structure of society have been paid much attention among agricultural econo- mists, social scientists and agricultural sociol- ogists. Technological progress has given the farmer of the 1970 s and ’Bos enormous poten- tial to increase and manage production. In al- most every sector, the technology of produc- tion has improved the input-output ratio, and it has become possible to replace much human labor with capital. A special object of interest has been the fitness and profitability of in- troducing labor-saving technology (Torvela 1977, Hemilä 1983, Ylätalo 1987). The rapid reduction in the number of farm- 504 ers and farms has had both positive implica- tions and considerable disadvantages in rural areas. Not only agriculture but also many oth- er functions integrated with agriculture and forestry have withered in rural areas. As a consequence, the population’s age and sex dis- tributions have become unfavorable, and the availability of services in rural areas has waned. Lack of appreciation for rural cultures and the great emphasis placed on urban cul- tures have enticed young people, in particu- lar, away from the countryside. Research into theseproblems has been a challenging task for agricultural economists and sociologists in the 1970 s and ’Bos. In fact, the Academy of Fin- land set up a research team for 1986—89, to study ‘The vitality of the countryside’. It was one of the most comprehensive project studies dealing with agriculture, forestry and rural areas. The approach was multidisciplinary, and the study was carried out as a coopera- tion project between five research teams from universities and research institutes. The research on rural vitality was primarily analytical, and directed its attention primarily to the properties, changes and goals of the subject (Varmola 1989, Kettunen, P. 1987 and 1989, Sippola, H. 1989, Survo 1989). The study confirmed the suppositions that hu- man resources of rural areas have considerally diminished, that there is a lack of the enter- preneurship, and that rural development has been sporadic. Although the study pointed out important regional development centers giv- ing life to their surroundings, the overall pic- ture of isolated rural areas was quite bleak. Researchers face an enormous task in finding alternatives for developing a healthy and vi- tal rural life and in studying the opportuni- ties offered by various options. Cooperative systems of various forms have been thought to be a factor which might pro- mote rural development. In fact, in the early years of this century, rural and agricultural de- velopment in Finland was stimulated by a strong cooperative movement. Research on cooperative systems has consequently been revived in several areas. In the early 1980s, the Nordic agricultural economists launched a 5-year joint study funded by the Nordic Council of Ministers. That study dealt chief- ly with the original characteristics of the tradi- tional cooperative movement, its membership democracy, its position in society, its decision- making, and its future potential and problems (Landsbrukskooperationen i Norden 1982 and 1985). As well as Nordic cooperation, research on the cooperative movement has been con- ducted together with Michigan State Univer- sity. In this context, attention has been paid to the potential of cooperative systems in mar- ket management (Ollila 1989). Agricultural economic problem-solving re- search extends to most fields of practical farm management. The undisputable cor- nerstone of this research tradition is the agricultural profitability study (Maatalouden kannattavuustutkimus 75 vuotta 1987). Main- taining this research is still considered to be very important for the continuous monitor- ing of the economic state of farming. At pres- ent, this research comprises more than 1000 farms of different sizes, selected from various regions and representing each line of produc- tion. Because of its diversity, this material gives a good basis for examining the develop- ment of both individual farms and the entire scope of agriculture. The farm accounting reports published an- nually (Kirjanpitotilojen tuloksia tilivuosit- tain) give a good picture of mostly full-time family farms, their use of production inputs, yields and costs. The economic performance of agriculture is also described by several criteria. Dozens of researchers use the data from bookkeeping farms, published in the farm ac- counting reports, in their studies every year. The most interesting topics have been the profitability of milk, meat, eggs and plant production, and changes in them for each re- gion and farm size class. These datahave also shed new light on the interrelations between the use of labor and mechanization on each farm, variations in the use of capital and loans, and the interdependences between 505 agriculture and forestry on each farm (Järve- lä 1982, Ikonen 1985). Research on the agricultural economics has also concentrated on studying the farmer’s managerial ability and decision-making, and the flow of information, its reception and adoption. It has been noticed that this type of research needs more and more cooperation with scientists studying man and his behavior (Westermarck, N. 1972). Being engaged in agriculture and forestry, the farmer must make long-term decisions that have a strong effect on economic performance. Such deci- sions include, e.g. operational strategy, the modernization of farm buildings, land pur- chase, forest regeneration and forestation of fields. Their effects extend over two or three generations. The reasoning used to make in- vestment decisions and the weights of the con- tributing factors, in particular, have received attention from an ever-widening circle of agricultural researchers in this decade (Sipi- läinen and Ryynänen 1987). Society and private organizations appropri- ate increasing amounts of funds for research and for adaptation of information. Research on the fruitfulness of this work, measured ac- cording to economic indicators, is in the be- ginning. Pioneering work in this field was made by Sumelius (1987) in his doctoral dis- sertation, in which he concluded that the resources invested in agricultural research and extension services have yielded a fair- ly high percentage of returns, significantly higher than the percentage of returns that could be given by the resources invested in the production itself. Good results, of course, are not achieved by means of research alone. Re- search must be supplemented with highly di- verse information services. Monetary mea- surement of information services, and espe- cially the division of the transfer of informa- tion between systematic extension services and general information (literature, the press, elec- tronic mass media) has proved to be difficult to define. Advances in communications and informationtechnology have opened up a new field of research, one in which agricultural economists must also invest some effort (Westermarck, H. 1987). Conclusions Research on the agricultural economics fo- cuses mainly on finding solutions to practical problems. To some extent, problem-solving research has also involved the production of information about the object of research, i.e. research on the substance. Owing to the scarcity of resources, however, research on the theory and methodology of this discipline has been paid less attention; there have been relied on international results, with which Finnish researchers have become acquainted through various channels, and we have adapt- ed them to the Finnish conditions. Operating on limited resources, this kind of division of research is partly the consequence of prevailing conditions (applied research must yield results) and partly the result of a conscious decision. This procedure, however, has the disadvantage that little pioneering re- search in the field is generated. The theory or methodology of research may lag, and at the same time, researchers’ capacity to do re- search may develop insufficiently. To a great extent, the profound problems now facing agriculture together with issues pertaining to the development of rural areas are economic issues. Economic research and insight concerning development alternatives are needed on both the micro level and the macro level. The knowledge included in the basic university degree is no longer enough for the researcher, who needs a wider perspec- tive and a deeper approach with respect to both theory and methodology. There is, how- ever, a severe lack of such researchers. The great importance of research has been noted in various sectors of society. Demand is now sharply focused on individuals with good researcher education and cooperation skills, and on the things they produce. The econom- ics of agriculture now has great challenges to meet: 506 Researcher education must be deepened and expanded considerably. In the discipline of economics, the num- ber of people given a post-graduate edu- cation must at least be doubled. The level of salaries, both during research- er education and for researchers, should be raised to correspond with the level of salaries earned by those working in busi- ness. In the field of research, more should be invested in quality. Research units should be expanded mark- edly, either by combining units or by hav- ing units work in very close cooperation. References Aaltonen, S. 1982. Maatalouspolitiikan tavoitteista, kei- noista sekä toimenpidevaikutusten analysoinnista. Maatal. tai. tutk. lait. julk. 45: 89—106. Bonnen, J. 1986. A Century of Science in Agriculture. Amer. J. of Agric. Econ. 68: 1065 —1080. Hahtola, K. 1977. Maankäytön ekonomia opetus- ja tutkimusalana. Terra 89: 4, 221 —224. Heikkilä, A-M. 1987. Lypsykarjayritysten optimaalinen koko. Maatal. tai. tutk. lait. lied. 132. 70 s. Heikkilä, T. 1982. Maatalouden aluetuen jakautumisen laskentamalli. Maatal. tai. tutk. lait. julk. 45: 150— 164. Hemilä, K. 1983. Measuring technological change in agriculture. 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