The Nature of the Farm - 9780262122535

The Nature of the Farm is a theoretical and empirical study of contracts andorganization in agriculture based on the transaction cost framework. Transaction costs are importantin agriculture because nature (for example, seasonality, weather, pests) plays such a critical rolein determining output and limiting the ability of farmers to specialize. The book develops specificmodels and tests the implications of those models against data sets from across North Americanagriculture, as well as against historical case studies such as eighteenth-century European landcontracts and the late nineteenth-century Bonanza farms in the United States.The book is organizedin three parts. Part I examines the classic question of what determines the optimal choice betweenfixed rent and cropshare arrangements, concluding that it is determined by a trade-off betweenincentives to overuse rented land and incentives to underreport shared output. Part II tests severalpredictions derived from a standard risk-sharing model of contracts and finds little evidence thatrisk sharing is important in contract choice. Part III extends the transaction costs analysis tobroader organizational issues. It introduces seasonality and timeliness costs as forces influencingthe gains from specialization and the costs of contracting, and finds that farm ownership and farmorganization are routinely shaped by these forces.