Agricultural Innovation
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October 23, 2009 Washington DC

October 23, 2009 Washington DC

Accelerating Energy Innovation: Lessons from Multiple Sectors

Rebecca Henderson and Richard Newell

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  • Picture info: Northern Flint (Longfellow, left), Southern Dent (Gourdseed, right), and an example of a Corn Belt Dent (middle) (University of Nebraska-Lincoln, 2004)
  • Speech by Obama:
  • Speech by Obama:
  • Picture: Peter H. Quail of the University of California at Berkeley inspects mutant Arabidopsis plants at the Plant Gene Expression Center in Albany, California. Quail is research director of the center, a joint venture of the university and the USDA . Photo by Jack Dykinga.

Agricultural Innovation Presentation Transcript

  • 1. Agricultural Innovation Brian Wright and Tiffany Shih UC Berkeley, Agriculture and Resource Economics Accelerating Energy Innovation: Lessons from Multiple Sectors Sponsored by the National Bureau of Economic Research Washington, D.C. Oct. 23, 2009
  • 2. Agricultural Innovation: A Context
      • Estimated rates of return to U.S. public investment (1915-1999): 45-60% (Evenson, 2001)
      • Increases in rates of food supply outpaced population and consumption growth,
    leading to better nutrition, longer life expectancies, increased labor productivity Impressive history of achievement through public investments
  • 3.
    • Benefit-cost ratio of U.S. research expenditures:
      • National: 32:1
      • Within-state: 21:1
      • Between-state: 11:1
    • But lag time between
    Agricultural Innovation: A Context Rate of Return on investment in agricultural research is large in the U.S.: 40-60% per annum (Pardey, personal communication ; image from University of Nebraska-Lincoln, Plant and Soil Sciences e-Library: http://plantandsoil.unl.edu/ ) investment and return is about 24 years
  • 4. Agricultural Innovation: A Context
      • Environmental variation shapes research activities
      • Total developing country public investments overtook total developed country public investments for the first time in the 1990s
    Production and consumption of agricultural resources are geographically dispersed, with spillovers
  • 5. Agricultural R&D Expenditures: Uniquely Diverse
  • 6. Agricultural Research Investments
    • Research investments as % of agricultural output value:
      • Devel’d Countries: 2.64
      • Brazil: 1.40
      • China: 0.40
      • India: 0.33
      • All LDCs: 0.50
      • (Pardey, personal communication )
    • China: recent growth in agricultural biotech spending:
      • $17M in 1986 to nearly $200M by 2003
      • (Huang et al , 2002; Huang et al , 2005)
      • Much higher now
  • 7. Agricultural Research Investments
    • U.S. public agricultural research expenditures:
      • 57% on product development, 43% on environment and other
      • Growth in spending down to 1% from 2% between 1915-1990
    • World Bank agricultural lending:
      • Big reverse:
      • $1.5 B in 2002
      • average of $4.6 B/yr between 2006-2008
    Research investment levels and directions tend to fluctuate inversely with food prices Brian, is this statistic what Phil Pardey told you for the U.S.? Or for the world?
  • 8.
    • Consultative Group on International Agricultural Research (CGIAR)
    Investment levels and directions tend to fluctuate with food prices Agricultural Research Investments
      • Trend to shift research focus away from yield enhancement
      • Investments dropped between 1994- 2002, rose after prices rose
  • 9. Agricultural Research Investments Public sector produces basic research that private sector relies upon to do focused applied research (adapted from Huffman and Evenson, 2006) Final users General and pre-invention sciences Innovation products Technology invention Public investment Private investment
  • 10. Intellectual Property (IP) Outcomes
    • Private investment responded to biotech revolution, and IPRs:
      • Amount comparable to public investment currently
      • CAVEAT:
        • Investments mostly on inputs and processing
        • Focuses on a few commercially important crops (corn, soybean, cotton, and canola)
      • Highly efficient in development and delivery of technology packages (e.g. Monsanto’s Roundup Ready)
    Privatizing innovation increases private investment, but does not substitute for public investment
  • 11. Importance of Public Investments “ We also have to strengthen our commitment to research, including basic research , which has been badly neglected for decades. That's always been one of the secrets of America's success… The fact is, though, basic research doesn't always pay off immediately . It may not pay off for years. When it does, the rewards are often broadly shared, That's why the private sector generally under-invests in basic science. That's why the public sector must invest instead . While the risks may be large, so are the rewards for our economy and our society…” September 21, 2009 President Obama, speech at Hudson Valley Community College, Troy, New York
  • 12. Importance of Public Investments
    • “ That's why the public sector must invest instead .”
    • President Obama, September 21, 2009
    • Key question:
      • -Can the public sector still support the necessary persistent commitment , in agriculture or in energy?
  • 13. History of Sustained U.S. Public Agricultural Support
    • Early historical influences
      • Europe, esp. Germany, established role of science in agriculture
      • Prioritization by important U.S. leaders, Washington, Franklin, Jefferson, and Ellsworth
    • Importance of locally adaptive research and large buildup of research capital stock for innovation
      • Institutional innovations: land grant colleges and local research stations with long term committed funding source (federal land grants)
      • Hybrid corn in the U.S.
    • Private interests influence public research funding
  • 14. Conclusions Public investment in agricultural research has had extremely high rates of return, in farm income and cheap food:
    • Future success will require continued sustained investments
    • However, long lag times and high rates of return make this need difficult to for the public to understand
    • Geographic dispersion of activities is appropriate for agriculture
  • 15. Conclusion
    • Leading private firms, motivated by IPRs, are efficient in developing, promoting and disseminating commercial technology packages
    • Has this come at the expense of small-firm entry?
  • 16. Conclusion
    • Need for local adaptive technology motivates global dispersion of research efforts and support
    • Upstream research are still dominated by public institutions and nonprofits
    • High historic rates of return accrued to public ag research in U.S. via sustained federal-state investment oriented by a clear mission
    • Is this still politically possible, in agriculture or energy, or will investment follow the crises?