Schultz’s transformation of traditional agriculture

1. Schultz Transformation of Traditional Agriculture
Vaibhav

2. •1. Some Misconceptions about Traditional
Agriculture
•2. Meaning of Traditional Agriculture
According to Schultz
•3. Characteristics
•4. Schultz’s Suggestions for Transforming
Traditional Agriculture
•5. The Process of Transformation

3. Some Misconceptions about Traditional Agriculture
Schultz dispel some wrong impressions about what a tradition agriculture implies
(a)Traditional agriculture has nothing to do with the traditions of a
society. According to Schultz agriculture can become traditional in
any country, irrespective of the customs and conventions which its
people have generally practiced. Even a forward looking society can
find its agriculture to be traditional in nature.
(b) Traditional agriculture has nothing to do with the institution
arrangement in a country. A country with any type of in situation
arrangements can find its agriculture being traditional. For instance
agriculture in a country can become traditional whether it has large
farms or small farms though generally people feel that traditional
agriculture is associated with small farm Japan’s agriculture is not
traditional even if the farm size is very small

4. Schultz`s thesis of Transforming Traditional Agriculture
•T.W. Schultz suggested ways and means to develop
agriculture.
•His book name is transforming Traditional Agriculture-1964,
suggests various steps for changing a traditional agriculture
into a modern agriculture
•Farming based on the kinds of factor of production that have
been used by farmers four generation are called traditional
agriculture.
•How to transform traditional agriculture, into a highly
productive sector of the economy is the central problem of
the thesis.

5. Meaning of Traditional Agriculture According to Schultz:
• Schultz is of the opinion that when technology in agriculture remains
unchanged for a long time and when people using various inputs under
such a technology have fully known the pros and cons if the use of
these inputs have therefore finally decided their preference for various
inputs, a time may arrive when in general the marginal productivities of
these inputs and their costs have become equal to each other, This is an
equilibrium, In such a case, further investment in these inputs will stop.
Level of these uses will no longer change.
• Further savings (except to keep these inputs at the equilibrium level)
was no longer made. This is a State when agriculture will become
traditional in character. Agriculture will no longer be progressive, It will
be stagnant and will remain so, so long as the art of cultivation and
motives preference to hold various factors of production remain
unchanged.

6. Cont.
• Technical attributes of the factors of production do not determine
the character of agriculture in a country.
• Traditional agriculture is not necessarily a backward, labour
intensive agriculture, using very modern machinery and other
inputs and having and having a very low productivity.
• Traditional agriculture can be capital intensive as well as highly sense
of productive and yet may be traditional in character.
• Even American agriculture can became traditional after some time
if its further development comes to a halt.
• Farmer neither think of introducing new factors of production nor do
the bring any change in the relative importance attached to various
factors being used in production.

7. Main Characteristics
• (A) Allocative Efficiency in Traditional Agricultural:
It is generally felt that resources in a traditional agriculture are
not optimally allocated. Schultz’s definitions that the resource
allocation is perfect in a traditional agriculture. Art of
cultivation remains unchanged (for agriculture to become
traditional) and so are the preferences and motives to hold
various factors of production, When year after year farmer,
under such circumstances, get the same return (under normal
condition), they are bound to adjust their investment in
various factors in such a way limit the marginal productivity of
each factor is finely balanced with its price and this balance
will stay so long as the art of cultivation etc. remains
unchanged.

8. Cont.
Assumption for the State of Perfect Allocation of Resources:
(1) The factors have been used for a long time without any change
(2) No significant activity like construction of road or digging of a canal is
taking place. Such activities will disturb the equilibrium temporarily.
(3) Events like war, partition or recruitment of labour in the army also
disturb the equilibrium temporarily. These are the assumed to be absent.
(4) Relative prices of various factors as well as of agricultural products are
assumed to be constant.
(5) As the state of arts is assumed to be unchanged, the change in the
technology, taking place at any time is ruled out
(6) There are no indivisibilities.
(7) There is a perfect knowledge about the returns to various factors.

9. • (B) The Doctrine of Zero Value Labour:
• Yet another conclusion can be derived form the definition of traditional
agriculture as given by Schultz. It is that in a traditional agriculture, there is no
disguised unemployment or what Schultz calls as zero value labour. We have
already pointed out that in traditional agriculture, as per. Schultz’s views, no
factor of production is involuntarily unemployed
• Schultz specifically uses this implication of Poor but efficient hypothesis to
emphasis that there is no unit of labour that is unemployed in traditional
agriculture either openly or in a disguised manner.
• A labour is disguised unemployed when its marginal productivity is zero. As
Schultz takes the plea that every worker, who is willing to work gets wages for his
work, his marginal productivity can never be equal to zero or there is no zero
value labour in traditional agriculture.
• This is a very important conclusion because economists like Nurkse have pointed
out that there is disguised unemployment in the agriculture sector and that the
disguisedly unemployed labour can be used for capital formation in under
developed countries. Schultz tries to negate this assumption of Nurkse and other
economists.

10. Schultz’s Suggestions for Transforming Traditional Agriculture:
There are three ways of increasing production.
These are to:
•(1) Make use of un-utilised resources
•(2) Optimally reallocate the resources so as to take
the production on to the production frontier
and
•(3) Change the nature of factors namely replace all
or some of the old factor by new ones with higher
output-input ratios.

11. The Process of Transformation:
• A. Supply of New Factors:
• According to Schultz three important steps are involved in the supply of new
factors.
• (1) Research and Development of new factors.
• (2) Distribution of inputs to the cultivators and
• (3) Extension of new knowledge.
• B. Demand for New Factors:
• Supply of new factors is of no use if the farmers do not demand them. Schultz,
therefore analyses the factors which should be kept in view while trying to
ensure that a demand is generated for the inputs.
• Profitability of a factor, according to Schuitz depends upon two factor. These
are (a) the prospective yield and (b) the supply price of the new input.

12. Diagrammatic Representation
Upper part of the figure we measure prices of factor inputs along the
vertical axis and demand for and supply of input along the horizontal
axis.
Lower part return in vertical axis and factor combination along the
horizontal axis.
Im Equilibrium in the traditional agriculture which shows that price of
factor inputs are very high. Demand and supply of factors of
production is very low.
When new and cheap source of income stream are developed in an
agriculture sector. As a result, the demand for and supply of factor of
input tend to rise and returns also increase.
• At the new equilibrium point Hm price of factor input is low i.e.
OP1.
• Demand and supply of factor is OX1
• Return would also increase from OR0 to OR1

13. Critical Evaluation
•1. Too general Concept
•2. Disguised Unemployment
•3. Inefficiency of Factor allocation
•4. Responsiveness of farmer
•5. Command Approach
•6. Self Contradictory