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As the land grows, so does the economy

  • Published at 11:47 pm August 12th, 2017
As the land grows, so does the economy
In what we might think is a quite remarkable achievement, the Bangladesh Agricultural Development Organisation has just managed to increase the amount of land suitable for paddy by some 6 to 11%. This is a bit of a shock for as the old investment advice goes, buy land – they’re not making it any more. It’s also rather more land being created than we worry about being lost to rising sea levels as well, so far at least. The little trick here is to now point out that of course they’ve not created some marvellous machine to make more land, instead they’ve invented a marvellous new trick to gain more production out of the same amount of land. In the economic sense this is, though, the same as having made more land. If we still only want the same amount of rice as we did before we’ve now got 6 to 11% of that land formerly used for paddy now available to do other things. We really have got more land. Arif Khan, inventor of the “Economy-Urea spray technique” is not quite up there with Norman Bourlag as yet – Bourlag is the man who led the Green Revolution starting in the 1940s and 50s. Starting with wheat he was able to breed the modern forms of that grain which feed so many. It is said that there are 1 billion alive today as a result of Bourlag’s work, the connection being that the world simply could not support as many as it does without that Green Revolution. The greater output from the new hybrids creating that “extra land” which enables us all to be fed as the population soars.
The little trick here is to point out that of course they’ve not created some marvellous machine to make more land, instead they’ve invented a marvellous new trick to gain more production out of the same amount of land
Khan’s work though has a certain neatness to it, engenders a certain wonder, even awe. We humans have been growing rice for at least 8,000 years now so it is a surprise to find that such an improvement is possible. We’ve also been using artificial fertilisers such as urea for a century at least. To find a new combination of those two which increases yield by so much is really rather remarkable. The finding being that the fertiliser, the urea, when applied in the normal manner (essentially, just thrown at the plants) isn’t efficiently gathered in. But if it applied as a spray, in a little water, then it can be absorbed not just by the roots but by other areas of the plant. More of the urea around is absorbed, thus less needs to be used and yet output also increases. We have a saving on our input costs and also more rice – and, in that odd manner above, we have more land as a result. All of which brings three different economic points to mind. The first being that those who insist that infinite growth on a finite planet is impossible are wrong. Or perhaps they’re correct at some extreme, like we cannot turn the entire weight of the planet into human beings. But, more normally, we can, and do, increase the supply of things by becoming more economical in their use. Sure, they’re not making land any more but as we can see it’s possible to increase the amount of land we can use for other things by becoming more efficient at what we already do. The second is that, despite my and my colleagues’ reputations as being extreme free marketeers, there really is a place for government. Consider this new technique – now you’ve invented it how are you going to make money out of it? For now we know anyone can use the technology, can’t they? In the technical jargon this is non-excludable and non-rivalrous. We can’t stop someone using the technique, and however much of it anyone uses there’s no less for everyone else. It’s almost impossible to charge someone for using it therefore. OK, would could write a book and charge for that but that’s not going to pay for the years of work that has been done in experimentation. This is what is known, again in the jargon, as a public good. And markets just don’t deal well with them because the difficulty of making money means which private economic actor will make the investments to create things they can’t profit from? Which is one of the things government is for. The private sector does produce some public goods because some humans are just like that. But not as many as we think can be produced, the output of them is below the social optimum. Thus, we devote some part of our income to taxation, out of which government finances public goods production and we’re, in the end, all made better off. Do note that this isn’t an argument in favour of all that government does, it’s only a justification for that collective action to produce what individual economic incentives will not. The third economic point is that this is largely how economic development occurs. There is no magic moment when everything gets better, nor is it true that the technologies we use are complete and not worthy of change. The process is a rather long and hard one, involving a lot of thinking, much tinkering, and often enough that we’re able to improve production methods by 1 or 3 or 6%. Yet, if we keep doing that then we will indeed all get richer. 2% a year improvements in everything doubles our riches in only 35 years, after all. And it is a long and hard road -- it’s taken 8,000 years to work out this specific point about rice growing now, hasn’t it? Congratulations to Mr Khan and let’s hope that he gets more than a handshake and a thank you note out of this. For he has just made us all richer by increasing the output of rice while reducing the input costs. Furthermore, he’s done that remarkable trick of having just made the country of Bangladesh rather larger in land area, in that odd economic sense that is. By my, admittedly very rough, calculation, he’s added land to the size of the Chittagong district, 14 entire upazilas. Finally, that point about limited resources meaning the impossibility of future growth. But do note, as here we actually create natural resources, as with this land, by inventing new technologies.   Tim Worstall is a Senior Fellow at the Adam Smith Institute in London.