Why are Small Farmers in America Not Adopting Big Data and Analytics to Raise their Productivity?
The WSJ has published an interesting piece with hints of Herbert Simon “satisficing” as it tries to explain why small farmers haven’t embraced the Big Data revolution.
Recall that Herbert Simon argued that we have finite time and similar to a chess player playing facing a clock (so 5 minutes for the game), we must optimize while facing thinking constraints.
I have a different explanation for the interesting puzzle pointed out by the WSJ. I posit that general Federal subsidies for agriculture remove the incentive for farmers to optimize with respect to wacky weather. What do I mean? As the probability distribution of extreme heat and drought shifts, a rational investor would take a second look at his old “rules of thumb” to see if he should change his “business as usual”. Which farmers are getting ahead of this wacky weather challenge? Which are sticking with their old patterns of behavior? The anticipating of getting insurance crowds out costly self-protection efforts.
Moral hazard emerges as the farmers know that they implicitly and explicitly insured if bad outcomes occur. So, the key what if here pertains to how the same farmers would act if the Government removed the safety net. Such farmers might also sell their land to a more analytic set of farming experts who have an edge in managing land facing volatile weather.
Recall from human capital theory, that having a skill and using the skill are complements. Nobody would train to become a brain surgeon if you expect to do one operation per decade. If Big Farms expect that they can acquire more farm land from small farms that want to sell, then this increase in scale gives the Big Farms an even greater incentive to invest in the human capital of land management when facing volatile weather.
So, the Federal Government is slowing down farming adaptation through implicit insurance of farmer income. Don’t believe me? Take a look at this paper.
Annan, Francis, and Wolfram Schlenker. "Federal crop insurance and the disincentive to adapt to extreme heat." American Economic Review 105, no. 5 (2015): 262-266.
A modern economy circulating products and services throughout the world doesn’t need money or sovereign countries (national currencies) to be successful. Today, we’ve the scientific knowledge and technological skills to convert our natural and artificial resources into daily life-sustaining deliverables: food, housing, education, healthcare, infrastructure, and employment demands. What we lack is unity, a global framework built upon fair and humane laws and safe and healthy industrial practices. I hypothesize that humanity can end poverty and reduce pollution by abandoning wealth and property rights, and instead adopt and implement an advanced resource management system that can provide “universal protections for all”. Replacing customary political competition altogether, this type of approach, which I named facts-based representation, allows us a better way to govern ourselves and our communities, basing policy and decision making on the latest information, in turn improving the everyday outcomes impacting our personal and professional lives.
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