Optimum Resource Allocation in U.S. Agriculture

Elasticities of production for nine input categories in U.S. agriculture were estimated with the assumption that factor shares adjust to the production elasticity with a distributed lag. A Cobb-Douglas production function was formulated from the estimated production elasticities and used to show the economically optimum level and combination of aggregate resources in U.S. agriculture. Adjustment to the least-cost input combination which would produce the actual average 1952–1961 output would have reduced the actual input dollar volume by $1.9 billion, or 5.6 percent. Adjustment of farm resources to an equilibrium level, with all resources earning an opportunity-cost return would have entailed a reduction of 4.2 billion 1947–1949 dollars, or 12.5 percent of the actual input volume. The cost of excess capacity was approximately $2.2 billion or 6.6 percent of the resource volume; the cost of a nonoptimal input mix was $2.0 billion or 5.9 percent of the resource volume. Two-fifths of agricultural labor was estimated to be in excess supply in the 1952–1961 period.