Editing Induced innovation (section)

== Induced innovation in agriculture ==

The development of [[agriculture]] is a fundamental part of the world economic growth. Being able to meet the demand of an exponentially growing population can be a challenging task, especially if we consider that one of the most important factors, land, remains fairly fixed.<ref>{{Cite journal |first=Paul R. |last=Ehrlich |first2=John P. |last2=Holdren |title=Impact of Population Growth |journal=[[Science (journal)|Science]] |series=New Series |volume=171 |issue=3977 |year=1971 |pages=1212–1217 |doi=10.1126/science.171.3977.1212 |jstor=1731166 |pmid=5545198 }}</ref>

According to the [[World Bank]] data, less than 38% of the global surface area can be deemed usable for cultivation of crops or permanent pastures.<ref>{{Cite web|title = Agricultural land (% of land area) {{!}} Data {{!}} Graph|url = http://data.worldbank.org/indicator/AG.LND.AGRI.ZS/countries/1W?display=graph|website = data.worldbank.org|access-date = 2015-11-05}}</ref>

Expanding such a number can only be achieved by remediation of soil in a certain area in order to make the land fertile. Such an intervention requires a huge investment that can be amortized only in a long period of time. Therefore, to meet the increasing demand, countries are forced to drastically increase the productivity of the land they dispose.<ref>{{Cite book|title = The Conditions of Agricultural Growth: The Economics of Agrarian Change Under Population Pressure|url = https://books.google.com/books?id=t6dv9ufX9_cC|publisher = Transaction Publishers|date = 2005-01-01|isbn = 9780202307930|first = Ester|last = Boserup}}</ref> This is where induced innovation steps in.

In order to best explain how Hicks’s theory works, consider a situation in which the demand for agricultural derived products increases as a result of either [[population growth]] or increased [[household income]]. Theory states that in such a situation, prices of inputs for which supply is [[Elasticity (economics)|inelastic]] will rise relative to prices of more elastic inputs. Similarly, if the supply of a particular input increases at a
faster rate than the supply of other inputs, the price of such input will decline relative to the price of the other factors of production used. Ideally then, farmers would be looking to replace or use less of the more inelastic and less responsive factors of production since they are the more expensive to use. Therefore, technical innovations that replace such inputs would guarantee less costs and hence more profits. In other words, when demand for their products increases, farmers are lured by changes in relative prices to seek for technological alternatives that substitute the increasingly scarce factors of production.<ref name=":1">{{Cite journal|url = https://conservancy.umn.edu/bitstream/handle/11299/54243/1971-03.pdf?sequence=1|title = Induced Innovation in Agricultural development|last = Hayami|first = Yujiro|date = 1971|journal = Conservancy|access-date = 2015-11-01}}</ref>

Here is where government intervention would be beneficial. Agricultural workers cannot develop these innovations themselves and therefore demand that public research institutions develop new technologies that will then be transformed into modernized machinery that agricultural supply firms can sell to local farmers.  Scientists will now study the best solution to this problem and respond by making the appropriate technical development such that producers can efficiently substitute the abundant inputs for the
increasingly [[Scarcity|scarce factors]]. Ultimately this will lead to a reduction of farmer’s unit costs in the best way.<ref name=":1" />