The Nature Of The Farm: Contracts, Risk, And Organization In Agriculture

The Nature of the Farm This page intentionally left blank The Nature of the Farm Contracts, Risk, and Organization in Agriculture Douglas W. Allen and Dean Lueck The MIT Press Cambridge, Massachusetts London, England © 2002 Massachusetts Institute of Technology All rights reserved. No part of this book may be reproduced in any form by any electronic or mechanical means (including photocopying, recording, or information storage and retrieval) without permission in writing from the publisher. This book was set in Times Roman by Windfall Software (using ZzTEX) and was printed and bound in the United States of America. Library of Congress Cataloging-in-Publication Data Allen, Douglas W. The nature of the farm : contracts, risk, and organization in agriculture / Douglas W. Allen and Dean Lueck. p. cm. Includes bibliographical references (p. ). ISBN 0-262-12253-7 (hc. : alk. paper) 1. Farm management. 2. Agriculture—Economic aspects. 3. Sharecropping. 4. Risk management. 5. Contracts, Agricultural. I. Lueck, Dean. II. Title. S561 .A543 2003 640 .68—dc21 2002075125 Contents Preface vii 1 Introduction 1 2 Farming in North America 17 I CONTRACTS AND THE TRANSACTION COST FRAMEWORK 31 3 The Simplicity of Agricultural Contracts 33 4 Choosing between Cropshare and Cash Rent Contracts 49 5 Sharing Inputs and Outputs 69 II RISK SHARING AS AN ALTERNATIVE FRAMEWORK 93 6 Risk Sharing and the Choice of Contract 95 7 Ratchet Effects in Agricultural Cont