Some Reflections on Agricultural Investment*

The study of the formation and use of capital is to my mind one of the most fascinating fields of economic research.Yet, apart from a long-standing practical concern about rural credit which has been mainly inspired by farmer agitation, the subject of capital formation has, in the past, been one of the most neglected aspects of agricultural economics.Recently, there have been indications of increased interest in this question by overseas workers.Tostlebe's very comprehensive study of capital formation and financing in American agriculture, which appeared late last year under the sponsorship of the National Bureau of Economic Research, is perhaps the most outstanding contribution in this area to date.lThe two latest issues of the International Journal of Agrarian Afluirs have been devoted to a series of comparative studies of problems connected with agricultural capital formation and use in countries at various stages of economic development.Nearer home, an F.A.O.official, Dr. J. P. O'Hagan, has prepared a valuable review of agricultural investment in Australia, a summary of which has recently been published.2My colleagues and I at the University of Sydney have also been engaged on research into various aspects of this problem in recent years.Paralleling this latter-day interest in capital formation in agriculture, there is evidence of renewed activity in the direction of empirical studies of the determinants of capital formation in indu~try.~The thing that impresses me most about these studies of industry is that, with the increasing significance of self-financing in industrial firms, the differences between agriculture and industry so far as investment decisions are concerned do not appear to be as great as we were perhaps earlier led to believe.In this paper I propose to review briefly some of the more significant points which seem to be emerging from recent studies of capital formation in agriculture. The Importance of Capital Investment in Australian AgricultureThe important role of capital investment in the recent development of the Australian rural industries should not need any emphasis.*This paper is based on an address delivered to the N.S.