Cost-benefit analysis of agricultural research: hybrid maize reconsidered

This paper reviews the use of benefit-cost ratio, and the internal or external rate of return for ex post and ex ante assessment of agricultural research projects. The classic data on hybrid maize are used to illustrate unsatisfactory features of these criteria. In the absence of practicable optimization procedures, it is suggested that the net benefits of projects might be quantified, then judgment exercised on patterns of resource usage as well as on social consequences. Present value of net benefits is sensitive to discount rate and to the base year taken for discounting, but an ‘equivalent annual flow’ is a useful alternative form of expression. It is finally pointed out that the rejection of the high rates of return on agricultural research published in many retrospective studies does not weaken the case for investment in agricultural research which has to be determined by national needs. If, in the past, science was pursued for its own sake, nowadays it is being asked whether national expenditure on scientific research can also be justified in economic terms. Agricultural research would seem to be a particularly suitable area for studying this question since it is largely publicly funded, and agricultural benefits tend to accrue to the community as a whole in its capacity as a consumer of food.