1) Agricultural research policy assumptions about funding sources and spillovers may not be accurate, with research requiring more funding than expected from private sources or farmers to reach socially optimal levels. 2) Recent evidence shows returns to agricultural R&D are high but prior estimates overstated rates of return due to attribution and estimation problems. True returns are still very large but more modest than thought. 3) Global agricultural R&D investment has grown but intensity ratios have declined in many developed countries, with less funding directed toward on-farm productivity in places like the US and Australia.

1. Getting Research Policy for Food and Agriculture Right Philip G. Pardey University of Minnesota and University of Adelaide Reframing the Food Agenda: Setting the Scene for Australia Australian Agricultural and Resource Economics Society Conference University of Adelaide, Plant Research Centre, Waite Campus Friday August 19, 2011

2. Agricultural Research Policy Maxims and Perceptions Funding reductions by the public sector will/are being met by increased private funding Agricultural productivity performances have been strong and remain so Agricultural knowhow and technologies readily spillover Strengthened intellectual property rights have/will spur increased spending on agricultural R&D Collective action by farmers will be sufficient to fund agricultural R&D to socially optimal levels Agricultural R&D is fundamentally no different than other forms of R&D

3. Research Policy Instruments Amount and orientation of public funding Conduct (public and private) and priorities for R&D R&D taxation and (production) levy policies Allocation mechanisms (block, matched, competitive -- people vs projects vs institutions) Intellectual property (patents, PBRs, trademarks) policies and practice R&D regulation and trade policies

5. Substantial appropriation problems

6. Heterogeneity (biological production processes characterized by agroecological variation)

7. Very long lags

9. Stylized Representation of the Benefits and Costs of an Agricultural Innovation

10. Meta Evidence on the Returns to Agricultural Research Prior to 2000 (1,819 obs) 1958-2010 (2,229 obs) 40.1 %py Post 2000 (410 obs) 82.1%py 74.4%py Source: Pardey,Xudong, and Hurley (2011) and Alston et al (2000)

11. US Evidence on Rates of Return to Research “Focusing on the contribution of productivity-oriented agricultural research undertaken by the main U.S. public agricultural research institutions—SAESs, VMCs, ARS, and ERS—to agricultural productivity in the 48 contiguous states, including spillover effects to other states in the same geoclimatic region, during 1970–2004, the marginal real rate of return is approximately 50% (Huffman 2010: Huffman and Evenson 2006a,b).” Huffman, Norton and Tweeten (March 2011)

14. Benefit-Cost vs Real Internal Rates of Return, New Evidence Benefit cost ratios seem very big . . . but the implied IRRs are comparatively modest compared with prior estimates, reflecting the very long lags and other modeling details (improvements)

17. Spatial spillovers within and among countries

20. Global Science Spending Landscape, 2000 Total Science Food & Agricultural R&D 2007 OECD Total = $30.7 billion Australian share Public 3.2% Private 1.9% Total 2.6% $782.7 billion $37.8 billion Note: Spending in 2005 prices Source: Pardey and Chan-Kang (2011, beta version) and Dehmer and Pardey (2011)

21. Growth in Food and Agricultural R&D Expenditures “Global” Public Spending OECD Countries Source: Pardey and Chan-Kang (2011, beta version)

22. U.S. Agricultural Research Developments, 1950-2009 Declining Emphasis on Farm Productivity Slowing Growth in Spending Percent per year Percent 3.6 %py 1.8 %py 0.9 %py Source: Pardey and Chan-Kang (2011)

23. Australian Agricultural R&D Spending Growth, 1950-2007 Note: Excludes, fisheries, forestry and environmental research Source: Pardey and Chan-Kang (2011, beta version)

24. Food and Agricultural Research Intensity Ratios Panel a: Public Panel b: Public and Private Source: Pardey and Chan-Kang (2011, beta version)

25. Food and Agricultural Research Intensity Ratios, 1970-2007 16th in 2007 13th in 1990 Australia USA 8th in 1970 New Zealand Source: Pardey and Chan-Kang (2011, beta version)

26. Agricultural R&D Intensities vs Agricultural Area Extent, 2007

27. R&D Intensities- Agric. vs Other Sectors United States Australia Source: Pardey and Chan-Kang (2011, beta version) , NSF (2010), ABS (2011)

28. Food and Agricultural R&D Share in Total R&D Note: Low and middle income group excludes Eastern Europe and countries that were part of the former USSR Source: Pardey and Chan-Kang (2011, beta version)

29. R&D Shares, 1973-2007 (high-income countries) Share of private ag R&D in total ag R&D, 2007 Switz. US Aust. NZ Share of food proc. R&D in private ag R&D, 2007 Aust. US NZ Source: Pardey and Chan-Kang (2011, beta version)