This address is directed toward applied economists as they provide information to private and public decision makers. Central to this discussion is the role of markets as institutions in achieving society's desired ends. Current “economic correctness”–the view that unfettered markets are superior in achieving efficiency, growth, and welfare-has attempted to return a larger role to the private sector, but the relative roles of market-oriented versus government-oriented solutions to problems are often not well appraised. Views presented herein calls for agricultural economists to move simultaneously toward an understanding of the strategic behavior of firms in imperfectly competitive markets and toward an adoption of policy analysis consistent with a socially complex and globally integrated economy.

Morale and faculty development are closely related. The agricultural economics profession must decide what it is about. There is room to practice the principle of comparative advantage and allow a degree of specialization in teaching, extension, and research. To continue in the role of an applied discipline, there must also be an opportunity for the young professional to establish rapport with, and understanding of, the private sector and the policy-making arena. If that is to happen, there must be encouragement in the institutional setting and by faculty colleagues who respect the importance of investment in building rapport and in establishing credibility. If that environment is present, morale should be good and faculty development will occur.

The average real salary of agricultural economists has risen approximately 20 percent over the last two decades. Currently agricultural economists' salaries are approximately 6 percent above the average college of agricultural salary and 1 percent above the average of all university faculty. Over the last two decades agricultural economists' salaries have remained among the highest in the college of agriculture and their numbers have risen as a percentage of total agricultural faculty. Conversely our profession, and the college of agriculture in general, has experienced declines in salary levels and faculty numbers relative to average university salaries and total faculty numbers.

Market forces, when viewed from the perspective of faculty salaries alone, clearly indicate that the highest and best use of a faculty member's time and expertise is no longer university employment. As a result, many productive faculty members are becoming increasingly dissatisfied, and many top domestic undergraduate students are eliminating academia as an employment alternative. This trend operates to the long-run detriment of the land grant university system. In part, these forces are a direct result of outdated and/or unimaginative administrative policies, inadequate reward systems, and the inability of the profession to demonstrate its productivity in terms that society understands and appreciates. Implications are drawn for land grant consulting and grantsmanship policy.

The debate over privatizing and water markets has moved back and forth for decades between the “I” and the “We” perspectives. Rather than either/or, a balanced “I&We” view of water institutions is needed. West is meeting east in water law. Public interest needs must be satisfied in appropriate decision forums, but marketing may prove a social improvement when used as a supplement. Balancing an “I&We” institution involves establishing an acceptable or tolerable level of interference through judicious mixing of state, common and private property regimes. Third-party effects are eliminated as mutual gain arises in a variety of decision forums.

Whether or not privatization facilitates rural development depends upon what rural development means. In practice, rural development often is the result of a struggle between rent defenders and rent seekers. A positivist concept of rural development is proposed, and the institutions of public choice are examined to determine how they might influence privatization decisions. The conclusion is that whether or not privatization improves efficiency of adjustment in rural economies depends upon the specifics of political deals required to achieve a particular act of privatization.

Agricultural economists who serve as educators in emerging democracies have the opportunity to contribute to economic development by building human capital. A channel for educators to share lessons learned in these countries could benefit individuals preparing for assignments in foreign countries. Understanding the cultural and social differences in decisionmaking systems is critical to successful educational program development and implementation. Individuals in the emerging democracies often need training in management and market economics to apply at institutional as well as personal levels. Similar training for recipients of economic development funds could result in more effective application of funds.

The United States has for long had the world's premier system of higher education. No other country has anything that comes close to our major research universities (whether they be private or public), and that includes our international competitors, Germany and Japan. Our society expects a lot of our universities, and much more than other countries expect of theirs. For example, we were the only country in the world that turned to our universities (and especially to our land grants) to deliver an important part of our foreign policy in the form of economic and technical assistance to the developing countries.

Major changes affecting Agricultural Economics include: level and sources of funding, increased accountability, a renewed emphasis on teaching, increasing university and college linkages, an evolving student base, and the continuing adoption of educational technology. Major implications include: broader faculty teaching involvement, agribusiness program development, expanding multidisciplinary majors, Ph.D. program modifications for teacher preparation, expanding professional M.S. degrees, graduate program size and specialization reductions, alternative financing of graduate education, and faculty training in teaching methods. Teaching represents a major growth opportunity for Agricultural Economics, but it remains to be seen whether the discipline takes advantage of this opportunity.

Discussion of changes taking place in American agriculture followed by a review of the traditional model of extension suggests there is dissonance between what is needed to inform contemporary agriculture and what extension actually does. The paper further suggests that difficulty in packaging the newly needed information in ways that achieve the institutional maintenance objectives of extension explain a part of the system's decadence and reluctance to change. Since the intellectual problems of market failure, even political market failure, are within the domain of economists, diffidence by agricultural economists to those issues within the Land-Grant system can make a difference.

The political and economic environment in which agricultural research is conducted is changing. The methods of funding research are changing, food markets are international in scope, and the public is demanding greater accountability in higher education. These trends are creating new tensions within the agricultural research system, and the heightening of these tensions requires that a new equilibrium be established between the system's public mission and the competing public demands on the system (Danbom). This new equilibrium will determine the structure and performance of the agricultural research system in the coming decade.

This study analyses the effects of specific agricultural and exchange rate policies on tobacco production in the Dominican Republic. Direct protection resulting from output and input subsidies and taxes was positive on average from 1966 to 1988, but total protection was negative when exchange rate policies are considered. Tobacco policies were quite volatile and resulted in increasing production in the 1970s but decreasing production in the 1980s. Overall, tobacco production was 4.8 percent less than it would have been had there been no policy interventions. Several reasons are provided for the policies.

A capitalization approach is used to estimate econometrically the effects of exchange rate, interest rate and tax law changes on thoroughbred yearling prices. The analysis found that exchange rate and tax law changes have significantly influenced yearling prices since the early 1980s. Another serious price-reducing event was the 1986 tax law change. Both of these factors have counteracted the positive impact of increased purse rates on yearling prices.

The recent availability of Chapter 12 bankruptcy and the more frequent use of lender liability suits by borrowers are factors that may be adversely affecting the supply of agricultural loans. An experiment using hypothetical loan applications was undertaken involving 34 banks in western Arkansas. Responses were used to estimate the impacts of these legal procedures on banks' lending behavior. The estimated models indicate Chapter 12 is not a significant factor in the loan approval process. Lender liability has marginal significance in lowering the probability of granting an intermediate term loan.

Two methodological approaches were applied to estimating the number of non-bearing trees in the absence of such data using data for the Southern USA pecan industry. The first approach distinguished between bearing and non-bearing phases of a tree life and directly estimated the number of non-bearing trees. The second focused on indirect estimating of the non-bearing tree number from changes in production. This approach relaxed the assumption of maintaining maximum yields for infinite period as used in earlier studies. Empirical applications used two data sets from the pecan industry. The comparison of empirical results suggested that the first method was more accurate than the alternative approach in predicting the number of newly planted trees over an extended period of time. Additional data collection will allow for further application of available methodology to the pecan industry.