Ariel Ortiz-Bobea on the need for increasing public investment in agricultural R&D

Climate change and flagging investment in research and development has U.S. agriculture facing its first productivity slowdown in decades. Ariel Ortiz-Bobea, associate professor in the Charles H. Dyson School of Applied Economics and Management at Cornell University, explains what is needed to reverse course: a level of public R&D spending growth that hasn’t been seen in the U.S. since the years following World War I and World War II.

Transcript

David Nutt  00:05

Welcome to the Cornell Chronicle podcast, where we speak with the people behind our latest headlines about how they came to make their discoveries and what their discoveries mean for the world. Today we're talking with Ariel Ortiz-Bobea, associate professor in the Charles H. Dyson School of Applied Economics and Management, whose research interests range from agricultural economics to how humans adapt to environmental change. In a new paper, he examines the need for increased public investment in agricultural research and development to offset the emerging impacts of climate change. The numbers are pretty stark. The current public sector investment in ag R&D is annually about 5 billion from 1970 to 2000 that spending grew only 0.5% per year before stagnating over the last couple decades. Over the next 25 years, Ortiz-Bobea’s study shows, the U.S. needs to grow that R&D spending at least 10 fold to between 5 to 8% per year to maintain our current agricultural productivity in the face of climate change. That level of public R&D spending growth hasn't been seen in the U.S. since the years following World War I and World War II. Ariel, in a nutshell, why do we need this kind of investment? Why is supporting ag productivity so important?

Ariel Ortiz-Bobea  01:23

Thanks for having me. So, agricultural productivity in the U.S. has been growing for about like 2% a year for a long time, and we've seen over the past decade the first slowdown in U.S. agricultural productivity. And when you think about, how do we produce food and the inputs that go in – land, chemicals, labor  – maintaining productivity growth is essential, so that we can maintain lower prices of food. So the more productive you are, the fewer inputs you can use for production, and so that allows global prices to stay lower than they would be otherwise. The slowdown that we've seen in the U.S., we also start to see it at the global scale, which is concerning, because if you have slower productivity growth with a rising population, rising incomes, what that means is that it's a matter of time that prices start to go up, right? So that's obviously not in anyone's wish list that we have more expensive food. So that's one of the critical reasons why we need to maintain productivity growth so as to not to need to put more inputs into production, like land, which means deforestation or more chemicals, which might mean water pollution, for instance.

David Nutt  02:45

And this slowdown, is that a result of climate change? Or is climate change just compounding an already existing problem?

Ariel Ortiz-Bobea  02:53

I think it's compounding an already existing problem. We had a study, a global study, a few years back, where we tried to answer that question on the climate side: how much anthropogenic climate change has already affected global agricultural productivity, and we find there's a fairly clear signal at a global scale. When you start zooming in and you start looking at countries, the picture is a little bit more mixed, right? So the data is things get more noisy as you zoom in. In the U.S. context, in this study that just came out, we think that it’s the latter. So the R&D spending, so what really drives changes in the technology is the research that goes behind it, and that ends up leading to more productive farmers over time, and what we've seen is that that is likely the main driver of that recent stagnation. So that's not new. In some ways, there's been decades of research showing the returns of agricultural R&D on higher productivity in the U.S., and so what we're seeing recently is just the consequences of that stagnating investment in R&D and a flattening out or slow down of productivity growth in the U.S.

David Nutt  04:09

And when we talk about agricultural R&D, generally, what kind of research are we talking about? What's the range?

Ariel Ortiz-Bobea  04:16

So in terms of numbers, we're talking about 5 billion a year, and that's both federal and state funding going to agricultural universities, research stations across the nation. And that can be all sorts of – a lot of it say happens here at Cornell in the experimental station. So from breeding new types of grapes to developing new techniques to monitor fields. There's all sorts of things happening at land-grant universities and other universities across the nation.

David Nutt  04:49

And what's the difference between public and private R&D? You know, why not let private companies handle this?

Ariel Ortiz-Bobea  04:56

So that's a good question, and people always raise that. Yeah, so I would say that the private and public R&D are essentially complementary in nature. They focus on generally different things. Private R&D tends to focus more on inputs, on technologies that are embodied directly in the inputs. Think about like an improved seed or a chemical that farmers have to buy. On the public side, these technologies tend to be more what economists refer to as disembodied. So things are not necessarily embodied in the inputs. So think about improved management practices, although some of that R&D that is in the public sector also is embodied in inputs like new varieties and things like that, but they're essentially fairly different in nature. And I would say that for farmers, increasing productivity in a way that just makes their management more efficient overall leads to greater profitability, right? Whereas private R&D, some of those profits are directly captured by the innovators. So that's really kind of a fundamental difference between the two types of research and development.

David Nutt  06:13

And how urgent is all of this? You know, what's the risk in delaying investment in agricultural R&D?

Ariel Ortiz-Bobea  06:19

So in our study, before even talking about R&D, so one of the pieces of the study is trying to highlight how big, or quantify how big is the headwind that climate change presents for U.S. agriculture. You can think about it as you know you're riding your bike and you have a headwind in front of you, you have to pedal harder in order to stay at the same speed, right? So that's essentially the nature of the analysis we're conducting. So we needed to first quantify that slowdown. And so depending on the scenario that we're looking at sort of a 10% lower productivity by 2050, and so if you're going more slowly, means that you'll have to use more inputs to compensate for that loss, right? So the idea was to quantify how much do you need to fuel, right? So like, how high of a gear do you need to put on your bike to offset the slowdown from that headwind that climate change poses? And what we found is that it's equivalent to a 5 to 8% annual growth in R&D spending to generate the knowledge stock that would allow U.S. agriculture to be more productive and offset sort of the slowdown that climate change is posing in the coming decades. 

David Nutt  07:51

Speaking of headwinds, this paper is sort of coming out at a time where there's all sorts of threats to scientific funding. There's USDA staff cuts, and there's government pushback against climate change research. What does that mean?

Ariel Ortiz-Bobea  08:09

Well, it means that, relative to a counterfactual world where this didn't happen, it means that U.S. farmers are going to be less productive in the future, right? So you're talking about bikes, is like putting directly a stick in your wheels, right? You're really kneecapping the research sector. If these cuts continue to unfold the way they appear to be unfolding, and R&D has been stagnating for decades. So this is not a new problem. This is going on since the ’70s where the amount of research funding has not gone up in real terms. I think the general public should understand that, or the farming community directly understand that in order to be more productive, you need to have agricultural research. Productivity just doesn't fall from the sky, right? The techniques and the ways of producing that farmers employ in their field are not things that they come up with. These are things that are developed in experimental fields, in labs and universities, also in private companies, outside, sort of in the upstream to where the production occurs. And it takes time for those ideas and those new technologies to find their way to the field, and that takes decades. That can be a slow process. And what that means, the consequence of that is that when you stop funding agricultural research, you start seeing the results much later, right? But you will see it later, right? It's just that. It just, it just takes time for those things to manifest themselves, and this is being widely researched over multiple decades. And that's really the consequence. Is that what we're going to see is just a slowdown. We'll see what happens. I think that at times like this, I like to think in the long term and hope that stakeholders, people who are affected by this, and I'm talking about directly, farming groups and the farming community, broadly speaking, realizes that less agricultural research means less productivity. And in a world, say, where prices might be going down or we're in a more tricky environment geopolitically, you want to be able to produce. You want to be productive. And the idea that in order to sustain farm income, you'll have to rely on handouts from the federal government to sustain farm income, I think that's probably not kind of the most financially fiscal, responsible thing to do or to plan for the future, but we might, we might end up in having to go for that type of support more frequently in the future, if farmers themselves are not more productive, right? So it's a, you can think about it as a trade off. You farm income can go up when farmers are more productive, or just because you're handing them money, and people have to decide what kind of farming sector they want. Do you want to be simply complementing farmers? And farmers are simply farming, but they're not becoming more productive every year, and you have with falling prices, you have to start supporting them more than they are already are, or you want them to fend from themselves by being more productive and being able to produce more with less.

David Nutt  11:43

And for the sort of the non-farmer, you know, the average taxpayer who's a little skeptical, you know, how do you convince them that this is something that is worthy of their tax dollars?

Ariel Ortiz-Bobea  11:54

There's multiple things right. A lot of, increasingly, R&D is… I would say, private R&D nowadays is a bigger portion of the total R&D, right? So that's one point. So it's not like all agricultural R&D is public. That's not the case. So the case for the public sector getting involved here is just multiple reasons for that, and they go beyond the scope of the study, but I would point at at least a couple. The first one is that land-grant universities, right, have a very important historical role to maintain vibrant rural areas, right? So this goes back to the founding of the Department of Agriculture. You know, Lincoln called it the people's department, so this idea of having the public sector involved in conducting research and helping farmers become more productive dates back to those times in the 1860s so that's one thing, so that there's a deep history for why the you know, land-grant universities exist and their role. That is changing, right? In some ways, they’ve become more global. There's global challenges that scientists based in the U.S. are responding to as well, right? So research happening here can have benefits elsewhere in the world as well. One thing about public goods, so one fundamental role of the government is to provide public goods that would not otherwise be supplied by the private sector. So when you think about, say, water quality in the U.S. or biodiversity in landscapes that we enjoy so much when we travel and we watch movies with all those farming landscapes, the benefits of that are things that are not reflected in the market prices of food products. When you think about cleaner water coming from streams from farms, or having more birds or more insects and bugs in fields, that's not reflected in the price of food products, right? So these are, you know, economists call them public goods. So these are things that have public benefits, that you cannot exclude people from benefiting from. Think about it: if you were to voluntarily, say, increase water quality at a cost to you, it benefits other people, but why would you do it if it's just at a private cost to you? So this is where there's a role for these type of goods, and I would say that increasing agricultural productivity eases off the pressure that agriculture has on natural resources, and that's a public benefit, not only for U.S. citizens, but also globally, by reducing emissions, improving water quality and improving and safeguarding biodiversity. 

David Nutt  14:57

So you sort of, you've made the point in the paper that increasing the level of R&D investment, this is not something that hasn't happened before, that investment at this scale occurred following World War I and World War II. Why was it? Why was there such a movement at that time?

Ariel Ortiz-Bobea  15:15

Yeah, so generally, after, for good or bad reasons, there's lots of things happening after wars. There's a lot of spillovers from other sectors, and there's always a sense of renewal or refocus after big events like that, and that was the case. So early 20th century, some major boost in public R&D funding that were connected to some different acts that were passed that really boosted, for instance, the extension services in the U.S. And then we got into an era of where more crop breeding happened after the second World War. So these were major waves that in terms of ways of doing research that were revolutionized right after these two big events, and some of the levels of funding that we saw over those periods, we saw much bigger increases in R&D spending during those decades, and that's something that we haven't seen in the past five decades, since the ’70s. And what we quantify in the study is precisely – to put this in a framework – is that the level of the headwind that climate change presents to U.S. agriculture is in the order of magnitude. So to offset that is the growth in spending in R&D, in investment in R&D has to be at the same order of magnitude, not in levels, but in relative terms, in growth rates relative to those periods after the war. So it's like recovering from a war. That's the level of of investment and commitment that would be required to just offset the headwind that is starting to materialize.

David Nutt  17:07

So since there is a bit of a precedent here, does that make you hopeful? How do you how do you feel about all this? 

Ariel Ortiz-Bobea  17:14

This is one of those things where, you know, there's so many, there's a lot of studies quantifying, you know, how bad climate change is and we… I would say, that there's relatively fewer studies talking about the solutions and quantifying the solutions and figuring out what are the sort of the knobs that we can turn to respond to that problem. So familiar knobs. One familiar knob is the R&D investment. So that's a very well known dial that policy makers have control over. Congress has the control over that when we're thinking about the study we wanted to see well, do something that is not defeatist. Well, you know, how, how big is the climate change headwind? We wanted to think about the other side. Okay, so what can we do about it? This is not necessarily what we should do about it exactly, right, in terms of because R&D can be changing, and where we're using our historical returns to R&D to project them into the future, right? The returns to R&D could change, right? There's changes in the technology that could alter that. So it's not that we're going to conduct the same thing that we did in previous decades. Research keeps expanding the frontier of knowledge. But the encouraging thing was that, huh, we've seen this before, like it's the level of investment that we are seeing, it's a departure from what we've seen in in the past five decades. So it's not that we're fine, we're not fine in that sense, but it's not insurmountable, and I think that's very important to communicate, but it does require a reckoning that we understand the moment we're in and that it takes time for that effort to put agriculture in the U.S. in a higher gear. It takes time for that to happen, but you need to double down on research if you want to be able to compensate or offset at least some of the headwinds that are coming in U.S. agriculture's way.

David Nutt  19:38

Finally, I want to ask about your sort of evolution. Your research sits at a really interesting intersection between economics, public policy, agriculture, sustainability. How did you get here?

Ariel Ortiz-Bobea  19:51

How much time do we have? So let me start with the agricultural piece. I think something that helped a lot was being the son of two agronomists, having a relationship with agricultural production from a very early age really was extremely influential in everything I did, you know, as an adult. So while kids were, you know, talking about, yeah, ‘I want to be a police,’ you know, ‘policeman, a firefighter, an astronaut,’ I remember answering, ‘I want to be an agronomist.’ And people were puzzled. What is an agronomist? And had to explain to them what it was. And I actually became an agronomist. So my initial training is in agronomy, so I'm an agronomist by training, and I started studying biology and math. So my economic background and training came later in my academic training. And the reason I started to think about economics more seriously, I think it was during… So after I became an agronomist, one of the things that I started realizing is that I wanted to understand… in order to fix problems in the world, I needed to understand how government worked. And I got more training. I got a master's in public administration, and I was in my phase where I was going to save the world directly with my own hands and ended up working in government in my home country, in the Dominican Republic. And I worked with the minister of the environment, directly with the minister, I was special assistant to the minister of environment. This is where a lot of the environmental issues related to agriculture, not only agriculture and tourism, and all the intersections and things that how intertwined the environment and natural resources are to development, I find it fascinating. And as I was realizing that I couldn't change the world on my own, with my own hands, I started to think, well, maybe I have to think about, how do I write about problems, and how do I propose solutions without necessarily being the person who is implementing those solutions? And I thought economics was a very powerful framework to start thinking about problems, the trade offs that we make in society, how individuals behave in markets, whether something should be, you know, financed or not, sort of those trade offs, and how we think about them was, I think it's something that, I think it was very important for proposing solutions, or thinking about solutions to very important problems in the world today, and that's why I started to my training in economics. So it came later in life, and then I started working on climate change and agriculture, and how climate change is affecting agriculture and what to do about it. So it was a combination of a very, I would say, sometimes kind of torturous pathway that I took, kind of discovering the things that I felt were important and how to get training to start to contribute to the problems that I was seeing and here I am as a professor at a university. I actually never thought I would be a professor. I never planned to be a professor. And I probably, I thought I was probably going to be a bureaucrat at the World Bank or, you know, something like that. And when I started doing research during my, you know, my dissertation years, I found it so, so fascinating. I felt, ‘Oh, my God, I can do this for a living.’ I would never get bored. I could always think about a question. Wake up one day, think that’s an important, interesting problem. Let me try to understand it better, wrestle with that question for months, years. Even if you don't find the answer to every question you can strive to kind of shed a little bit more light on those problems and I thought, well, you know, if I want to do this every day and work with young people who want to do the same, then the university is the place for me. And so I've been, you know, fish in a pond since I came to Cornell 10 years ago.

David Nutt  24:37

I can't think of a better note to end on. Thanks for taking the time to talk with us today.

Ariel Ortiz-Bobea  24:42

Yeah, thanks. Thanks for having me.