Young
Evaluating Social Welfare Effects
parallel to PR, E becomes the least cost and the
most socially efficient weed control technique.
The development of the granular herbicide
generates P-P' dollars per hectare of efficiency
benefits, which represents the reduced resource
cost of producing the same output as before. If
the new technique is adopted over X hectares,
the aggregate short-run benefits would sum to
X(P-P') dollars per year, assuming one crop is
harvested per year. In the short run, these gains
will be captured in the form of Schumpeterian
profits by early adopting farms. Over the long run
they will be translated into increased consumer’s
and/or producer’s surpluses.
This procedure for measuring efficiency bene-
fits is fundamentally identical to that utilized by
Schmitz and Seckler in their evaluation of the
social benefits derived from the introduction of the
mechanical harvester in the processing tomato in-
dustry, although they did not explain the process
within the unit isoquant context. It should be rec-
ognized that these measurements may hold valid
only for the short run, because over the long run
the relative social prices of capital and labor could
change greatly. Schmitz and Seckler projected the
cost savings of the mechanical tomato harvester
through infinity, but this could be a risky practice
in a world of rapidly changing factor prices.
What are the distributional losses caused by the
switch in weed control techniques? Following
Schmitz and Seckier’s approach, the direct costs
borne by displaced hired labor can be measured
by the reduction in the earnings of the relevant
labor force after the change. Theoretically, if the
gains received by “winners” from the efficiency-
enhancing new technology were sufficient to com-
pensate the “losers” for their lost earnings, then all
groups could be made at least as well off after as
before the inovation. In reality, however, such
compensation is rarely paid. Returning to figure 1,
total employment in weed control is reduced by
the quantity (b⅛ - Ne) per hectare. Total earnings
in weed control are reduced proportionately under
the short-run assumption of no change in the price
of labor, Pl. The quantity Pjj (Nb - Ne) per
hectare defines the upper bound on labor’s losses.
On the other hand, if 100 percent of the dis-
placed workers find equal-paying jobs elsewhere,
their short-run losses are zero. Most often, labor’s
losses will lie somewhere between these two
extremes.
The preceding measurements are short-run, and
assume certain inflexibilities in wages and labor
mobility to rationalize the existence of any un-
employment. In a depressed area like the Brazilian
Northeast, resulting unemployment could persist
Fig. 1.
К/Ha (Social $)
Fig. 2.
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