The name is absent

cent for input prices. Finally, Farm B, the
intermediate resource situation, was simulated
in the stochastic mode assuming the differen-
tial rates of inflation.

Table 1 shows the net worth accumulation
and operator’s capital investment of the farms
after 20 years in the deterministic set of simu-
lations. The above average managers typically
accumulated net worths which were 25 percent
or more greater than those of average mana-
gers and the relative differences among
farmers of different managerial abilities were
almost unchanged by inflation. The effect of
inflation on both net worth accumulation and
capital investment depended largely on the
initial resource position assumed.

With no inflation, both average and above
average managers of Farm A, the low resource
farm, purchased 240 acres of land and operated
a total of 480 acres. However, when 3 percent
annual inflation was included in the model,
neither the average nor above average mana-
ger purchased land starting with the resources
of Farm A. The farmers’ assets, beyond their
machinery, were accumulated as cash or bank
deposits which were unaffected by inflation
and therefore the farmers were unable to
acquire sufficient assets for the downpayment
on land which would appreciate with inflation.
With inflation the farmers with low initial re-
sources had debt-free operations, but their net
worth and capital investment were less in real
terms than when no inflation occurred.

The real net worth accumulation of Farm B,
the initial situation of an intermediate quanti-
ty of resources, was not greatly affected by in-

TABLE 1. DETERMINISTICALLY SIMU-
LATED TWENTY YEAR NET
WORTH AND CAPITAL IN-
VESTMENT BY FARMS WITH
VARYING MANAGERIAL
ABILITY, INITIAL RESOURCE
SITUATION AND RATE OF
INFLATION.⁰

Net Worth Accumulation and Total Capital Investment
(Thousands of Dollars)

Average Managerial Ability         Above Average Managerial Ability

3⅞ Inflation                     3⅞ Inflation

Initial No       Current  Deflated        No       Current    Deflated

Situation   Inflation   Dollars Dollars    Inflation    Dollars     Dollars

SW^b    176        175          97          219          227          125

Pam ʌ _{cl     383       175         97         387         227         125}

W     212       399        221         346         605         335

Fam B _{cl    500      676}       374        _{h2        8}76        ₄₈₅

W    493       929        515         622        1203         666

Fam C  _{cl     723      1424        788         813        1408         780}

^aThe 0 and 3 percent rates of inflation are assumed to be
constant and affect all prices and costs equally.

^bNW indicates net worth and CI indicates the operator’s
capital investment.

flation. The average manager accumulated 4
percent greater real net worth with inflation
because of a larger livestock operation. Real
net worth accumulation of the above average
manager was about 3 percent less with infla-
tion because of slower expansion of the farm
business. Inflation did have a major impact on
the operators’ real capital investment. Both
the average and above average managers
owned 400 acres, 80 acres less land than with
no inflation, and their real capital investments
were only about 75 and 80 percent, respective-
ly, as great as with no inflation. In both cases,
although current income and equity increased,
the price of assets also increased and retarded
expansion. For example, with no inflation the
above average manager decided to purchase
80-acre blocks of land in years 3,12,16, and 20,
but with inflation purchases were made in
years 4,16, and 17 only.

The high resource situation, Farm C,
benefited from inflation. The average and
above average managers accumulated 4 and 7
percent, respectively, greater real net worth
with inflation than with no inflation. Inflation
tended to slow the acquisition of additional re-
sources during the first years of the simula-

TABLE 2. MEAN TWENTY YEAR NET
WORTH ACCUMULATIONS,
CAPITAL INVESTMENT, CO-
EFFICIENTS OF VARIATION
AND NUMBER OF EARLY
TERMINATIONS FOR FARM-
ERS OF VARYING MANA-
GERIAL ABILITY, INITIAL
RESOURCE SITUATIONS AND
RATE OF INFLATION⁸

Means and Coefficients of Variation of Twenty Year Net Worth
Accumulations and Capital Investments and Number of Terminations

^aThe 0 and 3 percent rates of inflation are assumed to be
constant and affect all prices and costs equally.

^bNW indicates mean net worth in thousands of dollars, CI
indicates capital investment in thousands of dollars, CV is
the coefficient of variation in percent and term refers to
the number of 25 replications of each situation which
terminated before 20 years of simulation were completed.

<<   <   1   2   3   4   5   6   >   >>