States Department of Agriculture (USDA) or the State Agricultural Experiment Stations (SAES)
are responsible for conducting most of the public research in the United States. When the USDA
was established in 1862, the majority of the nation was involved in agriculture and taxpayer
support of agricultural research was popular policy. Since then, the portion of the population
involved in agriculture has decreased significantly, and the support for such policy has decreased
and become more complicated as a result. Public tax dollars still support agricultural research
not only because the knowledge it generates has characteristics of a public good1, but also
because the returns from public investment in agricultural research have been large. Studies have
shown that the past public investment in research has resulted in at least a 35 percent annual rate
of return (USDA/ERS). Despite these high returns, tax dollars for research have become
progressively scarcer and state research stations have increased their reliance on contributions
from the private sector (USDA/ERS). This increasing scarcity of funding presents a paradox: is
the government cutting funding to a successful, cost-effective program or have the estimated
rates of return been overstated?
For the states of Alabama, Florida, Georgia, and South Carolina, this paper addresses the
returns from research in cotton and peanuts as well as the distribution of benefits among
producers and consumers resulting from research dollars invested in cotton and peanuts over a
thirty-three year period. Specifically, the objectives of this paper are:
i) To develop a theoretical framework for the analysis and evaluation of the social
benefits of publicly funded cotton and peanut research in the Southeast as it is
defined in the above paragraph.
1 Benefits produced from certain types of research are not restricted to those producing the research. This is one of
the reasons that “free riders” become a problem where some firms receive some of the benefits of research without
incurring any of the costs (Alston, Norton, and Pardey 1995)