AN ECONOMIC EVALUATION OF COTTON AND PEANUT RESEARCH IN SOUTHEASTERN UNITED STATES

equilibrium point is then used to calculate the size and distribution of the resulting consumer and
producer surplus.

The economic surplus approach is attractive for many reasons. It is flexible enough to be
applied in different situations with limited data requirements. It is also an effective tool when the
objectives include the measurement of welfare benefits from an induced shift in the supply
curve. Then the distribution of these benefits to consumers and producers is determined without
difficulty.

Duncan and Tisdell (1971) first emphasized the idea that the distribution of welfare
benefits from agricultural research can vary drastically depending on the shape of the supply
function. This suggests there are potential problems with using producer surplus to measure the
benefits of some common types of technical change. These methods may seriously
underestimate the change in profit from a new technology, depending on the characteristics,
which constitute the technology that shapes the supply curve and the kind of technical change
(Martin & Alston, 1994). Martin and Alston concluded that the producer surplus method is
troublesome even in the case of a linear supply curve and a Cobb-Douglas (quadratic) production
function. They find that the profit function is a more reliable resource, provides useful results,
and suggest that it be used instead of producer surplus to measure welfare benefits resulting from
a shift in the supply curve. They also discuss why the type of shift in the supply curve assumed is
important but impossible to prove empirically. Due to the significant difference in total welfare
benefits from a parallel shift in a linear supply curve versus a pivotal shift in the same.
curve, the authors maintain that the shift used in the analysis is crucially important. Specifically,
they point out that producers will lose if the shift is pivotal

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