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By M. J. Stabler (auth.)

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Early production functions yielded results with high residuals, attributable to technical change [152], [157]. Better specification of the functions has led to a reduction in these residual values by including variables increasing the explanatory power of the inputs. Some such variables are changes in machinery size and power, labour skill, farm layout, etc. However, changing specifications over time is merely another way of embodying technical change in the functions. The importance of identifying technical change lies in the precision which can be attained in production and supply functions in accounting for change and making estimations.

This may merely reflect the existence of comparative advantage elsewhere and should not give rise to concern on purely economic grounds, but many factors complicate the situation and indeed can cause agriculture to display what amounts to features of comparative disadvantage where none may have existed before. For example, in the United Kingdom the tax and legal structures have tended to favour the retention of resources in agriculture which have lowered its efficiency. Countries with a comparative advantage often support their agriculture in order to extend their markets further or to overcome trade barriers both natural and artificial.

So far, inferences of an economic nature on this factor are really a function of the methodological framework. Product and factor markets. Economic analysis on uncertainty over price, particularly product prices, has gone little further than being able to identify the determinants of uncertainty and the direction of any movements. Work on market conditions has concentrated on means of controlling the market structure rather than estimating the degree of uncertainty. Such is the unpredictability of many variables that this may well be the best course of action to adopt.

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