5. The Effectiveness of Extension
Agriculture has been the mainstay of the New Zealand economy for most of the 20th century. In the 1960s and 1970s, it was accounting for 80% of mercantile export earnings. While still of major importance, its relative position has recently declined to around 56% of mercantile export earnings. Prior to restructuring, it was generally felt by policy makers that agricultural research and extension were public goods which the government should provide. In this context, the definition of ‘public good’ was possibly wider in scope than that given below; the material benefit to the nation from agricultural exports was such that government continued to allocate state funds to support agriculture via research, extension and farm credit. Considerable private benefit accrued to the farmers, but it was still felt that state funding could be justified. While an extension service provides a mixture of both public and private goods, and the boundary between the two is difficult to define, government decided in 1985 that the results of extension were wholly appropriable (given the background of government policy for deregulation and reform) and decided to set in train the privatisation of the Advisory Services Division.
A public good is one for which consumption by one individual does not prevent consumption by another. Knowledge, information and improved management practices are public goods because they can be transmitted from one individual to another without diminishing benefits to either. In pure form, a public good is non-excludable in the sense that no practical rationing mechanism exists by which consumption is controlled by price. Non-paying individuals are not able to be excluded from the benefits derived from the good. A private firm is discouraged from developing a market for a product that can be easily shared. In this situation, the benefits of such a product cannot be appropriated and therefore, profit incentives do not induce private development, even though social benefits may be high (Just and Rausser 1993). There is a continuum between public and private goods, with few pure public goods; many of the results of publicly funded research would lie somewhere in the middle of this continuum.
Evaluations: No formal evaluation has been carried out as to the effectiveness of the overall programme of Advisory Services Division. There have been a number of evaluations of particular advisory efforts, which gave internal rates of return of anything from 16% to well over 100% (Squire and Hughes, 1973; Dawson and Smith, 1979; Smith et al, 1979; Mace and Peterson, 1979; Armstrong, 1980). A study in 1986 (Scobie and Eveleens, 1987) showed a rate of return of 30% to the nation from publicly funded agricultural research in New Zealand from 1926 to 1984. Recent United States Department of Agriculture (USDA) work (Fuglie et al, 1996) has shown a similar figure of 35% for US research work. Further work was undertaken in 1991 in New Zealand (Scrimgeour et al, 1991) to try and determine the rate of return to the nation from the publicly funded Advisory Services Division. This work could not differentiate between the rate of return from research and that from extension, and concluded that the 30% figure derived by Scobie and Eveleens was inclusive of both research and extension. United States work on the rate of return to extension has shown wide variability, from 20-110% (Fuglie et al, 1996).
In terms of the scope of public good provision in the agricultural sector, Scrimgeour et al (1991) concluded that the government requires some form of extension service to achieve its goals in rural communities, to obtain the information it needs from the agricultural sector, and to facilitate the implementation of government policy. However, these authors saw no reason for government to be involved in providing agricultural consultancy services. There is a wide range of services provided by a government extension agency which do meet the definition of public goods (Table 1). But it is also characteristic that some services are a mixture of appropriable and non-appropriable components that are difficult to separate. Withdrawal of government support leads to a loss of some of the original service as a result. In general the privatisation of extension services in New Zealand has resulted in a decline in the total quantum of services provided except where contractual arrangements could be established.
Table 1 : The Funding and Nature of Historical Extension Activities
| Activity | Funding | Nature of Activity | ||
| Govt | Private | Public Good* | Private Good* | |
| One to One Advice | * | * | * | |
| Field Days | * | * | * | * |
| Discussion Groups | * | * | * | * |
| Trials | * | * | * | * |
| Surveys | * | * | ||
| Training | * | * | ||
| Information Leaflets | * | * | * | |
| Demonstrations | * | * | * | * |
| Radio Talks | * | * | ||
| Journal of Agriculture | * | * | ||
| Media Articles | * | * | * | |
| Seed Certification | * | * | ||
| Health Certification | * | * | ||
| Rural Sociology | * | * | ||
| Policy Advice | * | * | ||
| Cost Benefit Analysis | * | * | * | |
Most of the activities shown would have both public and private good attributes. The * indicate where the activity could be classified. Both columns ticked indicate that the activity is intermediate on the public/private good continuum.
Notes: Most of the private funding would be agri-business firms funding trials and subsequent field-days and demonstrations. Few private consultants worked outside of the one to one advice, field days, and discussion group arenas.
Contact for Enquiries
Rural Affairs Coordinator
Sector Performance Policy
MAF Policy
Ministry of Agriculture and Forestry
PO Box 2526
Wellington
NEW ZEALAND
Phone: +64 4 894 0675
Fax: +64 4 4 894 0745
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