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Managerial concepts for agriculturalists

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Managerial concepts for agriculturalists
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Bulletin - Kentucky Agricultural Experiment Station - 619
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Johnson, Glenn Leroy
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Farming ( LCSH )
Agriculture ( LCSH )
Farm life ( LCSH )

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Bulletin 619 July, 1954
Managerial Concepts
f or Agriculturalists
Their Development, Present Status, Importance,
Shortcomings, and Usefulness
By Glenn L. Johnson
OF
1878 M
Kentucky Agricultural Experiment Station
University of Kentucky Lexington




CONTENTS
Page
THE DEVELOPMENT OF MANAGERIAL CONCEPTS ...................................... 5
MANAGERIAL CONCEPTS OF GENERAL ECONOMISTS ........................ 5
The Theory of Knowledge and Management .................................... 7
Three of M anagem ent's Tasks ........................................................ 8
Different Degrees of Knowledge Held by Managers ........................ 8
Distinction Vague Between Knight's Risk and Uncertainty Concepts 9
Knight's Uncertainty Concept Covered Three Sub-Concepts ............ 9
Statisticians Distinguish Two Kinds of Errors in Making Choices Betw een Tw o A lternatives .......................................................... 10
Five Different Degrees of Knowledge are Held by Managers ............ 11
Flexibility is Important When Learning is Possible .......................... 11
Five Tasks of M anagem ent .............................................................. 12
The Relationship Between Profits and Management ........................ 12
Study of Managers' Adjustments to Imperfect Knowledge Indicates
the Importance of Subjective Considerations in Management .... 13
Distinction Between Managing and Laboring is Difficult to Grasp .... 13
In Theory the Distinction Between the Business and Home is Becomin g In d istin ct .......................................................................... 14
Managerial Principles and Generalizations Having to Do with Learnin g .......................................................................................... 1 5
Economic Theory Contributes Important Insurance and Chance Takin g C o n cepts .......................................................................... 16
Strategy is Important in Managerial Theory .................................... 17
Strategies, Principles and Courses of Action .................................... 18
Principles of Use in Deciding How Much Chance to Take ................ 19
Insurance P rincip les ................................................................ 20
The Long Chance Principles .................................................... 21
Som e Other Strategy Principles ................................................ 21
Some Psychological Patterns Concerning the Value of Gains and
L o sses .................................................................................... 2 1
MANAGERIAL CONCEPTS OF FARM MANAGEMENT WORKERS .......... 22
Five Kinds of Problems Which Farm Managers Face ........................ 24
Impact of Managerial Theory on Agricultural Economics .................. 24
THE TESTING OF EXISTING MANAGERIAL CONCEPTS ................................ 26
C A SE ST U D Y RESU LT S .......................................................................... 26
C ase Study Farm er N o. 1 .... ........................................................... 27
C ase Study Farm er N o. 2 ................................................................ 29
C ase Study Farm er N o. 3 ................................................................ 32
C ase Study Farm er N o. 4 ................................................................ 34
T H E SU RV EY RESU LT S .......................................................................... 36
The Empirical Importance of the Five Subject Matter Areas ............ 37
Sources of Inform ation .................................................................... 38
The Importance of Subjective Uncertainty Including the Risk, Learning, Forced Action and Inaction Situations .............................. 40
G eneral Learning M ethods .............................................................. 42
Devices Used to Protect Against Unfavorable Outcomes .................... 43
T he U se of Strategy ........................................................................ 4 3
SUMMARY, CONCLUSIONS AND IMPLICATIONS ........................................ 45
Implications for Farm Management Researchers .............................. 48
Im plications for Extension W orkers ................................................ 48
Implications for Farm Management Teachers .................................. 49
Im plications for Farm ers .................................................................. 50




Managerial Concepts for
Agricultural ists-Their Development,
Present Status, Importance, Shortcomings and Usefulness
Glenn L. Johnson'
Department of Agricultural Economics
This bulletin has three sections: (1) a history of the development of managerial principles and concepts leading to tentative statements of modern managerial principles and concepts; (2) a presentation of case-study information and survey data gathered to serve as a basis for sorting the most useful from the less useful concepts; and (3) a summary statement containing conclusions as to the usefulness of the concepts to farmers, teachers, extension workers and researchers as well as their implications for these same workers.
The research reported herein was prompted by the rapid development of managerial concepts and the need to sort these concepts to determine which are useful to agriculturalists-farmers, teachers, extension workers, and researchers. Farmers comprise the largest single body of competitive managers in the United States. There are over 5 million managers of independent competitive farm businesses to justify a special interest on the part of agriculturalists in managerial concepts.
The first step in the procedure followed was one of reviewing the literature and consulting with professional farm management workers and economists. The object in carrying out these activities was twofold: (1) to trace out the historical development of managerial principles and concepts as a means of acquiring perspective and understanding, and (2) to assemble an inventory of existing managerial concepts. Following this step, an attempt was made to integrate and expand the existing managerial concepts and principles, particularly useful to agriculturalists.2
1 While many people have contributed ideas presented herein, the author alone is responsible for selection and acceptance. Contributors include D. Gale Johnson and T. W. Schultz formerr professors of the author), Cecil Haver, Lawrence Bradford, Burl Back, Ernest Nesius, Robert Rudd, George Byers, and many farmers and students.
2 At this stage in the work, Ky. Exp. Sta. Bul. 593, entitled "Decision-Making Principles in Farm Management," was prepared in collaboration with C. B. Haver, North Dakota Agricultural Experiment Station and published in cooperation with the North Central States Farm Management Research Committee,
3




4 I3ULLrETIN No. 619 [Uill,
The assembly, integration, and expansion of managerial principles, however, was not enough if their usefulness to farmers, teachers, extension workers, and researchers was to be clearly ascertained. The concepts had to be compared with reality as a basis for sorting the relevant from the irrelevant-the potentially useful from the less usefl. This was done by studying the case histories of selected farmers and by making surveys of the managerial activities of thirty-one farmers in Montgomery County, Kentucky.




1954] MANAGIERIAL CONCEPTS FoR AG-RICULTURALISTS 5
THE DEVELOPMENT
OF MANAGERIAL CONCEPTS
This section contains a history of the development of managerial concepts, and statements of those managerial concepts and principles now appearing to be useful to agriculturalists.
Present-day farm management concepts stem from two lines of thinking. One of these lines follows the general economists-Marshall, Mill, Smith, and others-back into antiquity. The other line is based upon the work mainly of farm management workers of the land grant colleges with an occasional use of concepts from the general economists or reference to some early Creek or Roman writer mentioning the problems of farming and land ownership. The most striking characteristic of both lines of thought is their bareness, until recently, so far as managerial concepts and principles are concerned.
MANAGERIAL CONCEPTS OF GENERAL ECONOMISTS
The early general economists rarely considered managerial concepts as such. Their considerations of management tended to develop out of attempts to explain the existence of profits. From time to time writers would refer to profits as payment for risk bearing, supervision, and administration. Thus, Adam Smith recognized risk bearing when he wrote that "the lowest ordinary rate of profit must always be something more than what is sufficient to compensate the occasional losses to which every employment of stock is exposed. It is this surplus only which is . . clear profit."' Smith recognized that profits as defined included wages for supervision and, in many instances, skill.
John S. Mill noted that profit included payment for risk bearing and for skill in "the control of operations." He wrote, "To exercise this control with efficiency, if the concern is large and complicated, requres great assiduity, and often, no ordinary skill. This assiduity and skill must be remunerated ."2 But this is about as far as he wenthis writings are not specific about the nature of this skill, what it does, how it earns or produces anything of value, how it can be increased, and so on. Yet this skill appears to be the very core of what
' Adam Smith, The Wealth of Nations, Random House, Inc., New York, 1937, p. 96.
1 "John S. Mill, Principles of Political Economy, Bk. 2, Chap. 15, Sect. 1, as reported by Edmund Whittaker, A History of Economic Ideas, Longmans, Green and Co., New York, 1940, p. 406.




6 BULLETIN No. 619 [July,
should be taught, developed, and learned about when we teach or do research on farm management. And, this skill must be the very thing sought after by a farmer striving to become a good manager.
Another early economist, J. B. Say, came somewhat nearer to serving the needs of modern agriculturalists. He conceived of a masteragent having the reputation of intelligence, prudence, probity and regularity, and he wrote that "this kind of labor requires a combination of moral qualities . .judgment, perseverance, and a knowledge of the world, as well as of business." The master-agent "is called upon to estimate, with tolerable accuracy, the importance of a specific product, the probable amount of the demand, and the means (method) of production." Likewise the niaster-agent "profits by the knowledge and by the ignorance of other people and by every accidental advantage of production."' Say did better than Mill and Smith but still failed to provide a systematic presentation of managerial concepts and principles for use in learning, teaching, and studying management.
As subsequent economists refined economic theory, they became less and less concerned with management. Refinement was easier when the changes and fluctuations of the real world were assumed away. It was easier to envision high profit combinations of inputs, cost relationships, demand curves, supply curves, and such, when bothersome changes and fluctuations were assumed away and all persons in the economy were assumed to have perfect knowledge of existing conditions and changes. Under such assumed conditions, there would be little need for management-nor would profits persist as the perfectly informed members of the economy would eliminate one another's profits. Among these economists was Alfred Marshall who, while not having a specific theory of management, hit upon many relevant points in his discussion of profits in business ability. For instance, he wrote". ..business power is highly non-specialized, because in the large majority of trades, technical knowledge and skill become every day less important relatively to the broad and. nonspecialized faculties of judgment, promptness, resource, carefulness and steadfastness of purpose."2 Other pertinent points made by Marshall included the idea that interest rates often partially cover the earnings of management and payment for risk bearing, that risk is related to managerial earnings and managerial earnings to rare nat7
' J. B. Say, A Treatise on Political Economy, Bk. 2, Ch. 7, as~reported by Edmund Whittaker, A History of Economic Ideas, Longmnans, Green and Co., Neyw YorkI 1940, pp. 616-17.
' Alfred Marshall, Principles of Economics, Macmillan and Co., Ltd,,, 1936, p. 606.




1954] MANAGERIAL CONCEPTS FOR AGRicULTURALISTS 7
ural abilities, and that supply and demand schedules exist for managerial services ."
Knight Isolated the Relationships Among Change, Imperfect Knowledge, and Management
Knight,2 writing later, argued that the existence of change accounts for imperfect knowledge and that, in turn, the existence of imperfect knowledge explains the need for management. Thus, a theory giving management something productive to do was evolved. Knight then turned to a consideration of choice making and in so doing began to consider the problems of management more systematically. The first step in integrating management concepts into the then existent economic concepts was to examine the theory of knowledge. If change causes imperfect knowledge and if it is management's job to handle problems created by imperfect knowledge, then the processes of learning and deciding are fundamental tasks of management.
The Theory of Knowledge and Management
In connection with the learning process, Knight noted that conscious behavior involves (1) perception of a situation or problem and
(2) inference or prediction of future outcomes. The envisioning of problems involves concepts of what "ought to be-iLe., a problem does not exist until reality appears to differ from what it is believed it should be. In problem solving, we estimate what the future will be if we do not try to solve the problem relative to what it will be if we do. The processes of perception and prediction are subject to many errors, i.e., we may incorrectly see the present, incorrectly predict the future, and/or incorrectly estimate our ability to change what will happen. What ability exists to predict outcomes depends on the existence of constant modes of behavior in the physical and social worlds. However, the number of items and modes of behavior in the real world are too numerous and complicated for limited, finite, human minds; hence, the learning process involves classification-the process of grouping numbers of objects and relationships too large for our limited minds to handle individually into a number of groups small enough to be handled.
Knight, of course, recognized that both deduction (determination of the detailed implications of general propositions known or assumed true) and induction (the drawing of conclusions about a wide group
' Ibid., pp. 588, 590, 612-3, 618-9, 623.
2 Frank Knight, Risk, Uncertainty and Profit, London School of Economics and Political Science, London, 1937, Reprint No. 16.




8 BULLETIN No. 619 [July,
of objects or relationships from observations on a portion thereof) play important roles in the reasoning processes.
Thus, to summarize, the processes of thinking and reasoning involve perception and prediction or inference. Perception involves envisioning problems as well as making observations. Hence, concepts of what is important-value systems-are involved; problems do not exist until reality appears to iffer from what it is believed it 11 ought to be." Classification becomes a means of reducing the exceedingly complex world of things and relationships into something simple enough for limited human minds to grasp or perceive. Classification is also helpful in envisioning problems. Examples of classifications and perceptual aids are found in budgeting, different systems of economic thought, and such composite terms as capital, livestock, machinery, labor, and real estate. Thus, budgeting, economic theory and principles, and farm business analysis procedures all become analytical tools useful to managers in perceiving and analyzing the situations in which they find themselves. These various mental tools involve both deductive and inductive reasoning techniques.
The inductive reasoning processes are sometimes closely approximated by the formal processes of statistics and at other times are more complex than anything yet formalized by statistical theorists.
Three of Management's Tasks
From the above it is obvious that managers must:
(1) make observations;
(2) analyze such observations;
(3) make decisions.
What is observed obviously depends on the concepts guiding one's perception. Thus, budgeting procedures, economic principles, and such, serve to guide managers in performing the above three tasks. Later, two more tasks will be added to these three to bring the total to five.
Different Degrees of Knowledge Held by Managers
After considering the processes of learning employed by managers, Knight turned to a consideration of the different degrees of knowledge held by managers. He distinguished three degrees of knowledge: perfect knowledge or certainty; risk; and uncertainty. The perfect knowledge or certainty situation, he pointed out, was the situation commonly assumed by theorists, in which managers have no riskbearing and learning tasks to perform. Knight's risk situation, in which




1954] MANAGERIAL CONCEPTS FOR AGRICULTURALISTS 9
the probabilities of making errors of perception and inference are known, permits the risk-bearing function to be carried out; however, as the probabilities of errors are known, the costs of bearing the risks can be computed and incorporated in insurance schemes, thereby eliminating this type of risk bearing as a necessary managerial task. This, then, left the uncertainty situation as the only situation in which management was needed to handle problems arising from imperfect knowledge.
Distinction Vague Between Knight's Risk and Uncertainty Concepts
Knight's work was followed by that of Hart' and Hicks2 both of whom built on his work. Hart pointed out that Knight's distinction between risk and uncertainty was not clear-cut. He argued that when a manager feels that the passage of time permits him to learn more about a future event, he may act as if the situation were an uncertainty situation even though probabilities of errors were known and risk-bearing costs therefore computable.
Knight's thinking was incomplete in two respects. First, he distinguished between risk and uncertainty on the unrealistic and objective basis of whether or not it was possible to compute probabilities of errors rather than on the subjective, but more realistic basis, of whether or not the amount of information on hand was considered adequate for action. Second, he did not break his uncertainty category down into sub-categories distinguishing between situations in which managers try to learn, do not try to learn, and are prevented from learning.
Knight's Uncertainty Concept Covered Three Sub-Concepts
In the late thirties and forties a statistician named Abram Wald3 re-examined the formal theory of statistical decision-making. He noted that statisticians commonly set up a required standard of accuracy in making a decision, then compute the number of observations required to meet this standard, secure the observations, and make the decision. It appeared advantageous to Wald to devise a system of statistical decision making whereby a standard of accuracy
'A. G. Hart, "Anticipations, Uncertainty, and Dynamic Planning," Studies in Business Administration, Vol. X1, No. 1, University of Chicago Press, Chicago, 1940; and "Risk, Uncertainty and the Unprofitahility of Compounding Probabilities," Readings in the Theory of Income Distribution, The Blakiston Co., Philadelphia, 1946.
' J. R. Hicks, Value and Capital, Oxford University Press, Oxford, 1938.
"Abram Wald, Statistical Decision Functions, John Wiley and Sons, New York, 1950. This hook contains much of Wald's earlier work in a more generalized form.




10 BULLIETIN No. 619 [July,
is set first and information then is gathered and analyzed simultaneously. After each "batch" of information is analyzed, one of three decisions is made: that enough information is on hand to decide to act, that enough information is on hand to decide not to act, or that not enough information is on hand to make either of the first two decisions, in which case the learning process is continued. This development by a statistician provided the basis for dividing imperfect knowledge situations into subjective risk situations, on one hand, and into three subjective uncertainty situations, on the other hand. The distinction between subjective risk and subjective uncertainty depends on the subjective standards of accuracy elected by the analyst (manager or statistician, as the case may be). The three subjective uncertainty situations are (1) the situation in which learning is continued;
(2) the situation in which learning is discontinued because its cost exceeds its value or no action is taken because it is decided that the probabilities of error are too great; and (3) the situation in which a manager is forced to act by outside circumstances even though more learning would be worthwhile if time permitted.
Statisticians Distinguish Two Kinds of Errors in Making Choices Between Two Alternatives
Neyman and Pearson', two statistical theorists, pointed out that two possibilities for error exist in choosing between alternatives. If one alternative is best but is not accepted, a type-I error is made. If, on the other hand, this alternative is worse but is accepted, a second type of error is made.
These two types of errors are commonly encountered in managing a business. Consider the alternatives of mortgaging or not mortgaging 120 acres of land in order to buy 200 more. If one fails to mortgage when he should have, he loses the profits and privileges associated with being a larger land owner. If, on the other hand, one mortgages when he should not have, he loses the original 120 as well as the 200 acres and the privileges of being a small land owner. Two distinctly different types of errors are involved as can be seen from the different consequences.
Modern statisticians, devising tests for use by business executives realize that the risks of making these two errors are to be specified by the person bearing the risk. They let the businessman tell them how many chances he is willing to take out of 100 chances of making each of the two types of error. After this is done, the modern statis'J. Neyman and E. Pearson's work on this subject is summarized by P. Hoe1, Introduction to Mathematical Statistics, John Wiley and Sons, New York, 1947, pp. 202-6, and S. S. Wilkes, Mathematical Statistics, Princeton University Press, Princeton, N. J_, 1947, pp. 152-6.




19541 MANAGERIAL CONCEPTS FOR AGRICULTURALISTS 11
tician attempts to devise a test meeting the businessman's specifications. This z- procedure recognizes that the desire for accuracy is a personal subjective thing determined by the businessman's desire for accuracy and his willingness to secure accuracy by paying for statistical observations, computations, and analysis.
Five Different Degrees of Knowledge Are Held by Managers
In partial summary, then, five different knowledge situations in which managers may find themselves are tentatively conceived. As different courses and principles of action are appropriate in each case, it is important to distinguish among these five. The five situations are:
(1) Perfect knowledge, or at least the conviction that knowledge
is nearly enough perfect to act as if it were perfect.
(2) Risk
(4) Inaction
f (3) Learning Imperfect knowledge
5) Forced action
The risk situation is defined as a situation in which a manager feels that his present knowledge is good enough for him to take either positive or negative action and that additional knowledge concerning this problem is not worth the cost of acquiring or learning it. In the learning situation the action under consideration is postponed until more is learned because it is felt that what can be learned is worth more than the cost of learning it. An inactive situation is one in which what is known is insufficient for positive action and in which, it is felt, the cost of learning exceeds the value of what would be learned; in this case the manager neither acts nor tries to learn. In the forced action situation some outside influence forces action even though the existing state of knowledge is regarded as inadequate and, if time were available, more knowledge could be acquired at a cost less than its value.'
Flexibility is Important when Learning is Possible
If what can be learned has value, it may pay to arrange business affairs (even at a cost) so that they can be adjusted or readjusted to profit from what is learned. This characteristic of a business organization is referred to as flexibility. Whenever what can be learned may have value, flexibility has value. As flexibility is often costly in terms of delay and reduced productive efficiency, the value of flexi' It can be argued that this is a special case of the risk situation in which an outside force abruptly reduces the value of what can be learned or abruptly increases the cost of learning.




12 BULLETIN No. 619 [July,
ability must be matched against its cost in determining the optimum organization of a business. The value of flexibility, to an individual manager, depending as it obviously does on his ability to learn, is a personal, subjective futuristic thing.
Five Tasks of Management
It was noted above that the distinction between risk and uncertainty is subjectively determined, i.e., a manager sets up a standard of accuracy suitable to him in his situation. When he has acquired this degree of knowledge or accuracy, he acts on a risk basis-until he has it, he does not act. Action, therefore, is a managerial task. The fact that a manager bears responsibility for actions taken affects the standard of accuracy which he imposes upon himself. Thus, the earlier statement that three tasks of management are observation, analysis, and decision making is incomplete; action and the acceptance of responsibility must be added. The FIVE TASKS OF MANAGEMENT, then become:
(1) Observation
(2) Analysis (3) Decision
(4) Action
(5) Acceptance of responsibility.
The Relationship Between Profits and Management
In accounting systems, profits have ordinarily been computed as gross income less variable and fixed costs, the fixed costs being set by various more or less arbitrary assumptions. Only rarely are charges made for management, and as profits ordinarily go to management, residual profits so computed are regarded as payment to management.
Three of the above five tasks of management involve learning. Hence, it follows that part of the pay to management is payment for learning more about existing conditions and changes therein. Decision making, however, is not complete until action is taken. And, in turn, the nature of decisions made and the actions taken depend upon responsibilities borne. Thus, it also follows that the pay of management is partially determined by responsibility borne.
The demand for performance of the management tasks partially depends upon the uncertainty (ignorance and change) present and the seriousness of the problems created by that uncertainty. The effective supply of managers depends upon the distribution of learning capacity (either inherent or trained), confidence in judgment, wil-




19541 MANAGERIAL CONCEPTS FOR AGRICULTURALISTS 13
lingness to "back it up," and the wherewithal to accept responsibility. The amount which managers earn depends in some still incompletely specified way on the supply of and demand for managerial service.
Study of Managers' Adjustments to Imperfect Knowledge Indicates the Importance of Subjective Considerations in Management
The distinction between risk and uncertainty makes it evident that subjective considerations are important in understanding management. But this is not the end of the matter. The subjective desire to avoid losses accounts for the setting up of safety margins, discounts, insurance schemes, on one han-1, and the desire to receive gains accounts for long chance taking, motivation, and such, on the other. In the learning processes employed by managers, many of the costs are personal and subjective. Thinking is hard work, the value of flexibility is a personal subjective thing, and the value of what it is expected will be learned is, of course, a personal subjective thing. Still further, what can be learned is partly a matter of personal capacity.
Distinction Between Managing and Laboring Is Difficult to Grasp
Laboring is usually thought of as the exercising of physical proficiencies and, to a greater or lesser degree, mental skills. The distinction between laboring and the employment of skills, on one hand, and management on the other, is easy to draw in the extreme cases and difficult at the center.
The parallel drawn between learning and management in this bulletin provides a basis for distinguishing between managing and laboring. When a hired man who does not know how to handle a grain-combine decides to acquire such ability, it is necessary for him to perform the five managerial functions discussed in this bulletin. Thus, in managing his own affairs (note that they are not the affairs of his employer), a hired hand is performing managerial actions. Once, however, this ability is acquired, be becomes a more skilled laborer. The return for his managerial activity is the skill which he acquires-he acquires a worthwhile asset (a new skill) as a result of his managerial action. When he sells the use of this asset to the farmer employing him, he is not selling managerial services-he is selling skilled labor. His wages are a return on this asset-not returns to his management. The skill itself was the return for his managerial actions.
A carpenter who knows how to construct complicated roof structures is not ordinarily classed as a manager while doing such work.




14 BULLETIN No. 619 rJuly,
Similarly, a man handling a herd of high quality dairy cows for another is not a manager; instead he is a herdsman-a skilled laborer. On the other hand, a beef producer, with his own herd, observing the markets, accepting responsibility for his decisions and making decisions on the basis of what be can learn is classified as a managerhe is operating in a situation of imperfect knowledge and change and spends his time handling his business through the process of performing the five managerial functions outlined herein. If a farmer does not know bow to build a gate and spends time learning how to build various gates before taking action and accepting responsibility for the results, he too is engaged in managerial activity. Once, however, ability to build the gate is acquired, the farmer building the gate does not differ from a carpenter who could have been hired as a skilled laborer to perform the same task.
When, as a result of performing the managerial functions, assets are acquired which have repetitive value, such assets are ordinarily referred to as skills.
The functional definition of management developed in this bulletin implies that management is needed only in situations involving change and ignorance. It is because knowledge is imperfect or changes imperfectly foreseen that it is necessary to perform the five managerial functions. A large percentage of the problems created by change and ignorance and encountered in running a business are not repetitive in nature. Such problems occur but once and the managerial tasks must be repeated for each problem. Thus, the manager handling such problems repeats the managerial tasks over and over again without the acquisition of personal capacities or skills having repetitive value and it is said that he is managing the affairs of his business.
In Theory, the Distinction Between the Business and Home is Becoming Indistinct
Earlier theorists distinguished between firms and households as follows. Firms, they conceived, were concerned with maximizing dollar incomes; households, on the other hand, were concerned with maximizing personal satisfactions derivable from spending dollars. The realization that many personal satisfactions are involved in management makes the above distinction vague and indefinite. In fact, the lines of demarcation between firms and household become so indistinct and the lines of interrelationships so complex that we are forced conceptually to combine the two and treat them jointly.
It will be seen later (p. 48) that in practice, the Land-Grant system has been unable to maintain the distinction between the farm




19541 MANAGERIAL CONCEPTS FOR AGRICULTURALISTS 15
business and farm home and has, in many instances, set up extension programs designed to eliminate the distinction.
Managerial Principles and Generalizations Having to Do With Learning
Certain managerial principles and generalizations pertaining to the learning processes can be derived from statistical theory, other bodies of logic, and the application of the economizing techniques to the learning processes. Certain of these principles follow.
1. It is unnecessary to learn unless a problem exists. Problems exist because situations differ from what it is believed or conceived they should be. Thus, beliefs and concepts help managers perceive what should be observed and analyzed' in solving the problems which they face.
2. Organized systems of thinking (such as those incorporated in budgeting procedures, systems of economic principles, the land-use approach to farm organization and schemes of logic) decrease the cost of making observations and analyzing by:
(a) helping managers perceive or envision their problems,
(b) concentrating attention on the most important facts in solving
a given problem, thereby eliminating expenditures of time
and effort on useless facts, and
(c) insuring that the necessary types of facts will be gathered.
3. Organized systems of thinking, such as those mentioned in principle 2 above, speed up analysis of observations by contributing an understanding of the casual and structural relationships involved.
4. When facts and data become available slowly with the passage of time, attention to the sequence in which the facts and data become available is desirable because:
(a) that sequence often helps explain observations, and
(b) economic information tends to lag and contains trends which
are useful for purposes of prediction.
5. When valuable facts and data are becoming available slowly with the passage of time, it often pays to spend money, time, and effort in postponing decisions until more such facts and data become available. The ability to postpone decisions is referred to as "flexibility."
6. While what is learned generally has value, it pays to substitute habit, custom and tradition for learning whenever the importance of the expected resultant errors does not exceed the cost of learning.
ing. Ignorance is often, but not always, believed to be a situation worth reniedy-




16 BULLETIN No. 619 U111y,
7. More should not be spent for additional information than such additional information is estimated to be worth, and equal expenditures (in time, money and effort) should return knowledge of equal value in solving alternative problems.
8. The accuracy of estimates, choices between alternatives and decisions, tends eventually to increase at a decreasing rate as the number of observations used increases.'
9. The per-unit cost of additional observations (in time and effort) often increases as the number of observations used increases .2
10. The value of accuracy tends to increase at a decreasing rate as additional information is acqu-'red .3
11. As the cost of accuracy tends to increase at an increasing rate as more is acquired, and its value tends to increase at a decreasing rate, it is generally possible to equate the cost of additional learning with its value in accordance with principle 7 above.
12. Learning is a cumulative process; hence, in appraising the value of what is learned, allowance must be made for the value of the 11 experience gained" as well as for the immediate value of What is learned.
Economic Theory Contributes Important Insurance and Chance Taking Concepts
Insurance could be interpreted to reflect one's desire for security. Chance taking could be interpreted to reflect a tendency to gamble. Such interpretations, however, make "security seeking" and "gambling" separate objectives which a person tries to attain. While these two objectives are doubtless present among people, some good managers both insure and take chances. Such managers are not necessarily as inconsistent as they appear at first thought. This becomes apparent when insurance is regarded as the avoidance of loss and chance taking is regarded as the seeking of gain. When a person buys an insurance policy, the "odds" are sufficiently against him to cover administrative costs and profits for the insurance company. Friedman and Savage 4 point out that a person need not be a security seeker in order to buy insurance at unfavorable odds. All that need be true is that the personal "importance of losses" increase at an increasing rate as losses increase.
' This application of the law of diminishing marginal returns to statistical analysis is borne out repeatedly in statistical computations, though its statistical generality has not been investigated in connection with this study.
' This follows as a consequence of principle 8.
' This, of course, is an application of the law of diminishing marginal utility.
' M. Friedman and L. T. Savage, "The Utility Analysis of Choices Involving Risk," Jour. of Pol. Econ., Vol. LVI, 1948, pp. 279.




19541 MANAGERIAL CONCEPTS FOR AGRICULTURALISTS 17
Similarly, many long chances are taken at unfavorable odds, i.e., when land is bought on a "shoe string," brokerage fees and commissions often have to be paid. Friedman and Savage also point out that in order to do this a person need not be a gambler-i.e., he need not gamble for the sake of gambling. All that need be true is that the importance of gains increase at an increasing rate.
Friedman and Savage argue that the importance of gains in income does not continue indefinitely to increase at an increasing rate. In support of this conclusion, they cite the common practice of splitting prizes in large contests and lotteries into sub-prizes. This practice would not be profitable if participants continued indefinitely to value increases in prizes at increasing rates. If participants did value increases in prizes at an increasing rate, they would participate at less and less favorable odds (to the participant) as the prizes increase in size. This, in turn, would mean that the larger the prizes, the more profitable it would be to operate the contest or lottery. This condition would tend to eliminate multiple-prize contests and lotteries instead of increasing them.
Some evidence exists for concluding that the tendency to value potential increases in income at an increasing rate is associated with the "level of aspiration"' of the person or family involved. These "levels of aspiration" appear to be the next higher socio-economic plane which the individual has a chance of attaining. Similarly, some evidence exists to support the conclusion that the tendency to attach increasing importance to losses in income is associated with the next lower socio-economnic plane which the individual might fall to as a result of a loss. Further reflection indicates that the "newly rich" and newlyy poor" so often noted to be abnormal have probably not yet readjusted themselves to new "levels of aspiration" and new "levels of disdain." This subject is considered further on pages 26 to 36, which report the results of interviewing case study farmers.
Strategy is Important in Managerial Theory
From time to time, many of the earlier economic theorists noted the importance of strategic operations as a source of profits. In its development, free-enterprise competitive theory moved away from consideration of situations in which managers exploit strategic positions, engage in more or less fraudulent practices and employ force. The theory, so developed, was very useful in understanding free, competitive economics but was not realistic even for an industry as competitive as agriculture. Farm managers in dealing with others
'G. Katona, Psychological Analysis of Economic Behavior, McGraw-Hill Book Co., New York, 1951, p. 121.




18 BULLETIN No. 619 [July,
continually employ force, exploit the strategic positions they happen to be in and employ practices such as "covering up" more or less bordering on deceit and fraud.
Von Neuman and Morgenstern, one a mathematician and the other an economic theorist, noted the importance of strategic operations in management and proceeded to develop a body of economic theory built around the theory of games.' The theory of games was borrowed from military strategists who, in turn, borrowed some of their ideas from mathematicians and logicians concerned with the theory of gambling. In the theory which von Neuman and Morgenstern developed, free enterprise competitive theory becomes a special case in which strategies are of little importance.
The strategies employed by managers probably fall into two broad categories: (1) those dealing with impersonal situations in which others do not respond to actions taken by a manager, and (2) those personal situations in which other people employ counter-strategies. For instance, it may be good strategy to carry feed, cash, and credit reserves against the danger of dry weather. This strategy is unlikely to affect the weather which will occur. On the other hand, the carrying of a cash reserve for use in buying land when a neighbor's estate is settled may stimulate other persons interested in the same estate to carry a similar reserve as a counter strategy.
Strategy principles include insurance and long-chance-taking principles (which are based in part on psychological principles) as well as the principles useful in more personal situations. They are particularly useful in selecting the situations under which actions will be taken. Everyday observations indicate that these interrelated principles and courses of action are continually employed in business and are likely, in fact, to be what the student of agriculture intuitively desires to learn in an introductory psychology class. The popularity of Dale Carnegie's book on How to Make Friends and Influence People further attests the importance of strategy principles in everyday life.
Strategies, Principles, and Courses of Action
At this point, it is appropriate to summarize the managerial principles having to do with how much chance to take, insurance, longchance, and other strategies. These principles are based on statistical theory, psychological tendencies, and strategical theories.
'J. von Neuman and Oskar Morgenstern, Theory of Gamnes and Economic Behavior, Princeton University Press,~ Princeton, 1947; and John McDonald, Strategy in Poker, Business and War, W. W. Norton and Company, Inc., New York, 1950.




19541 MANAGERIAL CONCEPTS FOR AGRICULTURALISTS 19
Principles of Use in D3ciding How Aluch Chance to Take:
1. The seriousness of a given mistake in an estimate, choice, or decision depends (among other things) upon the size of the mistake; that is, how far the estimate is wrong or how great the difference between the alternatives. The accuracy of the estimate, choice, or decision, on the other hand, depends both upon the probabilities (number of chances per hundred) of making the given mistake (or error) and upon its size.
2. A decrease in the size of a possible mistake without an increase in the probabilities of making the mistake is an increase in accuracy and vice versa. A decrease in the probabilities of making the mistake without an increase in the size of mistake is an increase in accuracy and vice versa.
3. Insistence on an unduly high degree of accuracy increases the amount of facts and data required to make decisions, choices, and estimates. Especially when the amount of data and facts available depends upon the passage of time, insistence on an unduly high degree of accuracy causes delay, unemployment of assets, and reduced (on the average) but more certain incomes.
4. Undue tolerance for inaccuracy, on the other hand, tends to decrease the amount of facts and data required to make decisions, choices and estimates. When the amount of data and facts available depends upon the passage of time, tolerance of inaccuracy eliminates delay, keeps assets more fully (but not necessarily more efficiently) employed, and results in less certain and in some cases lower average incomes.
5. The value of accuracy and the seriousness of losses resulting from mistakes are personal and depend upon a long list of items, including: the psychological nature of the manager, his family obligations, his age, his debts, and his assets. The foregoing list is by no means complete.
6. In choosing between two alternatives, two kinds of errors can be made: (1) the first alternative can be accepted as correct when in fact it is wrong, and (2) the first alternative can be rejected as wrong (i.e., the second alternative is accepted) when in fact it (the first) is right. As the consequences of these two types of errors are often different, it is important to consider separately the two types of mistakes in making changes between alternatives.
7. Decisions concerning proposed single actions also involve two different errors often having very different consequences, For instance, the result of vaccinating hogs for cholera when it is not neces-




20 BULLETIN No. 619 [July,
sary is loss of the vaccination expenses, whereas the result of not vaccinating when it is necessary is loss of the herd.
8. As incomes and capital positions increase, people can simultaneously sustain greater losses and spend more on attainment of security or accuracy.
9. As equity decreases or conversely as borrowing increases, the danger from errors in predicting prices and yield responses increases. This danger, of course, is one of having equity fall to or below zero.
Insurance Principles:'
1. It is worthwhile insuring against losses only when the personal value or importance of losses increases at an increasing rate: i.e., if the last dollar of a given loss "hurts" worse than the loss of a dollar in insurance premiums. The "odds" of successful insurance schemes are always sufficiently against the user to pay the costs of, and perhaps protfis for, operating the insurance schemes. Users of insurance exchange a larger (but less sure) average income for a lower (but More certain) average income. It is worthwhile insuring only when the lower more certain income is worth more (personally) than the higher less certain income.
2. Informal insurance schemes can be set up by refusing to take action except when prospective returns are high enough to pay the costs of bearing the risks involved. A part of the cost of operating such schemes is the foregone average income. Thus, as additional income opportunities are foregone in setting up additional insurance schemes, such additional costs must be matched against the value of the additional insurance secured.
3. Informal insurance schemes can be set up by combining risks as protection against failure. The costs of such insurance occur as a result of participating in more activities than would be profitable in the absence of risks. Such additional costs must be matched against the value of the additional protection secured. Diversification beyond that amount which is advantageous because different crop and livestock enterprises complement and supplement each other is an example of this type of insurance scheme.
4. Pessimism, which is the same as overestimating the chances of disaster, can incorrectly make it appear advantageous to insure even when the disutility of losses does not increase at an increasing rate.
1M. Friedman and L. J. Savage, Op. Cit.; K. E. Boulding, A Reconstruction of Economics, john Wiley and Sons, 1950, New York, pp. 121-6.




19541 MANAGERIAL CONCEPTS FOR AGRICULTURALISTS 21
The Long Chance Principles:'
1. It cannot be worthwhile accepting, at unfavorable odds, (1) a small chance of a large gain and (2) large chances of a small loss, in exchange for a more certain income unless the personal value and importance of gains increases at'an increasing rate.
2. Optimism, which is the same as over-estimating chances of success, can make it incorrectly appear advantageous to take long chances when the utility of gains does not increase at an increasing rate.
Some Other Strategy Principles:2
1. One principle which can be followed in risky situations is to select among alternatives that course of action which minimizes the maximum losses which can be incurred.
2. In dealing with personalities who can in turn react to strategy, thc following strategies often have value:
(a) A random, apparently nonlogical course of action often confuses the strategy of the personality being handled.
(Wi Covering up of actions often confuses the strategy of the personality being handled.
(c) Nonrevelation of intentions prevents the personality being
handled from taking counteraction.
(d) Uncovering the intentions of or logical patterns of action
taken by the personality being dealt with makes it easier to
handle him.
(e) The use of force (economic, political, social, etc.) covering
up, and misleading is necessary for self preservation and attainment of objectives when competing with persons employing similar strategies.
(f) Reconstruction of a person's scheme of values, as is often done
in advertising, often makes it possible to handle him more
advantageously.
Some Psychological Patterns Concerning the Value of Gains and Losses3
1. Persons "normally" attach increasing importance to additional losses up to a limit and then decreasing importance to additional losses beyond such levels; hence, persons ordinarily do not insure against losses beyond some limit.
'M. Friedman and L. J. Savage, Op. Cit.; and K. E. Boulding, Op. Cit., pp. 118-21.
'McDonald, Op. Cit.; von Neuman and Morgenstern, Op. Cit.
'M. Friedman and L. J. Savage, Op. Cit.




22 BULLETIN No. 619 [July,
2. Persons "normally" attach increasing importance to additional gains up to a limit and then decreasing importance to additional gains beyond such limits; hence, persons ordinarily do not take long chances for stakes beyond some limit.
3. The importance attached to possible gains and losses depend on many factors such as the psychological nature of the manager, his family obligations, the beliefs and values of his neighbors and members of the community, his education, the amount of analytical experience be has had, his asset position, his debts, and his age.
4. Newly rich and newly poor persons are apt to be "abnormal" with respect to the importance attached to losses and gains and, when abnormal, run to either extreme, i.e., toward security seeking or risk taking.
5. Abnormal people with respect to the importance of losses and gains include the extreme long-chance taker and the extreme security seeker. The extreme security seeker will pay abnormally large amounts for security (perhaps even at the expense of his own and his family's welfare). The extreme gambler will pay abnormally large amounts for a chance of "bitting it rich" (perhaps even at the expense of his own and his family's welfare).
MANAGERIAL CONCEPTS OF FARM MANAGEMENT WORKERS
The earliest farm management workers were primarily empirical workers. Several of the earlier workers were former agronomy or animal husbandry men who became concerned with over-all problems of farm organization and launched into studies of such problems without benefit of the existing body of economic theory. Others investigated existing economic theory, found it static and nearly void of managerial concepts and then discarded it in favor of empirical investigation. Still others investigated economic theory and found it a source of concepts useful in solving managerial problems if not a source of managerial concepts. Among the last group, H. C. Taylor, W. J. Spillman and, somewhat later, J. D. Black should be listed.
The thinking of the empirical workers in farm management, like that of the economic theorists, was bothered by changes. They, too, went through a period in which they developed ways of abstracting or getting away from such difficulties. As prices fluctuated widely and yields varied from year to year, farm plans and budgets were not accurate. The natural thing to do was to start making plans and budgets on the basis of "average," "normal," or "long-run" prices, yields or output data, and requirements or input data, and such.
Once the concept of normall" became established in farm man-




1954] MANAGERIAL CONCEPTS FOR AGRICULTURALISTS 23
agement, farm planning and budgeting techniques evolved in a manner very similar to static economic theory. Farm management workers began to seek the most profitable organization of farms. Problems of enterprise combinations, costs, levels of output, and so on, were considered. And, just as in static economic theory, concepts of management and its earnings tended to be ignored. The definition of profits used by these workers was an accounting definition unrelated to a concept of management-in fact, the accounting definition was residual in nature. That is, an estimate of profits was obtained by subtracting actual variable expenses plus arbitrary fixed-asset charges from gross income.
As would be expected, the use of static economic theory had little effect on the bareness of empirical farm management work as a source of managerial concepts and principles.
From time to time, considerations of risk caused farm management workers to discount average returns and seek out the safer of alternative actions. These tendencies, of course, were also found in static economic thinking which considered risk and risk-bearing functions occasionally but not systematically. Thus, the farm management workers employing static economic theory and those developing it did not differ as far as managerial concepts were concerned-both groups were quite sterile as far as managerial concepts and principles were concerned-and, for a similar reason. Both groups, in abstracting from change and ignorance, were led away from the managerial problems of handling change and ignorance.
What then was the contribution of farm management research workers and teachers to the management of farms? They did not develop a systematic concept of management, define its tasks, nor develop a set of managerial principles. Their contribution was one of helping managers solve problems, not by making the problem-solving processes employed by managers more effective, but by furnishing data and information to managers. Historically, the data and information furnished to farmers by farm management men has tended to be rather technological, mainly from the fields of agronomy and animal husbandry.
The departments and sections of farm management were only one group in the land-grant system furnishing information to farm managers. Agronomists and animal husbandrymen disseminated information about both existing and new production methods. Similarly, price information was assembled by the agricultural economics departments with the aid of the Federal Outlook and Situation Programs and distributed to farmers. Along with the price outlook information, much information on governmental policies and programs was distributed.




24 BULLETIN No. 619 [July,
In addition, the land-grant system has disseminated information about such economic and political organizations as drainage associations, marketing cooperatives, federal land banks, farm credit organizations, and price support programs. More recently, several of the land-grant colleges have become aware of the need among farmers for information about the needs and desires of the farm family in planning farm businesses. Hence, Farm and Home Planning Programs, Balanced Farming Programs, and such, have been inaugurated. These programs, while still not considering all of the personal problems involved in planning a farm business, do recognize that farm managers are concerned with personality and consumption problems, a significant step forward from having separate home economic and farm management extension programs.
Five Kinds of Problems Which Form Managers Face
Summarizing, now, five kinds of problems have been important enough to farmers for the land-grant system to recognize them in extension programs. The five are:
(1) Technical problems
(2) Price problems
(3) Problems created by changes in technology
(4) Problems involving political, economic and social institutions
(5) Personality problems.
Impact of Managerial Theory on Agricultural Economics
Beginning in the thirties, the changes, imperfections in knowledge and foresight which bothered the economic theorists began to bother agriculturalists employing "normal" and "average' data in farm planning, budgeting and credit work. Thus, it was natural that these workers would attempt to use the new managerial concepts being developed by general theorists as soon as contact was established between the two sub-disciplines.
In 1939, T. W. Schultz, an Iowa agricultural economist, published an article on the "Theory of the Firm and Farm Management Research" in the Journal of Farm Economics.' This article, which was based on Knight's work, pointed out the need for a theory of management, profits, risk, and uncertainty as a guide in doing farm management research, teaching farm management, and thinking about farm management problems. This article became a turning point in farm management thinking concerning managerial concepts and principles.
'T. W. Schultz, "Theory of the Firm and Farm Management Research," Jour. Farm Econ. Vol. XXI, 1939.




1954] MANAGERIAL CONCEPTS FOR AGRICULTURALISTS 25
Since this turning point, several pieces of important empirical work have been done on the decisi6n-making process in farm management. In 1942 Schultz and Brownlee published the results of two trials to determine price expectation models applicable to agriculture.' In 1949, Brownlee and Gainer published an article on price anticipations and farm planning.2 D. Gale Johnson picked up the trend of thought and explored its consequences for agriculture as an industrythis work culminated in the forward-pricing idea which has received widespread recognition and is partially incorporated into existing price-support activities.3 Several pieces of work have been done on yield,4 tenure,5 and weather uncertainties.6 At the Kentucky Agricultural Experiment Station the works of Byers,7 Nesius,8 and Johnson9 have utilized managerial concepts provided by the economic theorists. Most of the above cited work is empirical in nature. Little attempt is made in these works to assemble existing managerial concepts into an integrated whole to serve as a frame of reference for farm management teaching, extension, and research. The first such published attempt was made by the present author and C. B. Hayer in a bulletin on decision making principles in farm management.10
'T. W. Schultz and 0. H. Brownlee, "Two Trials to Determine Expectation Models Applicable to Agriculture," Quar. Jour. Econ., Vol. LVI, 1942.
20. H. Brownlee and Walter Gainer, "Farmers Price Anticipations and the Role of Uncertainty in Farm Planning," Jour. Farm Econ., Vol. XXXII, 1950, pp. 265f.
D. Gale Johnson, Forward Prices for Agriculture, University of Chicago Press, Chicago, 1947.
'C. P. Heisig, "Income Stability in High Risk Farming Areas," Jour. Farm Econ., Vol. XXVIII, 1946.
T. W. Schultz, "Capital Rationing, Uncertainty and Farm Tenancy Reform," Jour. Pol. Econ., Vol. XLVIII, 1940.
C. P. Heisig, "Income Stability in High Risk Farming Areas," Jour. Farm Econ., Vol. XXVIII, 1946; R. Schickele, "Farm Business Survival Under Extreme Weather Risks," Jour. Farm Econ., Vol. XXXI, 1949, pp. 931-43, and "Farmers' Adaptations to Income Uncertainty," Jour. Farm Econ., Vol. XXXII, 1950, pp. 356-74; P. Thair, Stabilizing Farm Income Against Crop Yield Fluctuations, N. Dak. Agr. Expt. Sta. Bul. 362, 1950.
G. Byers, Systems of Farming for the Lower-Ohio-Valley Crop-Livestock Region of Kentucky, Ky. Agr. Expt. Sta. Bul. 521, 1948, p. 38.
E. Nesius, Allocation of Farm Resources for Economic Production of Pasture Forage, Ky. Agr. Expt. Sta. Bul. 568, June 1951, and How Farmers Make Pasture Plans to Meet the Uncertainty of Weather, Ky. Agr. Expt. Sta. Bul. 575, Dec. 1951.
G. L. Johnson, "Needed Developments in Economic Theory as Applied to Farm Management," Jour. Farm Econ., Vol. XXXII, 1950, p. 1140; Burley Tobacco Control Programs-Their Over-all Effect on Production and Prices, 1933-50,
Ky. Agr. Expt. Sta. Bul. 580, p. 55.
"0G. L. Johnson and C. B. Haver, Decision Making Principles in Farm Management, Ky. Agr. Expt. Sta. Bul. 593, 1953.




26 BULLETIN No. 619 [July,
THE TESTING OF
EXISTING MANAGERIAL CONCEPTS
Our survey of literature on managerial concepts indicated that the following concepts and principles are important in understanding management:
A. Management is the process of solving the problems created by change and imperfect knowledge and of adjusting an economic unit to the solutions. This task is a compound of five sub-tasks: observing, analyzing, deciding, acting, and accepting responsibility. (See p. 12)
B. Marginality principles apply to the subjective costs and values encountered by managers performing the five sub-tasks of management. (See p. 12)
C. Strategic principles, both personal and impersonal, are involved. (See p. 18)
D. Learning principles, involving both deduction and induction, are involved. (See p. 15)
The survey of literature also indicated that the main problems faced by farm managers are concerned with existing tec6ologies, prices, innovations, institutions, and personalities, and that managers find themselves in possession of different degrees of knowledge, mainly subjective certainty and subjective uncertainty, the latter including risk, learning, inaction, and forced action situations.
CASE STUDY RESULTS
Final formulations of managerial concepts and principles will likely utilize the above principles and concepts on the basis of their importance as revealed by experience and empirical studies. With the objective in mind of establishing relevance and relative importance among these concepts, case studies were started in the summer of 1949. Farmers were interviewed in two Kentucky counties. These interviews, very subjective in nature, tended to confirm the reasoning presented above and contributed to the formulation of the classification of subjective uncertainty into the subclasses: risk, learning, forced action, and inaction. The data obtained also emphasized the tremendously important roles played by subjective values in managerial decisions. In particular, "levels of aspiration" appeared to be highly important in determining the chances these farmers were willing to




1954] MANAGERIAL CONCEPTS iFOR AGRICULTURALISTS 27
take. Also, the interrelation between household and business decisions was clearly apparent.
In conducting these case studies, a serious effort was made to establish close friendly relationships with the farm family. Sometimes several visits were required and not all attempts were successful. Once confidence was established, the questioning took place in an informal manner. The objective was to gain insights into managerial processes. Prior to going out to the farm, a mimeographed list of questions was prepared.' This list was used as a guide in the questioning, though wording appropriate to individual situations was used in asking the questions. After the answers were recorded, summary statements were prepared for each farm. These statements are probably far from objective, yet as case studies they confirm the general appropriateness of the modern managerial concepts and principles summarized earlier in this bulletin. Four of the case study summaries follow.
Case Study
Farmer No. 1
This farmer decided to be a farmer early in life, on the basis of farm machinery advertisements, according to his own statement. He also feels that at an early date, his training for farming so outstripped his training for other occupations that his most profitable occupation became farming. Both husband and wife emphatically agree that in farming, the dollar is an intermediate end, to a more ultimate end of maximizing satisfactions. Items high in their scale of satisfactions were being their own bosses and rural life in general. Husband and wife were in close agreement on these points.
The farmer says that he has been aware of the difference between management and farm work since he, as a boy and young man, supervised his father's farm while his father operated a store. He farmed with his father from 1921 to 1929. During the early twenties, however, this farmer was concerned mainly over technical questions, such as tobacco, hog, and corn husbandry. At that time he did not worry much about future prices, weather, or mechanical advances which would make his machinery obsolete.
This farmer accumulated working capital which he sold for $2,000 in 1929. He then moved to Indiana and with an additional $1,000, which he borrowed, started independent farming as a renter. Apparently, the move to Indiana was based on nonmonetary considerations-he states that a renter in Indiana is his own boss in contrast to the typical Kentucky tenant who is more of a laborer than a manager.
See Appendix A for a copy of the list of questions used.




28 BULLETIN No. 619 [JOY,
This farmer stated that he could have borrowed more when he started renting but did not-he says that he borrowed just what be should have as a renter on the 146 acres which he had. He feels now that he should have purchased land with borrowed money; he says this even in view of what happened to prices in the thirties. At the time, however, worry about prices did prevent him from investing in land. In the Indiana area and in his Kentucky neighborhood, yield uncertainty has not worried this man as much as price uncertainty. This farmer does not worry about the problem of technical obsolescence.
He stated that his credit remained good in the depression period. At no time did "external credit rationing" appear to prevent him from using capital to advantage. He applied fertilizer to corn throughout the depression. In his own mind he was sure that fertilizer applications twice as large as he applied would have paid in the depression years. He gave cash shortage as the reason for not applying the extra quantity. When asked why he did not borrow, he stated that he could have but did not want to do so. It appears that technical knowledge of outcome and ability to borrow were present but that he was unwilling to borrow for personal subjective reasons.
This man feels that his managerial ability has increased greatly since he started farming. However, he thinks that he should have purchased instead of renting in 1929 even with the ability he possessed at that time. He does not think that he should have operated a much larger farm because a larger farm would involve supervision of hired labor, for which he has an ethical aversion.
The first major decision which this man bad to make after becoming established as an Indiana renter was a decision in 1933 to buy or not to buy the 146 acres he was renting. This farm was offered to him on the following terms: 20-year repayment plan with no foreclosure if taxes and interest were paid. His computations, at that time, indicated that his annual rent always exceeded the taxes and interest load and that it would continue to do so even at very low prices. He decided not to buy, however, on the basis of advice from experienced farmers. He feels that all of these farmers were wrong because they all bad had the same experience with prices in the 1929-33 period. He indicated that he considered the odds of being wrong when he decided not to buy as well as the odds of being wrong if be had bought. He evidently figured that not buying minimized the possible loss which might be incurred-be appears to have paid more attention to possible losses than to possible gains. He said that he decided not to buy at that time, thus indicating that be postponed the purchase of land hoping to do a better job on the decision at a later date. He




19541 MANAGERIAL CONCEPTS FOR AGRICULTURALISTS 29
feels that the cost of deferring the decision (in terms of reduced income and the foregone satisfaction of being an owner) has greatly exceeded the value of any improvement in the accuracy of his eventual decision. Apparently postponement did not permit him to increase the accuracy of his decision enough to offset costs.
When asked what was the best business decision be had made, this farmer referred to the purchase of an additional 30 acres of land near the homestead of his present farm at $7600 at the end of the war. He said that he was 100 percent sure it was the right thing to do. He said further that he was advised, by his banker, to postpone his purchase until prices came down. He reasoned, however, that the extra tobacco base plus his need for more plow land, plus the land's current high earning power more than outweighed the gains to be derived from waiting for a drop in prices.
When asked to indicate another of his good business decisions, this farmer referred to his decision to raise hogs intensively in the Indiana area. He indicated that he made this decision on a risk basis as he was both willing and able to handle the risks involved. He also said that he prefers to handle hogs in contrast to cattle.
He argued that an increase in net worth increases his ability to run risks but decreases his willingness to do so after a proper (optimum) size of business is reached. His idea of proper size is partially determined by the relative value which he attaches to leisure and work, his aversion to supervision of labor, and his managerial ability. He also stated that his willingness to run risks increases with large decreases in net worth.
This farmer stated that ability to run risks is increased by diversification. He also stated that among enterprises, livestock enterprises increase ability to run risks more quickly than crop enterprises because livestock enterprises can be expanded to provide a market for labor, the sale of which will offset adverse developments.
Case Study
Farmer No. 2
This farmer gave as his reasons for becoming a farmer (1) desire for freedom which farm life offers, and (2) the fact that he was better trained for farm work than for other occupations. He appeared particularly interested in the freedom which farm work gives him to choose his day-to-day work. He is trained as an electrical welder and has worked off the farm for prolonged periods. He states that he can make more money off the farm than he can make on it. When asked whether farming yields more real satisfaction to him than city




30 BULLETIN No. 619 [July,
work he said that it does. His wife prefers urban life. She says there is too much work to do on the farm.
This man started farming as a share cropper (tenant) soon after he was 21. At that time, he thought of farming primarily as a laboring job. He did not attach much importance to the managerial aspect. When first questioned concerning his definition of management the only thing he could think of was the timing of farming operations. Later on he noted that management includes several other sub-tasks.
This farmer has scaled the agricultural ladder from day laborer to owner operator. He worked as a day laborer prior to marriage and as a tenant after marriage. Early in World War II, he sold out the equipment and livestock which he had accumulated as a tenant, secured training as an electrician, and accepted employment in Louisville. At this time, be purchased his first tract of land on about 50 percent equity. That land did not have buildings. While in Louisville, he accumulated substantial savings from his wages and income secured by renting his farm. The buildings now on the farm were built from timber sawed off the farm in the late war years and earlier peace years. He worked part-time and commuted to the farm while building the homestead.
He states that at the time he purchased the farm be bad no reason for wanting to borrow more money. With the benefit of hindsight, however, he says that if he had known what was going to happen to land prices he would have borrowed much more. Similarly, he says that if he had known at the time what he could do to the yields of such lands he would have borrowed more money. The answers of this farmer to various questions indicate that lending agencies did not place serious limits on what be could borrow. When asked whether his managerial ability had increased since he started farming be stated that it bad, because he now knows much more about the response of his soils to fertilizers and because he now has greater ability to make decisions. This farmer says that if be bad possessed his present managerial ability when starting to farm he could have started with a much larger farm.
When this farmer was asked to name the first major business decision be had to make after his business was well established, be first mentioned the decision to engage in grassland farming but, on second thought, indicated a decision to buy additional land in 1946. When asked if he had enough information to make this latter decision accurately he stated, "definitely, yes." He said the extra land was needed to increase the size of his business and that it was adjacent to that which he already owned. He felt that he was paying too much for the land but that the above-mentioned advantages more than offset




19541 MANAGERIAL CONCEPTS FOR AGRICULTURALISTS 31
the high price. At this point in the questioning, this farmer began to reveal the conservative manner in which he evidently makes his decisions-he does not take large chances. In the case of the above decision to buy land, be said that postponement of the decision would not have increased the accuracy with which he made it but that further postponement would have involved costs growing out of lost earning power.
When asked to mention the most serious reverse which he had suffered, he stated that he had suffered no serious reverses, mainly because prices have been going up ever since he started farming. He had sustained some opportunity losses-if he had known that certain actions would turn out as profitably as they did, be could have made more than he made. However, he said that such actions would have been taken in the dark with little knowledge of the risks involved. When asked what would increase his willingness to run risks, he mentioned net worth and small family obligations. When asked whether he would run greater risks if he had nothing to lose, he said that he would not because the running of such risks would endanger the person who lent him the money with which to run the risk. He recognizes that it might be profitable but feels that it is unethical to run high risks with low equity. When asked if he feels that be accepts larger risks than his neighbors with respect to business decisions, he said that he was about average.
When asked what he considers the best business decision since he first started to farm he again mentioned his decision to engage in grassland farming. He said that this decision was made, at the time he made it, on a calculated risk basis. He feels, however, that if he had spent more time securing information, be could have made the decision on a "certain" basis.
When asked whether he adheres strictly to a rotation, he said that he tries to and is working. towards a rotation, but that changing conditions continually break up his plans. He does not raise tobacco continuously on the same land. He feels that he should rotate it so that other crops will benefit from the residual effects of the fertilizer. He uses legumes in his rotation and does not terrace his land although he does practice a certain amount of contour planting. He does not have purebred animals although his dairy cattle are fairly well-bred jerseys. He plants hybrid corn and has tried fescue. He stated, on one occasion, that he does not know enough about fescue to make it a permanent part of his rotation. He seems to be postponing the decision on whether to use fescue permanently, pending the accumulation of more information concerning it. This farmer says that be




32 BULLETIN No., 619 [July,
makes a considerable effort to market 'his animals in accordance with current market conditions.
Case Study
Farmer No. 3
This farmer said that his farm background gave him training and interest in farming. He felt that his training makes it possible for him to earn more money at farming than in any other occupation open to him. When asked whether he derives more real satisfaction from farming than he could from any other occupation open to him he was undecided as he did not know how much satisfaction he would get from other types of work. His wife felt that there is more real satisfaction to be derived from farm life than from urban life.
When this man started farming he attached much less importance to management than he does now. He considered the task of a farm operator to be primarily one of doing the farm work. He said that he did not realize how much management was required on the farm until after he stopped farming with his father. At this point in the questioning, this farmer was very vague about the nature of management.
While he was in partnership with his father, he accumulated a considerable amount of livestock and equipment which be used when he started out for himself in 1927. At that time, he bought part of his present farm and borrowed a large percent of the value of the land. Even so, he said that he did not borrow enough because he was afraid of what would happen to prices. Despite the depression of the 30's this farmer said, on the basis of what has happened to prices since 1927, that be should have borrowed three times as much money as he did when he started. (He did not state whether it would have been possible for him to borrow that much money at that time). Similarly, be stated that if be bad known in 1927 what could be done to the productivity of the land, he would have borrowed more money. Both of these statements indicate that lack of information concerning price movements and the technical capacity of his land caused him to limit his use of capital.
When asked whether his managerial ability had increased since he had started, he said that it had increased three-fold and that he would have started with twice as large a farm had he had his present managerial ability when starting. At about this point in the questioning process, he began to define management in terms of accumulating information and making decisions.
When asked to recall the first major decision which he had to make after starting to farm for himself, he mentioned his decision




1954] MANAGERIAL CONCEPTS FOR AGRICULTURALISTS 33
to postpone land improvement. He said that at the time he made this decision he was convinced that he should carry out such a program on his farm. He said, however, that he could not borrow, and did not have the money to carry out such a program. At that time, he thought such a program desirable from a physical standpoint. He was not so sure that the future prices would permit the program to pay out. In fact, he was not sure that anything would pay off at that time. He was fairly sure that he would have lost less had he started a farm improvement program, but did not want to borrow money that might cause him to increase his cash, in contrast to inventory, loss. Evidently, he felt that postponement of the decision to start the land improvement program would enable him to make the decision more accurately at a later date. He says that this postponement cost him several thousand dollars.
When asked about the most serious financial reverses which he had suffered, he said he was convinced in 1935 that he had made a serious mistake when he purchased the farm in '27. Evidently, he purchased the farm with the idea of improving it and selling it at a profit, but prices went down and he was unable to make the expenditures on improvements. He stated that when he bought the farm he was quite sure that he was making the decision on a basis which was consistent with the risks he was willing and able to run. Evidently he was right, because his business did survive the adverse development of the thirties.
This farmer said that he is willing to run greater risks with a low equity than with a high equity. He said that he would not take very large risks at his present age with an old-age income virtually assured. While young, with nothing to lose, he was much more willing to run risks. He felt that in general he takes more business risks than his neighbors.
When asked to mention the best business decision he has made since starting to farm, he referred to his decision to buy adjacent land two years ago. He says that this land was handy, provided employment for his 24-year-old son, and in general balanced up his farming business. He felt 100 percent sure that he should buy it.
This farmer said that he does not adhere to a strict rotation, though he tries to. He also said that he does not raise tobacco continuously on the same land, but that he has doubled the rate of fertilizing tobacco in the last few years. He does not use terraces but states that he plants all his crops on the contour. He uses purebred animals and hybrid corn and fescue.
General comments made by this farmer are of some interest in evaluating the dynamic theory of the firm. For instance, he and his




34 BULLETIN No. 619 [July,
wife claim that the household and farm decisions are made jointly and in relation to each other. Current household improvements include a modern kitchen with electric stove and refrigerator and a $2,000 water system. It is apparent that the farm and home operationsare equally modern. There seems to be a bias in favor of the practical in contrast to the esthetic, both in the house and on the farm. Fancy buildings, fancy fences, and fancy equipment are absent in the fields, and in the home the kitchen is far more developed than the living room. The parallel between fields and home indicates that decisions are in fact made by both man and wife.
Another comment made by this farmer is of interest. He referred to a man who came to his community several years ago on a fixed salary and he used that fixed salary as an "ace in the hole" to make up losses which might occur in his farming operations. This "ace" evidently permitted this man to take much larger risks than the average farmer of the community.
Case Study
Former No. 4
This farmer started farming in 1911 after having spent some time working for the railroads. He said that he returned to the farm because be liked the work better, not because he thought he could earn more money at farming. He now feels, however, that he has earned more money farming than he could have earned at other work. The aspects of farming which he likes in particular is independence. As he farmed as a bachelor for several years, his wife's thinking did not have anything to do with early decisions.
When this man started farming, he rented some land from his
-mother and used some land which he had inherited. At that time, he attached very little significance to management unless management is defined as the possession of technical "know-how." He did not need to borrow money to get together the operating capital and livestock to start farming. He accumulated most of his cattle from farm sales. For the most part, he did not buy breeding stock-instead, he purchased a few animals and brought up his numbers gradually while accumulating the technical ability to handle them. There was considerable evidence in the conversation that he was very conservative. He does not act until he has accumulated enough information to make the outcome highly certain. Inheritance of land and the rental contract with his mother made it possible for him to set himself up in business at practically no risk. When asked whether he should have borrowed money to start out farming so as to get into immediate largescale livestock production, he indicated that he should not have bor-




19541 MANAGERIAL CONCEPTS FOR AGRICULTURALISTS 35
rowed money then because (1) borrowing is dangerous and (2) he did not know enough about handling livestock at that time.
He stated that price uncertainty did not keep him from borrowing money, but he was somewhat inconsistent in this statement as he had said earlier that he did not borrow because price uncertainty made borrowing dangerous. A similar inconsistency was encountered when he was questioned about yield uncertainties.
Apparently, this farmer has never been limited by outsiders in borrowing money but has limited himself rather carefully. Questioning did not reveal the extent of his internal cash rationing.
When asked to think back to the first major business decision which he made, he referred to a purchase of land between wars. Apparently, be borrowed a small amount of money to make this purchase. He felt that he had almost all the information required to make this decision, though he says that he acted under some pressure. As the land adjoined his farm, it bad an extra value to him and he felt be was forced to act to prevent someone else from beating him to the purchase.
When asked about a serious financial reverse which he bad suffered, be was at a loss to recall such an occurrence. Apparently, the only cases in which be lost money occurred in the purchase of cattle. He carried on cattle purchasing and feeding on a risk basis. He feels that a person feeding cattle has to be prepared to take occasional losses in order to be sure of being in business in the years in which profits are made. He said that he was financially able and also willing to run these risks. When asked what would increase his willingness to run risks, he answered the prospect of profits, but attached little significance to the amount of assets which he owns.
Although this man married late in life he does not seem to feel that lack of family responsibilities increased his willingness to run risks. When asked what would increase his ability to run risks, he answered experience and assets.
When questioned about his willingness to take long chances, be answered that he was definitely less of a risk-taker than his average neighbor.
Another profitable decision this man made involved the purchase of purebred cattle. Discussion of this decision indicated that he merely took advantage of an obviously profitable opportunity. During the depths of the depression be ran into the opportunity to purchase a purebred herd at sacrifice prices and had the money to make the purchase.
This farmer has tried to adhere to a strict rotation. He has practiced continuous tobacco culture for four years and states that he




36 BULLETIN No. 619 [July,
will continue to do so for another few years. He started tobacco fertilization about 15 years ago. He uses legumes in his rotation, has not terraced his relatively rough land, but crops on the contour. As indicated above, he has purebred animals. He uses hybrid corn when he plants corn, but is not using new varieties of any other crop. When questioned about practices which had been recommended to him but which he did not decide to follow, he referred to the planting of orchard grass. He feels that cattle do not eat orchard grass unless starved to it.
When questioned about whether or not his business had been adversely affected by family expenses, this farmer answered no. As he did not marry until he was past 50, after starting farming early in life with inherited assets, his income is so large that serious consumption-investment conflicts do not exist for him and his family. He said that he will be able to educate his three children and take care of all family expenses without hurting his business.
THE SURVEY RESULTS
Following the case-study work, a more detailed but still exploratory study was set up. In this study 31 Montgomery county farmers were asked questions concerning the management problems which they face; the sources of information they used in solving these problems; the importance to them of the risk, inaction, forced action, and learning situations; the adjustments which they make to subjective uncertainty; the relative importance of induction and deduction in their managing processes; whether or not they employ flexibility; and the importance of strategic operations in their managerial activities. A copy of the questionnaire used appears in Appendix B of this bulletin. Their answers to the questions, which it should be admitted were often far from ideally formulated, serve (1) as a basis for sorting out the most relevant of the new managerial concepts and principles, and (2) as a source of information for formulating subsequent more adequate surveys.'
The farms surveyed were located on soils of mixed limestoneshale origin, fairly rough in topography, and just west of the first escarpment of the Appalachians. Most of the farms were above 60 acres in size, and as they had fairly large burley tobacco bases, yielded the farmers moderate incomes. In general, the area is rather well served with roads, schools, markets, electricity, and telephones. The small-scale, exploratory nature of the study explains the limited geo1 This result was one of the prime objectives of the research project, as outlined, on which this report was based.




19541 MANAGERIAL CONCEPTS FOR AGRICULTURALISTS 37
graphic coverage of the sample. It would have been unwise to attempt a wider geographic survey in the absence of exploratory pilot studies. However, despite its geographic limitations, the results of the survey are quite conclusive in some instances and are highly suggestive in many instances.
The Empirical Importance of the Five Subject Matter Areas
The thirty-one farmers surveyed were asked whether each of the five types of information differentiated earlier were important to them in the management of their farm. The questions were asked in terms of prices, production methods, possible new inventions and developments, human nature, and government (programs, taxes, etc.) information. Without exception, each farmer indicated that all five types of problems were important (Table 1).
Table 1-Relative Importance of the Five Subject Matter Areas Unanimously Indicated
to Be Important by 31 Montgomery County Farmers, 1951
Subject Most important Least important
Production m ethods .................................................................. 19 0
P rices .......................................................................................... 6 0
Government (Programs, taxes, etc.) ...................................... 6 5
Possible inventions .................................................................... 0 11
H um an nature ............................................................................ 0 12
T otal .................................................................................. 81 28 *
0 Three felt unable to indicate which was least important.
The importance of the five subject-matter areas was examined still further by asking the farmers which of the five was the most and which the least important.
It should be emphasized that the farmers thought that all of the five categories of information were important. They were often reluctant to try to indicate the least important; hence, one should not conclude that human nature problems are unimportant because none thought such problems the most important and twelve thought them least important.
To test the extent to which the five categories cover information actually encountered by farmers, each farmer was asked to indicate other subjects a manager should study. Three denoted soils and soil improvement, one home food supply, another diversification, and another relationships among crops. Soil problems are really technical production problems. The home food supply is a problem involving production, on one hand, and consumption demands of the family (human nature), on the other. Diversification and relationships among crops do not fit into the above classifications directly, though




38 BULLETIN No. 619 [July,
a moment's reflection will indicate that price and technical information are basic to their solution. What the farmers were probably asking for were principles for analyzing such data and information rather than for the data and information. This suggests that problems involving the process of management may make up a sixth category not yet covered by managerial concepts.
Sources of Information
The next question concerned the sources of information, thinking methods, etc., used by farm managers in studying problems in each of the five problem areas. These questions were asked (1) to determine the relative importance of different sources of information,
(2) to secure leads for use in further development of managerial concepts and principles, and (3) to increase the participation of the interview in the questioning process by getting him to talk about subjects of interest to him.
In connection with the different types of information, the following sources of information were noted the number of times indicated in Table 2.
Commercial sources were by far the most important as sources of price information for the 31 farmers studied. Of the 57 sources reported, commercial sources were listed 31 times, while government publications were listed 15 times and state college sources only 3 times. College sources can be presumed to include extension service, vocational agriculture, and Agricultural Experiment Station personnel and publications. Even if some confusion existed among government and college publications, agencies and agents, it is still necessary to conclude that private agencies were much more important in contacting these farmers than either governmental or college agencies, in regard to price information. This is not to disparage outlook and situation work, as much of such work is aimed at supplying information to the private sources servicing farmers.
The picture was quite different when production methods were considered. Of 57 sources of information reported, state college sources were mentioned 22 times and governmental sources 3 times. General experience and observation accounted for 21, while private sources numbered only 10. The Farm Bureau was given in one instance.
Information on new inventions and developments was obtained from 40 informational sources, of which private sources were mentionid 23 times and public (8-college, 2-government agencies) sources
5 times.




1954] MANAGERIAL CONCEPTS FOR AGRICULTURALISTS 39
Table 2.-Sources of Information Used by 31 Montgomery Farmers, 1949
Source of mnformatxun Number of farmers
meotioning
In studying prices:
Radio and commercial publications ......................................... 24
Government publications....................................................... 15
Local markets..................................................................... 7
State colleges ..................................................................
Other sources..................................................................... 8
In studying production methods:
State colleges .................................................................... 22
Experience........................................................................ 14
Observation..................................... :*"'*.......'** ..*"*"**''*******'7
Radio and commercial publications ......................................... 10
Soil Conservation Service .....................................................S
Farmers organization............................................................1I
In studying new inventions and developments:
State colleges.....................................................................s3
General observation .............................................................S8
Private and commercial publications and radio ......................... 17
Farm implement dealers ....................................................... 6
Production and Marketing Administration ................................. 1
Soil Conservation Service .....................................................1
In studying government programs:
Farmer organizations............................................................ 7
Government agencies....................... :**'**** .......... 10
Radio and commercial publications ......................................... 12
State colleges..................................................................... 4
Political platforms..............................................................s
No answer, or did not study................................................... 4
In studying human nature problems:
Personal contact ................................................................. 27
References ......................................................................... 7
Observation and experience................................................... 4
In securing information on governmental operations, private
sources accounted for 13 of the 37. The government agencies themselves accounted for 10 of the 307 while the Farm Bureau accounted for 7, political platforms for 8, and state colleges for another 4.
The sources of information on human nature problems were distinctly different from the sources listed for the other four types of problems. Here the emphasis was upon the manager himself. Thus, 27 of the indicated 38 sources were of a personal contact nature with the other personality directly involved. References were indicated in 7 instances and observation and experience in 4.
The answers to questions concerning sources of information were consistent with what should have been expected. Farm management has been conceived in the colleges primarily as a static thing with a
* resultant emphasis on static types of information in extension programs. The 31 farmers placed heavy reliance on state colleges as




40 BULLETiN No. 619 [July,
a source of information on existing production methods but turned to private agencies for information on prices (which are everchanging), inventions, and new developments and government.
The Importance of Subjective Uncertainty Including the Risk, Learning, Forced Action and Inaction Situations
The next step in the survey was to secure information on the relative importance of subjective uncertainty and its different component parts (risk, learning, forced action and inaction) among the farmers surveyed.
Among the 31 farmers surveyed, 18 indicated that they took important actions in 1948 even though uncertain of the outcome. These actions, presumably, were taken in one of the risk or forced-action situations defined on p. 11. As seven of these later proved to be forced-action situations, 11 positive risk actions were indicative. Eight farmers listed important actions not taken last year because they felt that they did not know enough about the outcome. Evidently, these farmers felt that they did not know enough to be ready, willing and able to act and thus were either in the inaction or learning situations previously defined or were taking negative risk actions. The wording of the questions prevents further breakdown of the results.
Two questions were asked on the forced-action situation. First, the 31 farmers were asked to list things which they did because they were forced by circumstances beyond their control even though they felt their knowledge was inadequate. Seven of the 31 farmers listed such actions. The outside circumstances included dry weather, corn shortages, and money shortages. Second, the 31 farmers were asked to list things they did not do because outside circumstances prevonteJ them, even though they felt they knew enough about the situation to risk action. Twenty-three of the 31 farmers offered examples. It is felt that the answers to these two questions were inadequate for a number of reasons, including: (1) an apparent unwillingness to admit being forced to do something because of outside circumstances, and (2) a tendency to list cost-increasing factors as outside forces. In general, about all that can be concluded is that the forced-action situation was recognized by some of the farmers sampled, and that it is difficult to distinguish forced negative actions from inaction and negative risk actions.
Another question directed toward the 31 farmers was designed to ascertain the importance of the flexibility principle and the learning situation. Specifically, they were asked, "Do you postpone decisions in order to have more time to learn? In other words, do you often




19541 MANAGERIAL CONCEPTS roR AGRICULTURALISTS 41
1 wait and see' how things come out before making up your mind?" Of the 31 farmers, 29 indicated that they follow this procedure, and 2 whose answers were inconsistent said they did not while giving advantages and disadvantages indicating that they did. Each farmer was asked to list the advantages and disadvantages of this procedure. Among the advantages listed in favor of the "wait and see" or learning attitude, by the interviewer, were such phrases as: "saves from complete loss sometimes," "safer to wait and see-make more in long run," "learn more by experience," "learn more before making decisions," "can't be too hastyon a farm, must wait and see," "may waste time and money on some unproven venture ... .. may jump in before having enough knowledge," "may decide too quick and lose when you could have gained by waiting." Among the disadvantages listed against the "wait and see" or learning attitudes by the interviewees were such phrases as: "on good things, lose by not acting," "sometimes lose by waiting till too late to do much about it," "situation sometimes gets worse instead of better; when the time is right, act then," "loses a lot of time waiting to see how things turn out ... .. sometimes there would have been more gain in making up one's mind earlier," might miss big profits," and "may wait too long; may have been just what should have been done."
Three conclusions can be drawn from the above: (1) the learning situation was empirically important, (2) farmers do take steps to prolong the learning situation, i.e., to keep the business flexible in order to gain from what can learned, and (3) farmers have clearcut ideas about the nature and extent of the costs and values of flexibility. Though this particular question was not well designed to indicate whether or not farmers are aware of the nature and extent of the costs of learning, the answers given imply that they are. The same may be said with respect to the value of what is learned.
A question dealing with the value of what is learned was also asked. More specifically, the farmers were asked, "Do you often feel that it is not worthwhile learning about 'something new' because you are not able to use what you learn for some reason or another?" The question was poorly asked from several standpoints, i.e., the word .1 often" made it hard to know what a "yes" or "no" answer meant, and the question did not focus the farmer's mind specifically on the costs and value of what is learned. Further, inasmuch as the question was asked by a representative from an institution of learning, the farmers may have been reluctant to give a "no" answer.
Of the 31 farmers questioned, nine indicated that they "often felt" it not worthwhile to learn about "something new" because they were unable to use what was learned. These nine, in giving their reasons,




42 BULLETIN No. 619 Uill,
indicated that they considered information learned valueless if unusable and therefore not worth its cost. Among the reasons given by the 22 indicating that they continue to learn even if something prevents their use of what is learned, there was considerable evidence that long-time values were often placed on what was learned despite its uselessness in the immediate situation. Reasons recorded by the interviewer included such phrases as "anything learned might be used someday," "like to know even though cannot use," "like to have a backlog of knowledge,"~ "never hurts to know more,"~ and "should keep up with the times." The evidence was strong among the answers that the costs of learning are weighed by farm managers against the value or usefulness of what can be learned.
General Learning Methods
In an attempt to explore further into learning methods used by farmers, the 31 farmers were questioned as to the relative importance of deduction and induction in their learning processes.
In order to secure an idea of the proportion of the farmers employing deductive thought processes, they were asked, "When you are trying to learn, do you sometimes find out that something is true and then 'play with the idea' trying to see in your 'mind's eye' how it would work for you?" Thirty of the 31 farmers interviewed answered "1yes" and the interviewer of the farmer who answered "no" indicated that he thought the farmer failed to understand the question.
In order to secure an idea as to the proportion of farmers employing inductive reasoning processes, they were asked, "When you are trying to learn, do you sometimes observe several outcomes (say, on neighbors' farms or as reported in magazines and newspapers) and then conclude that what works for others will work for you?" Every farmer questioned, indicated that he employed this technique of reasoning. Thus, we conclude that virtually all of the 31 farmers employed both deductive and inductive reasoning techniques.
Two more questions were asked about deductive and inductive reasoning. First, the farmers were asked which of the two methods came most naturally to them. In answer to this question, 11 indicated that deductive methods came most naturally and 20 that inductive methods came most naturally. The second question inquired as to the percentage of times they use the two methods. The answers for the 81 farmers indicate they employed deductive methods about 48 percent of the time and inductive methods about 57 percent of the time. While these percentage figures are not significantly' different from a
' At the 1O-perbent level.




19541 MANAGERIAL CONCEPTS Fon AcRICULTURALISTS 43
50-50 split, the over-all indications are that among these farmers, the use of deduction is probably somewhat less than that of induction, though not by enough to make much difference for most purposes in view of the limited geographic distribution of the sample.
Devices Used to Protect Against Unfavorable Outcomes
In order to bring specific situations to their minds, farmers were asked whether or not they carried out any of 10 different measures which would protect them against imperfections in their knowledge and analyses and, hence, errors in their decisions.
The answers to these questions (Table 3) established the fact that
Table 3- Protective Practices Carried and Not Carried Out by 31 Montgomery County Kentucky Farmers, 1950
Protective pract.' e Yes No
Carried crop insurance .................. 3 128
C arried fire insurance ............................................................................ 30 1
Grew more crops than would have been profitable (had you known
yields and prices with certainty) ................................................ 2 29
Used more expensive hay curing methods in order to protect yourself against unfavorable weather ................................................ 5 26
V accination of anim als ........................................................................ 21 10
Limed "just to be sure" even when you were not certain of need .... 8 23
Kept a "nest egg" of cash or money in the bank to use for a "rainy
d ay .. ................................................................................................ 2 2 9
Trained children, hired help, and others in order to protect yourself against costly "teen age" actions, dishonesty, failure to
carry out agreem ents, etc .......................................................... 26 5
Failed to borrow money for obviously profitable purposes in order
to "b e safe .. .................................................................................. 11 20
Kept more tractor or horse power than necessary for average weather as protection against poor weather ........................................ 7 24
Kept hay and feed over from one year to the next as protection
against possible low yields .......................................................... 19 12
these farmers were very selective in using protective practices. Three out of 31 carried crop insurance while 30 out of 31 carried fire insurance. Similarly, 19 out of 31 carried feed reserves over from year to year, while only five indicated that they used more expensive hay urine, methods in order to protect themselves against poor weather. The data presented in Table 7 are consistent with the conclusion that farmers reject or accept protective or insurance schemes on the basis of (1) the importance to them of the loss insured against and (2) the importance to them of the cost of operating the scheme.
The Use of Strategy
In order to secure an indication of the use of strategies by farm-




44 BULLETIN No. 619 [July,
ers, the 31 farmers were asked, "When buying and selling land, hay, livestock, machinery, automobiles, do you find buyers and sellers trying to put personal pressures on each other, such as:
1. Buying when the seller "has to sell."
2. Trying to make the buyer believe the item is really worth more than it actually is.
3. Trying to make the seller think the item up for sale is in "poor shape," "out of date," etc., in order to reduce the price asked.
Without exception, every farmer questioned answered "yes" to these three questions. When asked, "Can a farmer be successful without at least taking steps to protect himself against such actions on the part of others?" the answer was unanimously "no." The conclusion is unescapable-any complete formulation of managerial concepts and principles must include the role of strategies.




19541 MANAGERIAL CONCEPTS FOR AGRICULTURALISTS 45
SUMMARY, CONCLUSIONS, AND IMPLICATIONS
A survey of existing managerial concepts indicates that management's main task is that of adjusting a business to imperfect knowledge and change, the five steps in this process being observation, analysis, decision making, action, and acceptance of responsibility for action.
In performing these five steps or tasks, systems of convictions, beliefs and organized thought patterns help managers envision problems and see what should be observed. Organized thinking patterns contribute to both analysis and decision making. Broadly speaking, these thinking patterns tend to be inductive and/or deductive in nature with combinations of the two approaches the most important. One core set of managerial principles appears to involve the process of ascertaining the optimum amounts of observation and analysis needed in order to assure that the cost (in personal subjective terms as well as objective terms) of performing more of these activities will at least be equaled by the value of the additional results obtained.
The subjective nature of managerial activity makes it increasingly difficult to distinguish between the firm and household in economic theory, a situation recognized in the land-grant system in such developments as the farm and home development programs.
In making decisions and accepting responsibilities, certain psycbological patterns appear important. Persons adjusted to their present income level and social status appear to attach increasing importance to increases in income as the changes involved become large enough to make significant improvements in their socio-economic level possible. This condition causes persons to accept long chances of making gains capable of bringing about major changes in their level of living even if the odds are or appear to be quite unfavorable. It also appears reasonable to expect people who are well adjusted to their income level and social status to attach increasing importance to decreases in income as the changes involved become large enough to cause serious reductions in their socio-economic level. This condition causes persons to insure against such losses even when the odds are sufficiently unfavorable to pay the administrative costs and profits to the insurance company.
Also, in connection with decision making and the acceptance of economic responsibility, certain strategy principles are important. Part of these strategy principles are impersonal, i.e., the manager




46 BULLETIN No. 619 [July,
sometimes operates against an impersonal economic or physical system which does not respond to his actions. Included among the principles useful in these situations are the insurance principles, longchance-taking principles and, if learning is possible, the flexibility principles. The other strategy principles are personal in nature and are employed, mainly, by managers dealing with individuals or organizations capable of responding to the manager's actions. The personal strategy principles deal with the use of force in all forms at the disposal of the manager, the exploitation of strategic position, covering up, discovery of an opponent's intentions, and such.
A survey of the informational services extended to farm managers indicates that the main problems which farm managers handle grow out of (1) imperfect knowledge of existing production methods,
(2) imperfect knowledge of existing prices and changes in prices,
(3) changes (innovations) in production methods, (4) changes in social-economic and governmental arrangements, and (5) imperfection of knowledge about and changes in the personalities important to the operation of the business.
The above concepts and implied principles were tested by a survey of 31 Montgomery county farmers having small- to medium-sized farms located on mixed limestone-shale soils of medium fertility, just west of the first escarpment of the Appalachians, with the following results:
1. In general, this survey confirmed the realism of the managerial concepts and principles assembled, integrated, and expanded from the fields of economics, farm management, statistics, logic, and psychology.
2. All five problem areas (price, production, innovations, human relations, and institutions) proved to be important, the listing however appearing somewhat incomplete. An interest in instruction in performing the managerial. tasks was evidenced in connection with crop combinations and diversification.
3. The farmers surveyed sought information from various sources, probably going to those sources in position or desiring to service them best. In general:
(a) The land-grant system appeared to be a good source of static
information particularly on existing production methods.
(b) Commercial sources appeared to provide dynamic information more effectively, particularly on:
(1) prices, in which case the radio, press and local markets
were important, and on




19541 MANAGERIAL CONCEPTS FOR AGRICULTURALISTS 47
(2) new developments and inventions, in which case the
radio, press, and farm implement dealers were important.
(c) The Farm Bureau, government agencies, the press and radio
appeared to be good sources of information on government
programs and taxes.
(d) The manager himself appeared to be his own best source of
information on human nature problems.
4. The 31 farmers surveyed indicated by answers to both direct and indirect questions that the subjective uncertainty situations are important.
5. Within the subjective uncertainty category:
(a) Risk situations were important.
(b) Forced action situations were important, though forced negative actions were confused with negative risk actions and
with inaction due to lack of knowledge.
(c) The learning situation appeared to be particularly important.
6. In connection with the learning situation:
(a) Subjective costs and values of learning were recognized by
farmers in the comments which they made.
(b) The flexibility principle, including concepts of the value of
flexibility, its costs and its functions, was seen by a large proportion of the farmers.
7. All farmers giving clear-cut answers to the questions on whether or not they employ deductive reasoning indicated that they did.
8. All farmers indicated that they employed inductive reasoning.
9. Answers to questions concerning whether deductive or inductive reasoning came most naturally to them and as to the proportion of time each method was employed, indicate that a slightly heavier emphasis was being placed on induction than on deduction.,
10. Three questions were asked on the employment of personal strategies in managing farms. All 31 farmers were unanimous on all three questions in indicating that such strategies were employed. Further, when asked whether a farmer could be successful in farming without taking steps to protect himself against such strategies, they unanimously indicated that be could not.
The concepts and principles summarized above, along with the conclusions drawn, have several important implications for agriculturalists. These concepts and conclusions bear directly on the work




48 BULLETIN No. 619 [July,
of farm management researchers, extension personnel, farm management teachers, and farmers.
Implications for Farm Management Researchers
The emphasis which this study indicates that farmers place on learning activities and subjective values, suggests the need for a basic reorientation for farm management research. Historically, farm management research has been pointed primarily at the furnishing of information to farmers with respect to production problems. Our study indicates that research should be done on ways and means of increasing the skill with which the five managerial tasks (observing, analyzing, decision making, acting, and bearing responsibility) are performed. The study also indicates that much research is needed on the roles which subjective values play in the management of farms, that is, the subjective importance of income changes, of security, of flexibility, of the results of learning, and such. Appareqtlyjarm management -research needs to be reoriented toward solving managerial problems of fa rmers-rather- than toward the -pioblems of organizing ad -erating farms.
Implications for Extension Workers
The results summarized and the conclusions drawn also have important implications .for extension workers in all fields of agriculture as well as for those in farm management. The survey indicates that farm managers face problems in the following five fields: existing production methods, prices, innovations, social, political and economic institutions, and personalities. The extension service is essentially a governmental agency designed to speed up the flow of information to farm managers. The results summarized herein indicate that extension activities in Montgomery county have been most effective in furnishing information on production methods and prices, that the extension service is somewhat less effective in furnishing information on innovations and institutions, and virtually noneffective in furnishing information on personality problems. General observation indicates that these conclusions apply over wide geographic areas. This suggests that perhaps the extension service should make a concerted attempt to present a more balanced program for disseminating data and information to farmers in all five of these problem areas. The farm and home development, balanced farming, etc. programs repreisent a step in the right direction in this respect.
Another important implication for the extension service arises from the importance of deductive reasoning among managers revealed by this study. Apparently, it is fair to say that the major emphasis




1954] MANAGERIAL CONCEPTS FOR AGRICULTURALISTS 49
of the extension service is on inductive teaching-teaching by demonstration and illustration. Yet, by contrast, this study indicates tentatively that deductive learning processes are almost as important as inductive learning processes in the managerial activities of farmers. If this be so, it suggests that extension teaching techniques might profitably be reoriented to balance the use of deductive teaching methods against the proportion of time farmers employ such reasoning methods in the solution of their managerial problems.
With respect to farm management extension, the study has direct implications. The roles of learning (observation, analysis, decision making), action, and responsibility bearing in managerial activities are being established in economic theory and are being confirmed by such studies as the survey of 'Montgomery county farmers reported herein. This suggests that one of the primary jobs of farm management extension workers should be to increase the skill of farmers in the performance of these five managerial tasks. Training for skill in performing these managerial tasks necessarily involves far more than furnishing the farmers data and information on production methods, prices, innovations, institutions, and personalities. It involves training farmers in methods of both inductive and deductive logic. Farmers can be trained to use the tools of statistical reasoning, economic principles, budgeting, and logic. Training in these skills also involves the analyzing-,of, results of the ya-rl~us-a terniatve actions which may W1~ taken in a given situation ,an d development of ability to__e sthe 'responsibilities which must be borniefor action-taken. Anid, as these rTesponsibilities cross the indefinite line between the farm home and the farm business, the training must cover the importance of family goals and objectives in the management of business affairs. The use of strategies are also important in making decisions, acting, and bearing responsibilities-all farmers surveyed used strategies, yet the extension service does not train farmers in their use.
Implications for Farm Management Teachers
The implications of the above concepts, principles, and conclusions for farm management teachers are very similar to the implications for farm management extension workers. The need exists to reorientate farm management teaching from an emphasis on the distribution of data and information concerning the problems management must handle to an emphasis on training in performance of the managerial tasks. Students need to be trained in the inductive and deductive reasoning methods so important at arriving at sound decisions, if they are to understand the tasks of a manager. Students also need to be made aware of the interrelationship between decision making and




50 BULLETIN No. 619 [July,
action taking and of the responsibilities which managers must bear. They need to be made aware of the costs and values of learning in the managerial processes. They also need to be trained in the interrelationship between the home and business in farming, between restricted consumption and investment, and the conflict between consumption and saving. Further, the roles which various strategy, insurance, chance-taking, and flexibility principles play in the managerial processes need to be explained and demonstrated to the students.
Implications for Farmers
The concepts, principles, and conclusions also have important implications for farmers. If the five managerial tasks are correctly delineated in this report, then any farmer, by acquiring skill in the performance of the functions, can make himself a better manager. And, as a better manager, a farmer can expect to earn more dollar income and, more importantly, attain a higher degree of satisfaction from the resources at his command.




19541 MANAGERIAL CONCEPTS FOR ACRICULTURAL]s-rs 51
APPENDIX A
CASE STUDY QUESTIONNAIRE
1. Think back to the period during which you became a farmer:
A. Why did you want to farm?
1. Did you think you could earn more money at farming than at
other occupations open to you?
2. Did you think you would derive more "real satisfaction" from farming than from any other occupation open to you?
If married, did your wife agree with you?
B. At that time, how much attention did you attach to management, in
contrast to plain work?
C. Tell me, what did you think was included in the job of managing a
farm when you started farming?
D. How did you get together the land, livestock and equipment to start
farming?
E.' Describe the "layout" -which you had when you started?
F. How much money did you borrow when you started?
Was the amount borrowed too little or too much?
If too little, why didn't you borrow more?
G. If you had known what would happen to prices, would you have borrowed more or less money than you did?
H. If you had known what would happen to yields, would you have borrowed more or less money than you did?
1. If you had been able to foresee the inventions, plant improvements
and increased availability of fertilizer which occurred since you started farming, would you have borrowed more money to start out with than
you did?
J. Did actions of people who could have loaned you money prevent you
from borrowing as much as you should have when you started farming?
K. Has your managerial ability increased since you started farming?
With your present managerial ability could you have borrowed enough
money when you started to start with twice as large a farm?
11. Think back to the first major decision which you made after your business was well established.
A. What was that decision?
B. What information did you need in order to make it accurately?
C. How accurately did you feel you had to make your decision?
D. Did you have enough information to make it that accurately?
E. Would postponement of the decision have enabled you to make it
more accurately?
F. Would postponement have involved additional costs?
G. Would these costs have exceeded the value of the increase in accuracy
of your decision?
How do you measure the value of increased accuracy in decision making?
H. Could you have organized your affairs so as to reduce these costs? 111. What is the most serious financial reverse which you have suffered?
A. Was this reverse a result of a conscious decision?




52 BULLETIN No. 619 [July,
B. If answer to A is no, then think of a major financial reverse which
was a result of conscious decision.
C. Was this decision made on the basis of a "calculated risk"?
D. Did you feel that you had enough information at your disposal to
make this decision subject to the risk which you were willing and able
to run?
E. What would have increased the risk which you were willing to run?
F. What would have increased your ability to run risk?
G. What would have decreased the risk which you were willing to run?
H. What would have decreased your ability to run risk?
1. Ate you a bigger gambler with respect to your business than your
typical neighbor?
IV. What is the best business decision which you have made since you started farming?
A. Was this decision made on the basis of a "calculated risk"?
B. Were you both willing and able to bear the consequences of taking
such a calculated risk?
C. What are the factors which would have increased the risk which you
would run?
D. What are the factors which would have decreased the risk which you
were willing to run?
E. What are the factors which would have increased your ability to run
risks?
F. What are the factors which would have decreased your ability to run
risks?
V. A. Which of the following practices do you employ or have you employed?
1. Strict adherence to a rotation
2. Continuous tobacco culture
3. Fertilization of tobacco
4. Artificial insemination
5. Use of legumes in rotation
6. Terracing
7. Contour cropping
8. Use of purebred animals
9. Use of hybrid corn
10. Use of a new variety of another crop
11. Varying the marketing of animals in accordance with current market conditions
B. Select one of the above practices which you have adopted and tell me
why you adopted it.
C. Select one of the above practices which you have definitely decided
is not advisable for you to adopt on your farm and tell me the basis
for your decisions.
D. Select one of the above practices which you have not adopted but are
undecided about and tell me about your current thinking on the
matter.
VI. List the major business decisions which you have made since starting to
farm.




1954] MANAGERIAL CONCEPTS FOR AGRICULTURALISTS 53
VII. Has your business been adversely affected by unusual family expense?
Indicate the major instance.
A. Could you have insured against this development?
B. Did this situation arise as a result of an earlier incorrect decision, i.e.,
an unwise decision to postpone an operation?
VIII. Has your family's desire for recreation, education, household furnishings, automobiles adversely affected the size of your farm? Explain.
APPENDIX B
INFORMATION USED BY FARMERS IN MAKING MANAGEMENT DECISIONS
N am e.........................A ddress ........................Appr. A ge......... Acres M anaged ........
I. Indicate whether a farmer (who is really the manager of his farm) should
pay attention to the following in order to be successful:
1. Prices Yes........ N o ........
2. Production methods Yes........ No .......
3. Possible new inventions and developments Yes........ No ........
4. Human nature Yes........ No ........
5. Government (programs, taxes, etc.) Yes........ No ........
II. Which, in your opinion, of the above is the most important? ....................
W h ich is th e least im p ortan t? ............................................................................
III. What other subjects should a manager study?
I ....... ...... ...... .........................................................................................................
2 ....... ....................................................................................................................
IV. Indicate sources of information, thinking methods, etc. which you use
in studying each of the following:
1 P r ic e s ................................................................................................................
1. Prices........................ ........... ..........
2 P ro d u ction m eth o d s ........................................................................................
3. Possible new inventions and developm ent ................................................




54 BULLETIN No. 619 [july,
4 H u m an n atu re .......................... ....... .. ........... ....... .... ... ..
. ... .. .. .. . .. .. ....... ......... ........ .. ..... ..... ... .. ........ ..... ..... ........ ...... .... ........ .............. .
5. Government ... .......... .................... ... ... .........
V. List a number of things which you did last year even though you were
not sure of the outcome.
2 ..... ....... ..... ..........................................................................................................
- ................................. ................................................................................. ........
3 ......................................................................... ...................................................
Dept. of Farm Economics, Ky. Agr. Expt. Sta., Lexington, Ky. R &: MA 42
VI. List a number of things which you did not do last year because you felt
you did not know enough about the outcomes.
I .................................................... ............................................................... .........
2 ..............................................................................................................................
S ..................... .................................................................................... ..................
VII. List a number of things which you did last year because forced to by
circumstances which you would not have done (because outcomes were so
poorly known) had you not been forced. (Indicate circumstances.)
I .. ........................ ........................................ ............................................. . ........
2 .. .............................. ........................... ......... ...........................................
3 .. ..................................................................... ......................................................
VIII. List a number of things which you did not do last year because outside
circumstances prevented you even though you felt you knew enough.
(Indicate circumstances.)
2 .............................. ................. ...................................... ............... .....................
2 ....................................... ......... .......... ........ .. .. .. .. .. . . ...........
IX. Indicate whether or not you did any of the following last year to protect yourself against possible unfavorable outcomes:
1. C arried crop insurance .................................................. Y es ........ N o ........
2. C arried fire in surance .................................................... Y es ........ N o ........




19541 MANAGERIAL CONCEPTS FOR AG11uCULTUIIALISTS 55
3. Grew more crops than would have been profitable
(Isad you known yields and prices with certainty). Yes .....No ....
1.Used more exp~ensive hay curing methods in order
to protect yourself against unfavorable weather ...Yes..... No....
5. Vaccination of animals ...................................... Yes ...No...
6. Limed "just to be sure" even when you were not
certain of need................................................. Yes ...No...
7. Kept a "nest egg" of cash or money in the bank to
use for a "rainy day"..........................................Yes ...No...
8. Trained children, hired help, and others in order to
protect yourself against costly "teen age" actions,
dishonesty, failure to carry out agreements, etc..Yes...No ...
9. Failed to borrow money for obviously profitable
purposes in order to "be safe".. ........................ -Yes...No...
10. Kept more tractor or horse power than necessary
for average weather as protection against poor
weather ...................................................... .... Yes. ...No...
11. Kept hay and feed over from one year to the next
as protection against possible low yields ............Yes...No...
X. Do you often feel that it is not worth while learning about somethingg
new" because you are not able to use what you learn for some reason or another? Yes ...No. ..List some of the subjects and reasons below:
2............. ............. ....... ........ I...................................
Ix. (a) When you are trying to learn, do you sometimes find out that
Deduction something is true and then "play with the idea" trying to see in
your "mind's Eye" how it would work out for you? Yes..No ..
(b) When you are trying to learn, do you sometimes observe several Induction outcomes (say, 0o1 neighbors' farms or as reported in magazines
and newspapers) and then conclude that what works for others
will work for you? Yes ...No...
(c) Which of the above thinking p~rocedlures comes most naturally
to you? (a) ...(b)...
(d) What prop)lortion1 of the time do you use (a).......... (b) ?
X11. Do you postpone decisions in order to have more time to learn-in other
words, (d0 you often "wait and see" how things come out before making upj)your mind? Yes...No ...... hat are tile advantages of this lprocedltre?
1. ........... .... ...................................................................




56 BULLETIN NO. 619
1 . ............... ...........................................................................................................
...................................................................... ........................................................
................................... .................................. ........................................................
What are the disadvantages of this procedure?
. ..... .............................. ........... ............ ..........................
XIII. (a) When buying and selling land, hay, livestock, machinery, automobiles, do you find buyers and sellers trying to put personal pressures on each other such as:
(1) Buying when the seller "has to sell?" Yes ....... No ......
(2) Trying to make the buyer believe the item is really worth more
than it actually is? Yes........ No.........
(3) Trying to make the seller think the item up for sale is in "poor
shape," "out of date," etc. in order to reduce the price asked?
(b) Can a farmer be successful without at least taking steps to protect
himself against such actions on the part of others? Yes........ No........
8M-6-54