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The primary emphasis in this paper will be upon governmental agricultural commodity policies and their effects upon price variability. It is the commodity policies of the governments of the world and in the rest of the world's food and agricultural systems.

feasibility of using futures trading to permit a governmental or international agency to stabilize price. There is probably scope for further research into the nature of price formation where cash and futures markets exist in parallel, but even more should be done to assess the impact of such stabilization operations on other participants in the market. Will they scare away hedgers or speculators? Will they attract speculation of the wrong sort: that designed to profit solely from the eventual exhaustion of the agency's resources, whether of cash at the bottom of the market or of commodity at the top? My misgivings go beyond simply the capacity of officials to stabilize prices. I see a greater danger. It is widely recognized that the public sector has a role, however modest, in the regulation of commodity trading. This role must be exercised in cooperation with the exchanges themselves and with absolute impartiality towards all who trade on the markets concerned. Such regulation is quite incompatible with government operations on such markets designed to influence prices and by implication to favor one group of market participants against others. I would question whether this conflict can ever be solved by simply keeping the regulatory and the stabilization agencies at arms length since both derive their authority from the same source. If the prospects for stabilization of prices through intervention in the futures markets look slight, prospects for primary producing nations to stabilize their incomes by using futures markets may offer more hope. We should, however, be aware of the background against which the primary producers see the marketing process as a whole. An item under this title has been on the agenda of the United Nations Conference on Trade and Developm nt (UNCTAD) Committee on Commodities since the early 1970s, but progress generally has been slow. Although the intention was to study a fairly wide range of commodities by the time of UNCTAD IV in Nairobi last year, only three studies had been completed: cocoa, bananas, and hides and skins. Both the London and New York futures markets came

Several recent studies have reported the possibility of immiserizing technical change in agriculture. In these studies, the interaction of government commodity policy and technical change has been shown potentially to lead to a loss of national welfare, a negative rate of return to research. The purpose of this paper is to tie these recent results to the earlier results of Bhagwati and Johnson on immiserizing growth (technical change), and to offer a more general condition for describing the impacts of distortions on the benefits from technical change.

The systematic study of international economic relations has commanded increased attention in recent years amongst both economists and political scientists as the economic relations between nation states and groups of countries have intensified, changed in character, and generated a weighty set of new and complex problems. Matters pertaining to food- stuffs and other primary commodities are the subject of both unparalleled cooperation and dangerous frictions between members of the international community. Those involved in the conduct and the study of international affairs attach great weight to commodity policy issues in international economic relationships. Equally, a range of "external" considerations have been elevated in importance in national policy formulation for the agricultural and food sector. Thus it is appropriate and timely that this Association address the subject of agriculture in international economic relations.

During the last decade increased attention has been given to the role commodity futures exchanges might play in international commodity policy. There have been suggestions (McKinnon, Houthakker) that national and international agencies, whose goal is the stabilization of commodity prices, should find it less costly to intervene in futures rather than spot markets. Recently, several less developed countries (LDC's) have requested assistance from the industrialized nations in increasing access to commodity exchanges located in developed areas (Conference on International Economic Cooperation). Many developing countries have also asked for help in establishing futures markets in their own countries (U.N. Committee on Trade and Development 1977). The purpose of this paper is threefold: (a) to report on LDC's participation in U.S. markets and discuss related public policy issues, (b) to explore the positive externalities that might be generated in LDC's that establish their own futures markets, and (c) to identify certain issues related to the role of futures markets in international commodity agreements. Although this latter topic is only peripherally related to the first two subjects, it is important because, at the same time we are seeing a growing interest by LDC's in using futures markets, we are also faced with proposals for international commodity agreements that combine governmental activity in futures and cash markets. Developing Countries and Commodity Markets

It is clear from the papers presented at this session that significant positive and negative externalities are associated with the results of agricultural research. Failure to account for the nonmarket effects of research suggests the possibility of misallocation of research effort, with maldistribution of its benefits and costs. The authors thus agree that we can and should consider nonmarket effects in estimating the benefits of agricultural research. All suggest avenues of economic research-on-research, which are proposed as contributions to the ongoing controversy over whether overor underinvestment exists in agriculture, and to decisions on "research priority setting"1 (Carlson) and "research system design" (Evenson). The suggested economic research needs include interdisciplinary work to measure precisely risks and other externalities, and fine disaggregation of benefits and costs to investigate distributional issues. While theoretically appropriate, such research requires considerable effort and expenditure. Before agricultural economists plunge into efforts that may, in and of themselves, contribute to an overinvestment in agricultural research, it is important to ask for whom and why we might go through such exercises. Let us consider who makes research decisions and what factors influence the decisions that result in a particular magnitude and distribution of market and nonmarket benefits and costs. First, there is the private sector, which responds to market signals. Yet, for agriculture, market signals tend to be distorted by agricultural policies. The provision of price supports, input subsidies, or protection through quotas can have profound effects on the direction of research as well as on the estimated magnitude of marl-4t benefits of such research. Ruttan has demonstrated these effects with respect to rice policy and Japanese agricultural research. In the United States, the existence of strong price and income support for production of selected commodities may explain why, as Carlson reports, pesticide research tends to focus on large (and, one might add, guaranteed) markets. The fact that major commodity prices have for fifty years been maintained at high levels, determined in part by production costs, means also that output prices relative to input prices have remained high. There has been no private inducement for innovative change in the direction of agricultural production research. On the contrary, there has been consistent, policy-induced encouragement for research on competitive or replacement inputs for landand labor-saving production of major commodities. This trend may explain Carlson's failure to detect a dampening effect of regulation on pesticide investment. Whether policy-induced market distortions are sufficiently strong to offset regulatory incentives for change in private research direction is a relevant and timely question. Alston, Edwards, and Freebairn review the conceptual basis for expecting a strong relationship, but the question has not received empirical investigation. Empirical tests may be difficult because a consistent commodity policy has existed for so long. However, if policy is suspected as a significant force in determining the direction of research, it may pay off more for economists to study the policy explanations of research trends than to try to combat strong market forces through scientific investigation of alternative technologies. The public sector, too, is influenced by market signals, distorted though they may be. In addition, the direction of public research is highly susceptible to public demand. For example, there was an inundation of public funds for integrated pest management (IPM) reKatherine H. Reichelderfer is associate director of the Resources and Technology Division, Economic Research Service, U.S. Department of Agriculture.