ABSTRACT
In this chapter the perspective of the use of cost and return budgets for economic analysis is emphasized. Our emphasis is on the potential for cost of production estimates to aid in the economic understanding of agriculture. Reasonable input into farm policy objectives would appear to be the analysis of the policy alternatives on the relative cost of capital and labor and economies of size. It does not appear that the cost of production studies of current farm income measurement information is the most efficient way to evaluate the policy alternatives within these objectives. Cost of production analysis was a major activity of scientists in land grant colleges and the US Department of Agriculture in the formative years of Agricultural Economics. Indeed, study of cost of production appears to parallel the growth of farm management and production economics-the early emphases of agricultural economics. Economic equilibrium provides for the equation of resource cost to output price.
