Uncertainty and Time-to-Build in Bioenergy Crop Production
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The Department of Economic Science was founded in 1898 to teach economic theory as a truth of industrial life, and was very much concerned with applying economics to business and industry, particularly agriculture. Between 1910 and 1967 it showed the growing influence of other social studies, such as sociology, history, and political science. Today it encompasses the majors of Agricultural Business (preparing for agricultural finance and management), Business Economics, and Economics (for advanced studies in business or economics or for careers in financing, management, insurance, etc).
History
The Department of Economic Science was founded in 1898 under the Division of Industrial Science (later College of Liberal Arts and Sciences); it became co-directed by the Division of Agriculture in 1919. In 1910 it became the Department of Economics and Political Science. In 1913 it became the Department of Applied Economics and Social Science; in 1924 it became the Department of Economics, History, and Sociology; in 1931 it became the Department of Economics and Sociology. In 1967 it became the Department of Economics, and in 2007 it became co-directed by the Colleges of Agriculture and Life Sciences, Liberal Arts and Sciences, and Business.
Dates of Existence
1898–present
Historical Names
- Department of Economic Science (1898–1910)
- Department of Economics and Political Science (1910-1913)
- Department of Applied Economics and Social Science (1913–1924)
- Department of Economics, History and Sociology (1924–1931)
- Department of Economics and Sociology (1931–1967)
Related Units
- College of Agricultural and Life Sciences (parent college)
- College of Liberal Arts and Sciences (parent college)
- College of Business (parent college)
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Abstract
Over the last years, the cellulosic biofuel mandate has not been enforced by the U.S. Environmental Protection Agency. The uncertainty surrounding the enforcement of the mandate in addition to high production and harvest cost contributes to farmers’ hesitation to plant bioenergy crops such as switchgrass and miscanthus. Previous literature has shown that under uncertainty and sunk cost, the investment threshold is further increased because of the value associated from holding the investment option. This warrants the use of a real option model. In this paper, we extend previous literature by applying a real option model to bioenergy crop production in the United States. We show the spatial allocation of switchgrass under biomass price and agricultural return uncertainty. The empirical model identifies the counties in the contiguous United States that are most likely to change to switchgrass production. Our preliminary results indicate a very small share of land in switchgrass production even at high biomass prices.
Comments
This is a Selected Paper prepared for presentation at the 2015 Agricultural & Applied Economics Association and Western Agricultural Economics Association Annual Meeting, San Francisco, CA, July 26-28.