Difference between Agriculture and Industry

The upcoming discussion will update you about the difference between agriculture and industry.

1. Dependence on Nature:

Agriculture is a biological process, which excessively depends upon natural conditions which play a great role in the growth of plant and cattle. The dependence on unknown and unseen power (nature) influenced by physical factors like rainfall, weather and soil composition, beyond the control of man, limit the scope of human endeavour.

Crops are exposed to several calamities like flood, droughts, hail-storm, diseases, insects, locusts and pests and stray animals. Production cannot be controlled as effectively as in industry, Crops have to grow before they are harvested. In this sense, nature does the business and man is merely the manager.

2. Peculiar Type of Time-Lag:

Agriculture involves a time-lag between the point of time when outlay is incurred and the time when returns are attained. Thus, a farmer who grows wheat has to go on spending labour and capital in its cultivation and wait till its harvest and sale of produce i.e. (6 months). This lag between outlay and returns varies, depending on the nature of farm output.

It is less than a year in the case of crops; and extends from over a year to 3 years in the case of cattle. During the interval, there is possibility of a radical change in demand and price which may totally upset the farmer’s calculations, Business oscillations cause changes in agricultural income, account for greater risks, and low turnover; and make the problem of agricultural credit and insurance much more difficult than that of industry.

3. Little Scope of Division of Labour:

Farming is, as a general rule, undertaken in sized units and gives comparatively little scope for division of labour. “The nature of agriculture does not admit of so many sub-divisions as manufactures… The spinner is almost always a distinct person from the weaver; but the ploughman, the harvester, the shower of the seed and the reaper of the corn are often the same”. (Adam Smith) “Thus that part of economic analysis which has been developed to explain the large scale organization typical of industry is less applicable to agriculture.” (Cohen)

4. Better Ground for Perfect Competition:

The large portion of economic theory which assumes perfect competition is far more real in agriculture than in industry. The farmer almost always disregards the effect of any change in his own output upon price, which is rarely true of the industrialist.

5. Factors of Production—Less Clearly Marked:

Various factors of production are less clearly marked in agriculture than in large scale industries. The distinction between employers and employees is not as much marked in agriculture as in industry. The employer-employee in relationship agriculture is more traditional and social than contractual as in industry.

Both work shoulder to shoulder during the peak days of the busy season to finish the work well in time, because work in agriculture has to be finalised within a given period of time as it cannot be carried over. Thus, workers cannot be organised as a distinct class against employers. This leaves little scope for strikes and lock-outs in farming.

6. Less Sensitive to Price Incentives:

Farmers are less mindful about production trends and are seldom aware of the influence of their production because adjustments in production are less smooth in agriculture than in industry largely because of the predominant role played by nature, the time-lag between labour and returns the regularity of harvest and the uncertainty of output. Agriculture offers less resistance to depression and equally less expansion under-price incentives. In industry, price movements are more sensitive to price changes.

7. Earlier Stage of Operation of Law of D.R:

In agriculture the law of Diminishing Returns begins to operate at an earlier stage than in manufacturing industries After a certain stage has been reached, the application of additional labour and capital units on a given piece of land leads to a less than proportionate increase in output and thus to an increase in the per unit costs of production.

8. Far Larger Proportion of Land to other Factors:

Agriculture requires a far larger proportion of land as compared to other factors than does industry. In fact, it is the only industry in which land surface is always a scarce factor of production because a farm needs space for crops to grow. On the other hand, a manufacturing or mercantile establishment needs space only for standing room for men and machines and storage room for materials.

9. Costs Attributable to Various Products Inseparable:

Many agricultural commodities are joint-products, either like wheat and offal, or mutton and wool, because they are both parts of the same plant or the same animal; or, like barley and sheep, because they are frequently produced most cheaply on the same farm.

The costs attributable to various products cannot be separated. In industry, several products might be produced by the same machinery; and the costs attributable to each produce can be separated. Thus, it becomes rarely justifiable to consider the supply of any one farm product in isolation.

10. Less Elastic Demand for Farm Products:

Agriculture is mainly concerned with the production of food which is the basic necessities of life. People, when they become richer, do not consume proportionately more food.

The demand for farm goods, therefore, rises less rapidly than that for industrial goods with a rising standard of life. Industry produces goods of secondary importance as compared to agriculture. It is, therefore, natural that the demand for agricultural product is less elastic than that for industrial goods.

11. Peculiar Nature of Farm Goods:

Agricultural products are generally perishable and their consumption cannot be postponed for a long period. Consequently, firm goods create a glut at the time of harvest and scarcity in the off season. This irregular nature gives rise to special problems of marketing and finance which provide special importance to middlemen between the farmer and the consumer. Since industrial goods can be stored for long, it is possible to maintain supply according to requirements of the people.

12. Production of a Variety of Crops:

It is agriculture which supplies raw materials for industrial production. Every farmer produces a variety of crops as a general practice on widely scattered small units; and has very small quantities of all produced goods to sell. On the other hand, industries are supposed to be specialized in the production of limited and specified products.

13. Main Occupation of Vast Majority of Population means of Livelihood:

In an agricultural economy a large section of population depends principally on agriculture as a means of livelihood. For example, at the beginning of the 18^th century, (prior to Industrial Revolution) the agricultural population of England was more than three-fourths of the total population. The Americans who are most advanced today, were originally rural. At the close of the eighteenth century, more than nine out of ten persons there lived in places like villages with small populations. In France, about three-fourths of the population was rural in the middle of the last century.

In Germany, “approximately two-thirds of the population was rural up to the third quarter of the last century. In Japan, more than eight out of ten persons lived on agriculture till quite during the last century. In Russia, more than eight out of ten persons were rural even up to the time of the First World War.” There is, however, a common belief that agriculture is the main occupation of a vast majority of population in an agricultural economy; and that the rural population consists of nothing but farmers.

14. Concept of Agricultural Share of National Income:

The concept of the agricultural share of national income refers to the share accruing to the aggregate national income from the persons engaged in (i) agriculture, animal husbandry, and ancillary activities, (ii) forestry, and (iii) fishing. Of course, a large section of agricultural population does not necessarily mean a large agricultural share in national income total.

15. Seasonal Character:

The dependence of the agriculturist on weather and other natural conditions suggests its seasonal character. This applies not only to the changing of seasons but even during the same day the nature of work changes from hour to hour.

On a farm there are things which have to be certain hour of the day, and quite different things at other hours: and so from day to day, from week to week, from month to month and from season to season the work is constantly changing involving a multitude of operations, widely different in their nature requiring the use of different skill.

Moreover, a sudden change of weather may necessitate a complete change in the farmer’s plan for the day, and force him to do a kind of work which he did not plan to do at all. Hence the work of the agriculturist calls for resourcefulness and versatility.

16. Performing Triple Functions:

Agriculture is an industry of small units where work is carried on in direct connection with his home and family. It is quite common for the farmer to live on the farm and for different members of the family to participle more or less in the farm work.

For this reason, the men engaged in this industry are their masters. “The business of farming is still in the main carried on in small units, with the farmer himself (with the help of his family) performing the triple function of entrepreneur capitalist and manual worker.” (Edgar Thomas)

Thus, it is clear from the above discussion that the economic problems of agriculture are characteristically different from those of industry. “These differences are factor in price analysis and policy, nature of saving and investment organization of production, establishment of equilibrium between demand and supply, degree of competition amongst products, nature of risk, incomes, wages, costs and benefits, etc.