Most of us have dreamed about having a flying car to escape the traffic or just to enjoy mesmerizing views from above. It’s 2018 and it seems like flying cars are finally here, but why aren’t many people buying them?
I’m sure there are several good reasons why—at least for now—and going over them can help us understand why small farmers are slow to adopt new technologies such as self-guided tractors, drones and many apps out there. Although this problem is sometimes oversimplified as a matter of insufficient access to credit, it’s very complex. Let’s see why.
To start, people might say ‘I didn’t even know flying cars were here already! Where can I buy one?’ This lack of knowledge (technically known as “incomplete information”) can be an obvious reason for not buying a flying car. The same goes for small farmers, especially in developing countries. They don’t always know about all the new agricultural machines and gadgets out there.
Then there is the issue of knowing which option is the best among all the available ones. First-time consumers usually know little about the true quality of a product (a problem of “asymmetric information”) and having many different options available can compound the problem. If choosing among the several flying cars that will soon be for sale seems complicated, imagine choosing among all the gadgets in the AgTech world. Just look at this innovation hype curve or at this infographic. With so many options out there and more coming out all the time, how can a farmer determine which is best for them?
Now, let’s assume everyone knows where to buy a flying car and which make is the best for them. One of their first considerations would be whether they can afford one, either by using their savings or getting a loan. Small farmers ponder the same—can they buy a fancy self-driving tractor? In Latin America, most small farmers probably can’t. Liquidity constraints (the technical name for this problem) are clearly an important factor hindering technology adoption, but they’re not the only one.
Then comes the question of whether the new technology is worth it. Does it make sense for you to have a flying car? The answer depends a lot on individual factors. Having a flying car seems like a good idea for people with long, slow commutes. But what if someone loves biking a lot and prefers to bike 20 miles each way, every day? Similarly, there could be a self-driving tractor that is precisely designed for plots the size of a farmer’s; however, what if her plot has a few rocks that the tractor can’t avoid efficiently? This problem of “unobserved heterogeneity” can make us think, mistakenly, that technology adoption should be much higher than it really should. But even if the tractor were perfect for her plot and increased her yields, would she be able to sell all that extra produce at a price that would eventually make up for the costs of the tractor? For a farmer, adopting new agricultural technology is all about increasing profitability.
There are a lot more questions commuters and farmers may want to answer before buying a flying car or a new agricultural machine: Will they know how to operate those machines? Do they require a special fuel that is expensive or difficult to get? What if they stop working? In short, are there “missing markets”—for fuel, parts, repairs, or even training—that could prevent them from using their new machines adequately and uninterruptedly?
Another important consideration: how risky is it to adopt the technology? Someone could lose control of a flying car and crash! For small farmers, accidents are probably not a big concern but they could lose their livelihoods if they invest in the wrong technology! Both decisions carry some risk. Perhaps people would rather wait until their friends have bought a flying car to see how well it works without running risks, but if everyone has the same idea it will be a long while until someone buys the first flying car. This is called a public good problem and it certainly affects agricultural producers, too.
The Inter-American Development Bank has financed several programs aimed at increasing technology adoption among small farmers in Latin America. These programs generally finance partly or fully the cost of purchasing agricultural machinery and provide technical assistance so that farmers learn how to use it. There are successful stories to tell from these programs, like CRIAR in Bolivia, PTTA in Haiti and PROVIAR in Argentina. However, even their beneficiaries still face several challenges to continue adopting new (and well-known) technologies. Much additional work needs to be done to resolve this complex problem.
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