Cash as an Evaluation Criterion


 In commercialized and monetized agriculture, cash can
effectively substitute for most other inputs. If more
seed is needed, it is purchased with cash (or credit,
which is another form of cash). If more labor is needed,
it is also purchased with cash. However, in many small,
limited-resource farm situations, nearly all resources
used in the production process come from the farm. Only
a very few inputs are purchased. These include inputs
which are not available on the farm, such as chemical
fertilizer, insecticides, herbicides, and improved or
hybrid seed. On farms where farmers are unaccustomed to
making purchases with cash, great care must be taken to
evaluate the productivity of, or return to, the additional
amount of cash required for alternative technologies.
 On fully commercialized farms, where cash is
basically not a limiting factor, the criterion of profit
maximization may be relevant. Profit maximization is
achieved where the value of the product obtained from the
last unit of input is just equal to the cost of that
additional unit. However, farmers with very limited
amounts of cash will not usually be interested in
utilizing as much cash in an individual enterprise as is
required to maximize profit. Rather, they will be looking
for ways to achieve the highest return (or productivity)
per unit of cash invested in the enterprise. In this
situation, the amount of product per unit of cash (similar
to the amount of product per unit of labor) is a relevant
evaluation criterion. Calculations can be made in a
manner similar to those shown above for returns to labor.
 Because cash can be converted into many different
kinds of inputs, it is more critical to look at
alternative uses for cash and not just consider return to
cash investment for individual enterprises. This is even
more critical on small farms where family necessities
compete directly for limited cash resources. If
researchers consider only the return to cash investment in
the commodity in which they are interested, they may well
find that what appears to be a "good" technology is not
acceptable to farmers, who would rather use the cash in
another way, such as for a wedding or to repair the house.