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This chapter discusses how Vernon Ruttan and Yujiro Hayami’s research provided a consistent and effective framework for analyzing how markets, technology development, and institutional changes interact to facilitate agricultural development. Ruttan and Hayami’s research are widely recognized for farmers’ increase in agricultural production due to effective technology and institutional change, as demonstrated by the Asian Green Revolution of the 1960s. The chapter concludes with an explanation of how the induced technical change theme provided the structure needed to integrate a large body of theoretical and empirical research on agricultural development.

This chapter begins by discussing the ideas surrounding John Hicks’s concept of induced innovation and the broadening of that idea by Vernon Ruttan and Yujiro Hayami to a more general theory of technological and institutional change. This is followed by a description of the pivotal environmental technology and policy changes in the late 1960s and early 1970s. The chapter concludes with an interpretation of the current debate over international climate issues, which is considered a major threat to sustainable economic growth other than poverty in low-income countries.

This introductory chapter provides a background to Vernon Ruttan and Yujiro Hayami’s thesis concerning the role of induced technical and institutional innovation. In the thesis, Ruttan and Hayami argue that as the insufficiency of a factor of production increases, technology that saves on the use of the factor is induced to develop, along with supportive institutions, property rights systems, public sector research, extension systems, and marketing institutions. This chapter concludes with an overview of the visions and perspectives contributed by Ruttan and Hayami.

This chapter demonstrates the approach used by Vernon Ruttan and Yujiro Hayami in their study, which involves the estimation of a cross-country production function of the Cobb-Douglas type for thirty-eight developed and underdeveloped countries. In the estimation, the differences in agricultural output per worker are accounted for by variations in the level of conventional and non-conventional inputs per worker and classified as internal resource accumulation, technical inputs supplied by the non-agriculture sector, and human capital. The independent variables used in the study include labor, land, livestock, fertilizer, machinery, education, and technical manpower.