Living History of Ag Economics with William Murray

hello my name is Jim Kristensen I'm pleased to be here today with dr. William G Murray in connection with the 75th anniversary of the American agricultural economics Association professor Murray has been involved in agricultural economics for nearly 60 years a brief list of his accomplishments would include such things as professor emeritus at Iowa State University president of the American agricultural economics Association chairman of the department of economics and social sociology at Iowa State University chief economist for the Farm Credit administration and economist for the Bureau of Agricultural Economics author of standard textbooks in the areas of agricultural finance and resource valuation gubernatorial candidate for the state of Iowa and dr. Murray was recently made a fellow of the American agricultural economics Association dr. Murray how did you become involved in the agricultural economics profession was there a particular experience event or individual that influenced you yes it goes clear back to the Year 1923 I was a student at Ko College junior year at Coe college and I was trying to think about a career and one evening in the newspaper there was a headline on the farm page of the paper and the headline had to do with the problem that agriculture was having in getting more exports and the author of the article was professor EG north of iowa state college at that time who was head of the department of agricultural economics that headline and that article was the thing that captured my interest and imagination because four years between the age of about 10 and 18 i had been working on my grandfather's farm in the summertime I was born in Cedar Rapids Iowa and it was really a city boy except that I've gotten this chain to work with my grandfather and his son-in-law on their farm and this experience on the farm + eg narses plea for low tariffs so that we could expand our agriculture got me started in agricultural economics and then of course from that interest when I graduated in 1924 I decided to go to Harvard University and get a masters degree and then see what I could do in the AG business world in getting low tariffs and increasing exports of agricultural commodities so that's where I started in agricultural economics could you briefly discuss your educational background and professional activities it's interesting that with the background of eg nurses plea for a better agricultural business situation for farmers I decided that I needed to get some good education and I'd heard that Harvard University was the top university for economics so I went there after I graduated from college in 1924 and in June of 1985 which is almost exactly 60 years ago I got my master's degree and at that time the question was what should I do well there was an opportunity that developed to do some teaching and so I had that to consider but that wasn't exactly what I wanted to do because it was general economics and I wanted something in agriculture so I remember writing a letter to professor CL Holmes CL Holmes was head of the farm management and economics work at Iowa State College and I told him I was getting a master's degree and I wondered if there was any opportunity to do some more graduate work but to get a job well Holmes wrote back right away and said yes he said there is a half-time assistantship here at Iowa State College and with your training you're eligible and we'd like to have you it'll pay $100 a month for nine months and you will have an opportunity to spend half of your time taking coursework and the other half the time will put you to work on some research project so I came there in the fall of 1925 and the first thing they put me on was studying the financial situation they took me over to the courthouse in Nevada and they started me out checking the mortgages and finding out how much the farmers owned on their land and how much they owed on their livestock on chattel mortgages to the local banks this experience was fascinating because it showed that during the boom of nineteen eighteen and nineteen armours that had taken on an awful lot of debt the same that they did in the 1970s here just a few years ago so there's a lot in how I started out sixty years ago and about the same situation that someone would start out today and I think that some of the young people some young AG economist who are starting out today might have a big future in terms of the opportunity because the opportunity was sure good for me I not only did some graduate work but got a as the result of the research I got a bulletin out in Iowa State University in that first year and the bulletin had to do with the financial situation in five areas of the state the four corners and at Story County with county seat of Nevada we got the records and these records showed that there really was a serious financial problem on the farm well as far as education is concerned I went up to the University of Minnesota to do some coursework in 1929 and 1930 and continued to do research work at Iowa State after I got back and got my PhD degree from the University of Minnesota in 1932 and that completed my formal education but the interesting thing is that ciel homes put me to work on that financial situation with one of the professor's by the name of Fred Garlock and Fred Garlock was the one who gave me some of the detailed description of the things that I needed to do and it was very helpful and it's rather interesting that the rest of my academic life was spent right in that very same field of finance and along with it the valuation of farm real estate which was one of the things that came out of my study of the finance situation was what's wrong with the way in which we've been appraising our land and putting loans on the land and the same can be true to some extent of the way in which we put loans on our land in the 1970s and the trouble we're having today it's difficult apparently for people to learn about two generations and then they people forget so that's the story at least of the education then how I got started in agricultural economics and then agricultural finance and in farm appraisals contrast for me if you would the severity of the situation in the late 20s and early 30s to those that exist today there's an interesting contrast between what happened us back in the 60 70 80 years ago and what's happening today there's some similarities we had a land boom after World War one and land went up clear up to $500 an acre then this time in the 80s that the same land went up to four thousand dollars the naked we did it up eight times higher this time but when you think about prices and so on it was just about the same situation in terms of relativity then he rate the result of the land boom after World War one we had from 1920 until 1932 we had a continuous down down down in land values it was a slow process not nearly as fast as what's happened this time this time it was the not a land boom of two years it was the land boom that lasted from 1972 until 1981 in the World War one it was 1918 and 1919 and the first part of 1920 but in both cases we went we went off our rockers when we who were buying land we didn't consider how things couldn't change anybody working in farming should know that conditions are not going to stay stable they're going to go way up and they're going to go way down and in the nineteen seventies people began to think that they never would go down so that's the situation then well it was pretty much the same after World War one in 1918 there had been no downturn since way back in the 1890s and people had got the idea that farming would never go down and as a result of that they lost their bearings and began to pay prices that were out of line with income well what I what I what I can say now is that looking back at the my at the 1920 1932 period it was a period of what we call its second mortgage depression to start with people had both the second mortgage in the first mortgage when they bought a farm they might have paid down will say 25 percent of that price for the farm and they took out a first mortgage for 50% and the second mortgage for the other 25 percent if you were paying a hundred thousand dollars for a farm you put 25 thousand in and you got fifty thousand on the first mortgage and twenty-five thousand on a second mortgage well from 1920 until about 1930 we had a lot of problems in Iowa because we couldn't pay the interest on our second mortgages and whoever had a second mortgage usually took over the farm or foreclosed and so we call that the second mortgage depression and that lasted for about ten years and then we had as many of you know the big depression in the 30s 1932 and the banks all closed and had to be reopened that's when we hit rock bottom the average value of land Anaya was only 88 dollars an acre then contrast that with the average value in 1980-81 when we got up to two thousand dollars on an average value of farm well any rate when 1932 came along it was the first mortgage depression you couldn't pay the interest on your first mortgage and that made it real serious and Congress got busy and there was a lot of activity and that's the time when I was very busy working on organizing what we call debt advisory committees in the state to help negotiate settlements prevent foreclosures because there was no use of a lender taking over a farm if there was a good farmer on there the lender in many cases found out that he could lose less money if he kept that farmer on there and shaved down the loan and in the eventually that farmer who had put a lot of money into that farm would do a lot more to save it and to pay the lender then a tenant who came on later if the fight the lender foreclosed the lender wouldn't have near the support for the farm well that gives you a little of the contrast between what we're going through in 1985 with what we were going through in 1932 to 1935 okay we we've discussed some of the problems what were the contributions of the agricultural economics profession in the early days and briefly describes if you would for me what groups or individuals were basically responsible for his contributions it was interesting that the farming community Congress and interested people lenders and others look to the agricultural economics group for help they wanted information for example these studies that I had made of Finance I finished my doctor's degree in 1930 and had the information on the situation in Story County the central county in Iowa and this information was grabbed by people they wanted information they wanted to know today with our polling devices and with all our technological know-how in getting information it's been much we've had much better information than we had back in the 1920s and 30s but we did have some and of course the fact that I had been working in that field gave me an opportunity to use that information and get it out because people wanted it what was the involvement of the Bureau of Agricultural Economics in the Farm Credit administration at the time there was in the result of this Depression resulted in really three things happening first of all in our own Department of Agricultural Economics at Iowa State where I was working on finance we had a series of research projects on the depression and we gave out a number of bulletins with information not only on what the facts were but suggestions for how it could be improved I'll give you an example from my own field because I knew that better than any other we worked on a better method of appraising land because we found in our studies that the lenders had loaned too much money on the poor land compared to the good land and that a larger proportion of their loans to poor farms were foreclosed than for good land what had been wrong was that the appraisers the people who were determining how much should be loaned didn't see the third dimension the depth of the soil all they saw was the surface and as a result on a poor farm that might have had gravel underneath they never investigated that and they loaned too much money on that farm with poor soil as long it was level or fairly level they would loan heavily on it and there were a lot of farms poor farms with poor soil that had loans that were far too heavy so we got out of Bolton on we called it the productivity method of valuation in which we stress the fact that in valuing land the soil was very important and the income you could get from that soil was tremendously important in determining its value don't be misled by the sale price find out what the farm is capable of producing and that's one of the things that we did during the Depression and I can remember the Aetna life insurance company gave us some money to carry out that particular project now the other one of the other things was the Department of Agriculture in Washington which expanded and was also very active at this time in helping farmers and giving them information and also on the finance area and the third group which was probably more important than any other and that was the Farm Credit administration that was organized in 1933 they developed a program under Bill Myers and frosty Hill in which they got legislation so they could loan money to farmers to refinance their debts on the basis of normal value higher value than the depressed value of that time and through the federal land banks they made this credit available it was a marvelous program and in 1935 the Farm Credit administration in biggle me and two going in and becoming their chief economist for a year and to work with them in this program of getting money out to the farmers I've always been impressed with the fact that they the government can do some things and do them well and in this case the Farm Credit administration did a remarkable job in refinancing farm debts I'll give you an illustration we'll take a farmer who has a $16,000 first mortgage that doesn't sound like much but that was a situation in the 1930s $100 an acre on 160 acres 16,000 and the farmer couldn't get enough money to pay the interest on that loan and so there was a possibility of foreclosure instead of that the federal land banks with the Farm Credit administration assistance sent an appraiser out there and will say that he authorized a double loan a federal land bank loan and what was called a land bank Commissioner loan of 12,000 now that twelve thousand dollar loan was four thousand short of what the farmer owed but it was all the farm could handle what happened was that we had these DEP conciliation committees or debt advisory committees that we'd set up in each county in Iowa and these committees would hear a case like this one that I'm just telling you about where the farmer owned 16,000 and the banks were willing to lend 12,000 the federal land bank would then the total of 12,000 well cash was so short in that period you have no idea how little cash there was around that 12,000 dollar carrot you might say was so tantalizing that the insurance company or other lender would say well if you can get me 11,500 I'll give up this $16,000 loan and the other $500 you satisfy the other creditors and there'll be no foreclosure and with these debt conciliation committees helping on cases of that kind we got a lot of settlements which prevented foreclosures and I know men who were certainly happy because their farm which was at that time worth $100 an acre soon became worth two or three hundred dollars an acre and of course recently was up to three thousand dollars an acre but now has been going down recently but any rate we had a fascinating experience and one final footnote the debt advisory committees that we had were small committees usually made up of uh maybe three people one would be a someone maybe a retired judge or a retired lawyer who had legal background another would be a finance person who had retired or was well respected in these community the third would be a retired farmer so when the farmer who was in debt and the land the creditors went to this committee they were going before a committee that had know-how expertise in giving suggestions the committees had no authority they weren't paid anything but they did this in order to help the general situation in their area okay given your involvement in Ag finance and credit resource valuation after the depression of the 30s I naturally found myself in a less intensive critical demand situation and we started the course in farm appraisal farm valuation and then the course in farm finance well the course in farm finance actually had been going but we gave it a an update and as a result of the notes that I built up I decided that we needed a book a textbook in those fields and this was the origin of the two books that I had a chance to be in on because there wasn't much of anything of that kind existing it was a product really of the depression and came after the Depression was over we also started in 1941 a series on when value estimates in order to give people some idea what their farm was worth each year on November first we would ask the broker's land real estate brokers in the state what the value of land was and with their estimates we were able to put together a survey that eventually gave a value for different quality land in each county of the state of Iowa each year let's talk for a minute about the attitudes of producers students or farmers towards work done by agricultural economists and specifically could you contrast attitudes that existed in the early days to those that exist currently it was been fascinating over the 60 years that I've been involved in Ag economics to notice the growing interest in agriculture and I might mention the fact that I was pretty aggressive in my early days about trying to get AG economics to people and I wrote to that country gentleman which was the major farm magazine at that time this was in the 1930s and I suggested to them that they needed a column or a page in their magazine on farm management or on agricultural business they had nothing of that nature it was either on crops or soils or livestock but nothing on the economic angle and I remember getting a letter back which discouraged me I guess in which they said they didn't think that the people were interested in this kind of information and unfortunately they were not interested in my contributing anything in this area and wasn't too many years after that that the country gentleman went folded went bankrupt and I always thought well they just didn't keep up with the times people wanted to know something about the financial situation AG business was AG business and it was interesting to not only the farmers but to consumers also in the early days was work done by economists recommendations and so on and so forth are they well perceived by producers there was a growing interest and of course the thing that showed the growing interest was the fact that in the newspapers and then magazines like wallace's farmer and successful farming out here in this area farm journal a growing amount of agricultural economic information and at for instance an iowa state college when I first went there the Economics Department was in two rooms at the top of old Curtis halls well we occupy pretty much a whole building today there's just a definite demand and the demand has grown okay let's talk about Anika analytical tools used by our profession in your opinion which analytical tools or techniques have had the greatest impact on our profession and were these tools generally accepted when they first appeared the calculating machine of course has been the standby and of course recently the computer has come in there's been a growing use of the statistical tools and it was my good fortune when I started out in the 20s to get gather financial information that there was a machine called the Hollow Earth machine and it had a system of cards that you punched holes in and when you punched the holes in the card you did it to show the data that you had it had it had the card had 45 columns and you could get 45 columns of information if you if you were putting down amounts and you used four columns for like three thousand four hundred and sixty-five dollars that use four columns and you had 45 columns but then after you got these cards with the holes in them you could run them through machines and the machines would add and subtract and make all kinds of calculations for you well when I had my doctor's thesis on the financial situation in storey County I used 25,000 of those cards and my thesis was largely a collection of data that I got by using these machines which I did because of the statistical laboratory at Iowa State College which helped me in getting into this new type of machinery it was interesting that the IBM company International Business Machines was just starting up at that time while they'd been going for some time but they were interested in this these machines with the cards and they put out a magazine called thing thi NK and one of the tragic parts of my life is that I didn't take that thi NK seriously enough because if I had I would have invested the few nickels and dimes that I hadn't saved I'd invested it in some of the IBM stopped because these machines were fascinating and they did a marvelous job but instead what a few nickels and dimes I had I bought some US Steel instead of some IBM and you can imagine if I bought IBM and all this splits and things that have happened since I probably would have gotten so rich that I would have quit AG economics fortunately in one respect then I can say that maybe it was okay that I didn't invest in IBM because I've enjoyed AG economics and then and have no regrets the fact that I have been able to get a great deal of satisfaction out of watching the development of Ag economics know the tools of the economists are two major ones they are the course the statistical calculating tools including the computer but they also are what you have in your mind there is still no substitute for logical thinking there is no substitute for the quality of putting things together and working out solutions in your head we sometimes are talking about how much we can get out of a machine and the machines will be able to do thinking and intellectual work and so on but most of what we'll be able to get out of the machines will be what we put into them and how we with our head with our brains how we ask them to do things you can't get away from the intellectual requirement quite often we read about the qualitative versus the quantitative evolution in the profession of agricultural economics was that evolution calm peaceful there's been a lot of discussion about the qualitative versus the quantitative in many respects I suppose the quantitative the statistical the making of models the development of statistical a economics has been more more impressive and has involved people more than the qualitative the philosophical my own view is that they both are necessary and that sometimes we get enamored with our statistics and forget that the qualitative the thinking part of it is going to be and deserves to be equally important okay having had a very rich and incredibly diverse career what would you tell someone who is about to embark upon a career in agricultural economics about the recipe for success well my experience has been interesting when I first started out teaching I taught students in Ag agriculture economics and most of those students were from the farm and what was interesting to me was that practically all of them wanted to go out into business to get a job with John Deere or Swift packing or Quaker Oats or some some fertilizer company very few of them were interested in going back to the farm even though they're dead or their father of the girl he married had a farm they were not attracted to the farm and the reason they worked was because the farm had no challenge it was going back to a routine type of job of getting up in the morning and harnessing those horses and sitting behind a plow all day or forking manure but something that was lacking and that something was a challenge fifty years later when I quit teaching it was interesting that most students in my classes who came from a farm were interested in going back to a farm by that time the farm had become a challenge it was three or four times as large and it required all kinds of inputs it required strategy and marketing in farm management in the use of fertilizers and seeds and things herbicides insecticides it was big bidness and there was challenging business and although we have fewer farmers we have farmers who are entrepreneurs in the real on a sense of the word so one of the things that I can say is that farming itself is going to be from now on just as it has developed a real challenging job but that's not the only one for Ag economics what's interesting to me is that most large business concerns that are in Ag agricultural business of one kind or another they want AG economist so when I go back over 60 years I find that they're never in all of those 60 years has been any extended period when a fella couldn't get a good job in Ag economics which would be equal to his ability you didn't have to take an inferior job there was always something in the last 60 years available we never had a surplus of Ag economist that I can remember that didn't very soon disappear people could get jobs and then it couldn't get jobs teaching and research they could get them in Ag business various agricultural businesses and as I look ahead that is going to continue okay let's look inward for a minute Bill Murray has had a very distinguished career in terms of teaching in terms of research in terms of community service political activity what enabled dr. bill murray to jockey all these different activities and become such a success well that's debatable you said they're debatable but there's a there's a lot and being born at a at a time which gives you to do certain things I was born at a time when when when I reached the age of 21 years there happened to be a tremendous openings in Ag economics there were very few people in the field and it just happened at that time there was a demand for them one of the things that I feel about person in his career is to analyze it in terms of his own ability and that the opportunities that are coming along I could have gone into teaching economics instead of AG economics and I would have had a very attractive career compared to the one that I did have before I graduated I had thought well I don't want to get into teaching because teaching is outside the area in which things happen but once I got into the work in Iowa State College I found that you could get involved in research and in action and making recommendations and in doing things and I feel today if I was if I was going into AG economics today that I would certainly want to specialize specialize in something in which I would become as competent as anybody there are so many different specialties that you can get into even for instance in the area of computing just take this whole business of farm lending there's some specialties there that a person could get into in farm appraisal in the fields that I was in I think the person today might find it a little more difficult than I did to get involved as fast but with all the tools that you have with the computer and with the marvelous things that you can now do not only with the computer but with mathematics and statistics I feel there's a tremendous opportunity today for young people in Ag economics I like to think that this world is developing fast and the reason it's developing fast is because there's so many tools being made available and what it's necessary for the young person who's graduating like you Jim is to take into consideration your own abilities your own interests and then find especially and concentrate on it and then your doctor's thesis probably goes so far into that particular specialty that you'll know more than anybody else about that particular field now once you've done that the next thing you've got to do is to find somebody who wants that specialty and that's not always the easiest thing but on the other hand it's possible that there's somebody someplace with all the various angles new angles on development in other words what you want to do is to find follow the new angles remember that in 1925 instead of going into general economics I went into economics and economics is a specialty of general economics so I'm very much concerned about the present agricultural economic graduate students concentrating on especially once I asked my son who's a orthopedic surgeon I said maybe we should have general practitioners in medicine instead of some of you people who specialize so much though he said specialization is the wave of the future he said you specialize he said to me he said you didn't become a general he cannot economists you specialized in Ag economics well then you didn't you didn't just say AG economics you decided to specialize in land economics and you didn't decide just on land economics but you decided on farm valuation and farm finance as two very small relief but now specialties in the field of land economics of agricultural economics so he proved to me pretty much by logic that if you want to go places specialize okay given the fact that you have essentially observed the entire historical progression of the profession I'm sure you've observed pitfalls problems that have her all's various times if you were to counsel the profession on what to avoid what direction still avoid what would you say what are the pitfalls well that's a little difficult I think I've given you a positive thing and that is this business of specializing I suppose the pitfall can be that you get so enamored with some specialty that has no relevance to the opportunity to have a good job that you can find yourself out on a limb sometimes and there have been some people who have gone too far in a specialty in which there really was no real purpose in other words you've got to keep your eyes open you've got to see to it that what you do is going to be what somebody is going to want and that goes back to the fact that once you get trained you've got to find a job if you if you're interested in following the profession of some kind and want to do a good job you've got to see to it that there is going to be some demand for the kind of work that you want to do okay since you retired from actively teaching in 1974 from the Department of Economics at Iowa State University you've been intimately involved in the Living History Farms briefly tell me about how you develop this brainchild and actually got the thing implemented there's a combination of things that result in the Living History Farms while I was working on research I was always a bit critical of the AG Experiment stations because they didn't stick their neck out on new experiments and having an experimental farm and trying things so I was always interested in that aspect I was also fascinated with the career that my grandfather had who took land over in Tama County and developed a farm out of it it was nothing but Prairie there's a big story in our heritage in the people who have gone before us out here in the Middle West and so it seemed to me someday we ought to tell this story not only of what had happened in the past but also looking ahead to the future and so what we're doing down here is developing what we call a 300 year walk we start with the Indian site of 1700s and how the Indians raised corn and how they lived here and then we go to the Pioneer farm and we have an actual operating pioneer farm each day there's a meal cooked in the cabin log cabin and the farmer has oxen and he uses them and you can see them this gives people some idea of how their great-grandfather's or grandfather's operated and then you can go to where we're sitting today right here at the Flynn mansion because this house where we're sitting was built in 1870 and Martin Flynn who built this house had a big Shorthorn herd of cattle and he was quite an operator in 1870 and we have a little town called Walnut Hill right next to the Flynn mansions to show people what the town business was like in the early days and then we can go over to the 1900 farm which we operate which many people love to see who are older because they can relate to that farm and the farmer over there does the things that the 1900 farmer does he puts up hay in the barn the way they did it when I was a boy they have a threshing machine they thrash their oats like I used to be involved Tracy knows my grandfather's farm and when I was on the farm I always was dragged up as being the best straw stacker at threshing time and the reason they dragged me up was nobody really wanted this back straw but since I was from the city they got me to go into that straw pile and tramping down in the center so it would shed water and I I fell for the bait and I became the best raw stacker in North Tama County well those days are interesting there was there's something to that we ought to preserve and so when I before even before I retired I saw that I wanted to do something after I retired and fortunately and here again I think luck was with me the time was right and we've raised over five million dollars here from various ways and have got the Living History Farms here in Des Moines operating we haven't gotten near the things that we want yet but we're in we're on the way and the most interesting phase of it is this farm of the future farm demonstrations of the future where we're trying to show some of the new things we're just completing we have our solar farm home where we're we're doing some of the newest things for example we have a saltwater tank where we collect the heat during the summer and hold it to use it in the winter there are all kinds of new things we feel that a museum not only shows you the past but it also should go into the future to show you what may happen this is the kind of thing that we're doing down here at Living History Farms and it's fascinating it's marvelous I've had really two lives one mieka not egg economics teaching life and now this Living History Farms life and I'm I'm really very fortunate that I've been able to get in on this type of thing it's the same way as I got in on the economics in the beginning before it had really developed people are interested in their past and we need an Iowa someplace a show place where we can show what has happened here in agriculture over the last hundred and fifty years in this Middle West all the way from the open prairie to what we have today and not only that what we may have in the future okay we have several minutes left is there anything you'd like to add as we close up this session yes there is I've been very much impressed with the American agricultural economic association progress when you're involved in something as I was in the organization in its earlier years the period in which I was most active was from 1930 to 1950 those 20 years and in those 20 years we were just a young organization unfortunately fortunately we were able to blend together we put together two groups the agronomy farm management group that were interested in practical agriculture and the AG economic the group that came in from economics more philosophical and we got those two together and we accomplished something which I would call similar to hybrid vigor heterosis this geneticist called it you get two groups of different ideas but if you get them together and blend them together you get an increase in productivity hybrid vigor and that's what the Association has had and has had all those years I know when we had we had our annual meeting in 1948 at Lake Geneva in Wisconsin I at that meeting we had the principal speaker and the president was responsible for getting the principal speaker and you wouldn't guess who I had I got eg Norse the man who inspired me to go into a economic and at that time he was the first president of the Council of Economic Advisers in that case for President Truman and he came out and gave us a marvelous present our marvelous address so what I'm hoping is that the Association will continue as it as it is doing in showing this hybrid vigor of blending many different types of activity extension teaching and research and not only the statistical side but also the qualitative side of economics this so the future of our association is in continuing in that direction of including people who are out in business AG business as well as the man who is in the ivory tower and the man who are doing research in economics the Association has a great future and I've been I've been so satisfied and proud of the fact that I had a chance to be in it thank you thank you