Technological progress has been steadily made in the history of mankind, and agricultural technology progress was no exception. While some economists view technological progress as an exogenous shock factor, others have attempted to explain it as an endogenous result of changes in various economic conditions.

1. Briefly explain what Yujiro Hayami and Vernon Ruttan's theory of endogenous innovation is and what historical facts are based on.
2. The following table shows the real relative price index of land, wages, agricultural machinery, and fertilizer estimated by Olmsted and Rod. Explain what this data suggests about Hayami and Rutan's theory of endogenous technological progress.

 

Land Value/ Wage Ratio Wage/Price of Machinery Ratio Land Value/Price of Fertilizer Ratio 1850 33.8 37.5 1860 40.8 54.8 1870 62.9 29.6 1880 64.7 53.8 25.4 1890 71.1 69.7 39.9 1900 63.8 78.8 46.7 1910 100.0 100.0 100.0 1920 72.6 153.8 92.7 1930 68.8 128.1 109.6 1940 57.5 104.6 78.9 1950 42.8 163.7 123.7 1960 56.2 183.0 289.3 1970 56.0 209.8 583.4 1980 98.9 185.9 811.7