In farming the ideal situation for economic efficiency is that when an individual makes a productive effort then that individual should get the full benefit of that productive effort. Anything less than the full benefit discourages the individual from making the justified effort. The collection of taxes or an individual being in a collective may result in discouragement of effort.

The distortion can be visualized by considering what would happen in a university class if all students scores on examinations and assignments were added together and each student given the average score. One can imagine how academic performance would suffer. Or, suppose in a restaurant five individuals who do not care for each other decide to share the bill equally. One can imagine how the nature of what is ordered under that arrangement would differ from what is ordered when each individual pays his or her own bill.

If individuals are put into a group decision-making unit with people for whom the individuals do not care then there may be a distortion leading to economic inefficiency. For the sake of explanation suppose ten individuals who do not care about one another are put together into a collective farm in which the gains are divided equally. Suppose each individual can produce $10 worth of output in an hour. Under individual farming if an individual works an addition hour that individual gets $10. But in a collective of ten that individual gets only one tenth of $10; i.e., $1. It is essential to note that the cost of the labor effort of the individual in the collective is fully borne by the individual.

In a collective, costs may also get distorted. Suppose a tool costs $20 and this is deemed too high for for its benefit. Under individual farming the tool is not purchased. But in a collective of ten the tool may get purchased because the cost is shared among the ten. Thus collectivization greatly distorts the effective prices thereby decreasing productive effort and hence output. On the other hand collectivization results in the excessive spending because the price of inputs is similarly distorted.

But people care not only for themselves. They may care for specific other people such as family and friends. In collective farming if the benefit on an individual's effort goes to others who the individual cares about then the discrepancy between benefit and effort is reduced.

If among the ten collective members each member is part of a couple then the benefit of an hour's effort is $1+$1=$2. Thus the distortion of the benefit is in a ratio of five to one rather than ten to one. This is less of a distortion but still a distortion.

There may be potential economies of scale that the collective could benefit from but the production of the collective is hampered by the discouragement of individual effort. And the nonlabor costs tend to be excessive if individuals have any say in their determination. It is therefore an empirical question as to whether or not the economies of scale offset the discouragement of production and the encouragement of excessive costs. The rule of thumb for collective farming is that the yields are only 50 percent of the yields of private farming. Private farming may not be farming by one individual. Most likely private farming is family farming.

Individuals do belong to groups such that the well-being of the other group members is as important as the well-being of the individuals themselves. In modern times in developed economies the nuclear family constitutes such a group. In traditional societies it is the extended family. In ancient times the tribe constituted such a group. It is very natural for such groups to be the very basis of production.

Land Tenure in Mexico

Agriculture was independently discovered in the New World in among other places in what is now Mexico. This agriculture revolution in Mexico was based upon the corn plant. Social life at the time was tribal; it was very natural that corn cultivation should be tribal. The land was farmed tribally and the control of land was tribal.

With the Conquest the land was apportioned feudalistically among the conquistadores. The indigenous population was apportioned with the land to serve as labor on the conquistadores' haciendas. The original meaning of hacienda was not remote estate but production unit for hacer, to make. Under such a system it was obvious that the indigenous population would not have tenure of land.

During the nineteenth century, after independence, the distribution of land tenure was one of the two most important political issues. The other major political issue was the role of the Catholic church in Mexican society. The two issues were tied together in as much as the Church was one of the major land holders in Mexico.

The Mexican Revolution of 1910-1915 seemingly resolved both of these issues. The Agrarian Reform Act of 1915 and the Constitution o 1917 asserted that all agricultural land is under the control of the government and that private agricultural land in excess of specific sizes should be redistributed.

The Ejido Movement

Two institutions were created for land redistribution. Ejidos were communally farmed parcels. Villagers acting as a collective could petition the government to be granted parcels of land. The government retained title to the land and so the had only the use of the land, not its ownership. In southern Mexico villagers could petition to establish that their ancestors had farmed a plot of land communal before it was taken to be part of an hacienda. If the government agreed with the petitioners it established a communidad agraria, agrarian community. The communidad agraria is essentially the same as an ejido and the government statistics do not differentiate between the two. Hereafter ejido refers to both ejido and communidad agraria.

The ejidos had the option of allowing its members to farm individually parcelas (parcels) and/or farm collectively. The parcelas often were often too small for a family to survive. In 1982 about 30 percent of the ejido members had parcelas. But frequently members had to work for hacienda owners.

There were widely different attitudes among the presidents of Mexico toward land redistribution and the .

Some presidents avoided land redistribution because of concern for what it would do to agricultural production. Although by the early 1990's there were thirty thousand ejidos and communidades agrarias utilizing about half of the agricultural land of Mexico, the three to four million members of these organizations were some of the poorest farmers in Mexico. The communal farming program of Mexico thus managed to take half the agricultural land of Mexico, devote it supposedly to the welfare of a small fraction of the population and still leave them in poverty. For most their income from their ejidos is a suplemental income. Their main source of income comes from working as laborers for large land owners or as seasonal migrants to the cities of Mexico or the United States.

Over the years some ejidos began renting land to other farmers. This very reasonable practice was illegal until 1992. In 1992 the government gave the greater freedom on how to use their land, coming closer to giving them effective title to their land. It was the title to the land that the poor should have received instead of the use of the land.

(To be continued.)