Market Mechanics 57 



thereby become beneficiaries of uncompensated factor services.^ 



Many technical and economic factors in the reclamation of arid 

 land are at variance with the assumptions of competitive equili- 

 brium theory. Perhaps Teele has summarized these most succinctly: 



, . . both physically and economically desert land must be 

 reclaimed in large units. . . . Except for small areas here and 

 there, it is not physically possible to build irrigation ditches to 

 water single farms. Most irrigation farms are miles from the 

 streams from which the water for their irrigation is taken. A 

 stream of water only large enough for a single farm of 160 acres 

 would be lost by evaporation into the desert air or by seepage 

 into the desert soil long before it reached a farm only a few miles 

 from the source, while the cost of an independent ditch for each 

 farm would be prohibitive. Only by the use of large canals 

 watering many farms, is it possible to carry water through the 

 long distances necessary to reach the land far back from the 

 stream at an expense that is justified by the returns from the 

 land. 



Thus from the very nature of things, agricultural expansion 

 into desert cannot be accomplished in that gradual way that is 

 possible in other sections where single farms can be cut out of 

 forests or plains and developed gradually as there is demand for 

 their products. ^° 



Of less significance, perhaps, is the interrelation of resource uses 

 combined with indivisibility in production encountered by some 

 types of agricultural processing industries. Indivisibility contri- 

 butes to internal economies of large scale, and where the market 

 for output, or the supply area, is not big enough to accommodate 

 a large number of such enterprises, competition may suffer. Under 

 certain circumstances, only one enterprise for processing agricul- 

 tural output can be supported, and monopsony in the market at 

 the farm level results. For example, the processing of dairy 

 products and sugar beets and some types of fruit and vegetable 



* For similar examples of direct interdependence in the water field, see Hoyt 

 and Langbein, op. cit., p. 154; William J. Baumol, Welfare Economics and the 

 Theory of the State (Cambridge: Harvard University Press, 1952), Chapter 6; 

 and The Presidents Materials Policy Commission, Resources For Freedom, Vol. 

 5, 1952, p. 88. 



" R. P. Teele, "The Financing of Non-Governmental Irrigation Enterprises," 

 The Journal of Land and Public Utility Economics, October 1926, p. 227. 



