5/6 READINGS IN RURAL ECONOMICS 



Not infrequently the owner of a very profitable farm fails to accu- 

 mulate money. On the other hand, the owner of a farm that does 

 not pay any labor income may save money. 



The distinction between a successful farm and a successful 

 farmer is well illustrated by a farmer in one of the counties studied. 

 The farm is very successful, but the owner drinks and wastes all 

 that he gets. The neighbors do not consider his farm to be suc- 

 cessful, because the owner is not accumulating any money, and 

 they do not distinguish closely between a profitable farm and a 

 thrifty individual. This man's farm is very successful. It is no 

 fault of the system of farming that the money is wasted. The 

 farm produces the money. In other cases, a farmer may spend 

 his profits in educating his children and fail to accumulate money 

 as fast as a neighbor who makes less from his farm but who 

 saves all he gets. 



Financial success for an individual depends on spending less 

 than one receives. A farm is a financial success when it pays a 

 good rate of interest on the capital invested in addition to good 

 wages to the operator. 



A way of measuring the success of a farm. Labor income 

 defined. In order to compare different farms it is necessary to 

 have a way of measuring profit. The most accurate way of com- 

 paring is on the basis of labor income, or farmer's wages. Labor 

 income is the amount of money that the farmer has left after 

 paying all business expenses of the farm and deducting 5 per 

 cent for interest on the money invested in the farm business. 



An illustration of the method of figuring may make the point 

 clear. The averages for farms in Jefferson County are shown in 

 Table I. The average capital on these farms was $9006. This 

 includes land, buildings, stock, machinery, tools, feed and seed on 

 April i, and cash to run the farm. The average receipts for the 

 year were $1890. Any unsold products or increase in animals is 

 counted as a receipt. The average expenses were $735. This 

 includes all business or farm expenses. It does not include any 

 personal expenses, but includes the value of board furnished to 

 hired help. 



