The Farming Industry is Growing Up

Twenty years ago, the Netherlands set about on a mission to increase their agricultural production to sufficiently feed its population in the face of a severe land constraint. The European country has roughly the same landmass as the US state of Maryland but is home to nearly three times as many people as Maryland. Over the last two decades, the Netherlands invested heavily in research and development projects designed to help them grow more with less. That is, less land, less water, less energy, and less waste.

One of the major innovations during this period is the development of vertical farming. Instead of sowing seeds, water, and nutrients over vast swaths of land, vertical farming takes place in large indoor facilities. Plants are grown in large rectangular containers of water, which can be stacked on top of each other. The seeds are planted on small discs of soil or composite materials and the roots grow down directly into the water. Then nutrients are added to the water and light is provided artificially. This allows the farmers to precisely control the growing conditions and maximize crop yields.

The result of this and other innovations is that in addition to producing enough food to feed themselves, the country is now a major exporter of many agricultural products. In 2021, the Netherlands exported over €100 billion worth of agricultural products including flowers, vegetables, dairy, eggs, and meats. And with technology improving every day, there’s nowhere to go but up.

Discussion Questions:

1. Draw a PPF for the Netherlands where their two industries are agriculture and manufacturing. Show how the PPF changes as a result of the development of vertical farming.
2. Discuss the opportunity costs associated with investing in research and development (R&D). What is the role of intellectual property rights in R&D?
3. How do exports affect consumer and producer surplus in a market? Who gains, and who loses?

Multiple Choice:

1. If a country has two industries, manufacturing and agriculture, technological improvements in the agricultural sector will cause that country’s PPF to

2. If a country has two industries, manufacturing and agriculture, technological improvements in the agricultural sector will allow them to produce more

3. In the market for agricultural products, an improvement in technology will cause

Sources| Washington Post: Cutting-edge tech made this tiny country a major exporter of food; Unsplash: Indoor farming of plants