Multicollinearity and a lack of degrees of freedom are problems in simultaneous systems, particularly in large models where the number of predetermined variables may exceed the number of observations. Such problems are somewhat less obvious in the small and medium-sized models typically estimated by agricultural economists. Thus, estimators designed to cope with the degrees of freedom (undersized sample) problem have received little attention in agricultural economics applications relative to macroeconometric uses.

Retail firms in rural small towns survive because of the basic goods and services they provide to the residents in and within driving distance of the town. Yet, many small town firms have been forced to close due to migration of people to larger cities. The economic problems associated with the migration have caused federal and state governments to be deeply concerned. The remaining small retail firms do provide a foundation upon which to stimulate rural economic development and thus they are important to the nation's economy. They provide income and employment; they pay local property taxes, and they provide the personal interest of a small entrepreneur in the development of his community, a characteristic rarely found in the larger urban centers.

Three major problems appear common to recent research efforts aimed at measurement and assessment of the adequacy of community services. These include:

1. (i) difficulties and inconsistencies which relate to the definition and interpretation of utilization behavior,

2. (ii) econometric misspecification—e.g., omission of critical variables affecting needs or use—, and

3. (iii) choice of inappropriate estimation technique when the dependent variable (e.g., use or non-use of the service) is dichotomous.

Agricultural land in rural-urban fringe areas has received strong competition from expanding urban communities during recent years. Much of this urban growth has occurred haphazardly and has removed many acres of prime agricultural land from production as the private land market has failed to fully account for the social costs of land-use transitions. The impacts from these shifts in land use are felt by farmers, municipalities and the general public.

Economists have long wrestled with the problem of determining the value of nonmarket recreational activities. Knowing the value of a recreational activity could be helpful in at least three respects: (1) if the recreational activity is publicly provided, knowing the value which society places on that nonmarket activity would help in determining the appropriate level of public investment, (2) if a user charge for access to the recreational activity were necessary, a knowledge of the distribution of individual valuations would permit estimates of use (demand under alternative fees) and (3) to the extent that the resources involved in the recreational activity have other uses, knowledge of recreational values would help in determining the appropriate allocation of resources between the recreational activity and the other uses. Often the non-recreational activities already have dollar values established in markets; if the other uses are also nonmarket in nature, imputations of their dollar values would also be necessary.

In recent years, the topic of land prices has received considerable attention in the literature. Part of the interest stems from the importance of land as a factor of production in agriculture. Land prices have a direct influence on the ability of young farmers to operate and expand their operations. Thus, the interest in land prices by farmers, bankers and input suppliers is easily understood.

Economists play two rather distinct roles in the area of public policy. These roles might be characterized as analytical and operational. In their analytical role, economists develop models designed to evaluate alternative policy measures which either might be or have been adopted by a public agency. In their operational role, economists help develop the specific techniques and estimates necessary to make a chosen policy operational.

The property tax continues to play a major role in raising public revenues at the local level. While this tax contributed only 15.1 percent of all governmental (Federal, State and local) tax revenue in fiscal 1974, it accounted for 35.3 percent of local general revenue and 82.2 percent of all local tax revenue. It also continues to be especially important as a source of revenue for local schools with 57.4 percent of all local property taxes going to support local schools in 1969–70–the latest year for which data are available.