Solutions to the Agricultural Research Funding Conundrum Richard Gray Department of Bioresource Policy, Business and Economics, University of Saskatchewan, 51 Campus Drive, Saskatoon, SK S7N 5A8, Canada (phone: 306-966-4026; fax: 306-966-8413; e-mail: richard.gray@usask.ca). 2013 CAES Fellows Address Good morning Friends and Colleagues. I must begin by thanking John Cranfield for the opportunity to address this esteemed audience today. In discussing my duties John and Lars Brink suggested that with my lengthy experience it was my duty to inspire the youth in the profession. While the objective to inspire is pretty clear, the means of getting there is the difficult piece, especially when I see so many people in the room that have inspired me over the years. I will take my assignment seriously but I’m not going to try to reinvent the wheel, or myself, this morning. I will share with you what motivates and inspires me in a job I’m fortunate enough to cherish almost every day. I want to discuss my favorite topic of agricultural innovation and try to convince you that this is a very important and intriguing economic problem to tackle. I have had the opportunity to explore this area with the help of some great students and colleagues over the past 20 years. Thanks to all of you for your support and assistance. Global food security has come back on the radar of many policy makers subsequent to the run up of agricultural prices in 2007. With growing evidence of a slowdown in agricultural productivity growth and the expectation that the demand for grain will double by 2050 (Tilman et al 2011), many world leaders are concerned about global food security. Meeting this challenge with today’s productivity levels would not only be difficult and expensive, with the amount of land, water, fossil fuel, and other resources required, it would be unsustainable. If there is a way to achieve global food security, it must lie in multifactor productivity growth that will allow the world’s farmers to produce more with less. If the world food system were able to increase multifactor productivity by 2% per year for the next 36 years, the additional production requirements could be met with no increase in aggregate input use, potentially providing the double dividend of food security and sustainable resource use. While 2% growth rates have been accomplished in the past, the recent slowdown in agricultural productivity growth suggests a need to realign institutions to reinvigorate research and accelerate productivity growth. When policy makers are interested in increasing research investment, some of the ob- vious questions for economists are: What are the social and private rates of return? What types of institutions should undertake the investment? How can incentives be altered to induce more innovation? In attempting to answer these questions, I’ll be making the argu- ment that research spillovers and information asymmetries limit the incentives for most institutions to undertake the optimal amount of research. I’ll present theoretical argu- ments supplemented by some empirical evidence that research spillovers are at the heart of the research underinvestment by the public sector, private sector, and producers. I’ll Canadian Journal of Agricultural Economics 62 (2014) 7–22 DOI: 10.1111/cjag.12035 7