Agricultural pricing and environmental degradation

Abstract

The link between agricultural pricing and land degradation is often difficult to analyze empirically. The authors'understanding of how agricultural supply responds to changing prices in developing countries is incomplete. Even more incomplete is the author's analysis of subsequent impacts on the resource base sustaining agricultural production. Yet available evidence suggests that some important effects do exist, and much further analysis of them is warranted. The social, economic, and environmental relationships that determine the often countervailing effects of price changes on land use and management are extremely complex. Not enough is known about: (1) farming systems in developing countries; (2) open-access use and common property resource rights; (3) land tenure regimes and security; (4) access to technology and other farming systems information; (5) the distribution of wealth and income; and (6) coping strategies for variable climatic, economic, and social conditions. All these factors influence how rural households respond to price changes in terms of managing land and natural resources, and often they may override the incentive effects of price changes. Changes in pricing policies will then be less effective in correcting resource degradation than other approaches to dealing with its underlying causes. Such approaches include providing better research and extension advice, improving property rights and management, and establishing more secure tenure or access rights. At the same time, it is wrong to assume that poor farmers - even those in resource-poor regions far from major markets - are totally isolated from agricultural markets. Virtually all subsistence households require some regular market income for cash purchases of agricultural inputs and basic necessities; many small farmers provide important cash and export crops. So changes in market prices often significantly affect the livelihoods of rural groups. Clearly, the economic incentives emerging from these impacts will affect farmers'decisions to invest in land management and improvements. Just because we do not always understand the economic and social factors determining these incentive effects does not mean they do not exist. Nor should the complexity of the links between price changes and resource management - which sometimes appear counterintuitive - deter further analysis of the role of agricultural pricing in land degradation.Environmental Economics&Policies,Crops&Crop Management Systems,Agricultural Knowledge&Information Systems,Economic Theory&Research,Agricultural Research