Miranowski, John A.

English

Research Papers in Economics

MORE FEDERAL  GOVERNMENT  INVOLVEMENT
IN SOIL CONSERVATION
John A. Miranowski
Iowa State University
Historical Development  of Conservation  Funding
It is important to indicate at the outset that I do not intend to argue
for  more  funding for  soil conservation  programs, but rather for  more
efficient  use  of the  resources  presently  committed.  Before  we can  go
very far in evaluating the impacts of soil conservation spending changes,
we  need  additional  background  on  soil  conservation  programs.  It  is
hoped that such information will tell us something about the objectives
of the program  and where opportunities  for improved  efficiency  exist.
In the  beginning,  soil  conservation  was  perceived  as  a  profitable
investment  that  was  only  limited  by  farmers'  ignorance  of the  pro-
ductivity  costs  of soil  erosion.  (2)  Thus,  if the  early  programs  were
capable of demonstrating the potential gains in long run income (through
educational  efforts,  demonstration projects,  and technical assistance),
the farmer  would  then  adopt  conservation  practices.  Initially,  cost-
sharing was added to the soil conservation program to induce farmers
to plant crops that were  not in surplus. Coincidentally,  the crops that
were planted in response to these subsidies were soil-conserving crops
such as legumes.
Thus the objectives  of maintaining farm  income  and  soil conserva-
tion were  effectively  integrated  for farm policy purposes.  During this
early phase of the conservation  program, it is important to reiterate,
the advocates  did not believe  that conservation did not pay.  Instead,
they were pursuing  a constitutionally  acceptable  means of maintain-
ing farm incomes.
During and  immediately after  World  War II,  increased  production
became the goal of farm policy. In keeping with this focus, cost-sharing
subsidies  were  expanded  to  include  production-oriented  practices.  Even
though  farm  surpluses  were  soon  to  return,  the  broadened  focus  of
cost-share  subsidies  continued.  During the  1950s  and  1960s,  produc-
tion incentives were combined  with off-setting programs,  such  as the
Soil Bank,  Cropland  Conversion,  and  the Great Plains  Conservation
Programs,  which  reduced  output  while  simultaneously  retiring  the
most erosion-prone  lands.
66Finally,  the  1970s period was an era of all-out production and  "fen-
cerow-to-fencerow"  planting.  More erosive  lands were  brought under
cultivation,  previous  conservation  practices  were  abandoned  for  var-
ious reasons,  and cost-share subsidies declined in real dollar terms.
Also, during the  1970s, the nonpoint source pollution resulting from
soil  erosion  was becoming  a major concern  and was  addressed in the
Federal Water Pollution Control  Amendments  of 1972  (FWPCA - 1972)
and in the Rural Clean Water Program (RCWP).  The rapidly  growing
export market for food and feed crops exacerbated the soil loss problem
both  from  the  point  of view  of soil  productivity  and  environmental
quality.
The 1980s have witnessed  a renewed  and overwhelming  interest in
the soil productivity  issue, coupled with a waning interest in environ-
mental quality  as it relates to residuals from agricultural  production.
Yet increased  budget-cutting  pressure  has led  the administration  to
propose substantial cuts in cost-sharing funds for soil conservation,  as
well as various other federal conservation assistance programs. These
proposed reductions  have  elicited  a tremendous  outcry  from soil  con-
servation interests,  who are seeking a substantially expanded budget
to  attack  soil  loss.  Not  since  the  Dust  Bowl  days  of the  1930s  has
concern  for soil erosion been greater.
Economics  of Conservation
Having exposed  the historical development of soil conservation pro-
grams,  I  would like to say a word or two  about the economics  of soil
conservation.  In the long run, a strong economic  argument cannot be
made for federal funding to protect soil productivity.  It is in the land-
owner's self-interest to maximize the return to the land investment.
Preliminary results of an Iowa  study indicate that land purchasers
do pay more for  less eroded land and for land with less erosion poten-
tial. These premiums that they are willing to pay closely parallel the
long term productivity  differential.  These  findings  are evidence that
the  land market  is  working  to protect  our productive  wealth.  Then,
why do we continually hear the call for government intervention  and
assistance? Generally, the purported signs of market failure are short
run phenomena:  cost-price  squeeze,  insufficient credit and high inter-
est rates, high land prices, and increasing tenancy.  The important soil
resource  decisions  are  long run  phenomena  occurring  in a  dynamic
environment.  Soil conserving  investments  are not instantaneous,  nor
need  they  be.  Topsoil  formation  is  an  on-going  process  that  is  fre-
quently ignored. If we are losing productive capacity, this factor would
be reflected in increasing prices for the remaining productive  land.
There are a couple exceptions  to the argument against intervention.
One exception  to this position, initially suggested by Ciriacy-Wantrup
(1),  is the need for  a  "safe minimum  standard"  for the protection  of
soil productivity.  Given uncertainty surrounding future food demands
67and supplies, this phenomenon is akin to an option demand for future
productivity.
For example,  Malthusians  argue that technical  change  in agricul-
ture is slowing and that our great strides of the past cannot be dupli-
cated in the future. Thus to satisfy future food demands, more cropland
would be needed. Although these individuals ignore the biotechnology
revolution  and its enormous potential  in agricultural production,  un-
certainties  concerning future productivity do persist.
The strongest argument for public intervention and funding for soil
erosion control is for the protection of environmental quality. The mar-
ket  system  does  not account  for  off-site  impacts  of soil  erosion;  the
market  fails  to  recognize  the  externalities  associated  with  erosion.
Such  impacts  may  destroy  fish and  wildlife  habitats,  reduce  recrea-
tional  opportunities  and  flood  protection,  increase  water  treatment
costs,  and  eliminate  amenity  resources  important  to  all  of us.  Yet,
these external  effects are receiving little attention.  Secretary Block in
his  preferred  program  has  set  priorities  for  conservation  spending.
Again,  protection  of productivity  is  first on  the list and the  off-site
impacts  are  last,  unable to  be  funded because  of budget  constraints
but possibly benefitting from productivity-enhancing investments (i.e.,
"trickle-down"  impacts).  Because  the externalities  are ignored  in the
marketplace,  commodity  prices  do not  reflect  the true  social  cost  of
production.
An argument may also be made that society's interest in promoting
farm exports  to generate foreign exchange justifies public  investment
in maintaining  soil  productivity.  To the contrary,  I would argue that
foregone  productivity,  or the prevention  of such,  is  a private  cost  of
production.
The  background  that  I  have  presented  is  probably  sufficient.  For
some of the reasons listed, we can probably justify the current federal
involvement level.  I am not opposed to federal involvement, just to its
current form. To make my case for substantial revisions in the federal
approach,  the  1978 ACP Evaluation  will be considered.  More specifi-
cally, the distributions of erosion, subsidies, practices,  costs, and farm
size will be discussed.
Distribution of Erosion
My purpose is to put the soil erosion issue and the need for additional
funding into the proper context. Based on the  1977 National Resource
Inventory data (5),  which quantifies the seriousness  of the soil erosion
problem,  only 7  percent of our cropland was suffering  serious threats
to  long run productivity  and  another  16 percent  was  suffering  mod-
erate threats.  A moderate threat is defined as an average annual soil
loss of 5  to  15 tons per acre  and  a serious threat  is  15 tons or more
per acre per year. The 1978 Agricultural  Conservation Program (ACP)
Evaluation  (4)  reported  even  lower estimates of 4  and  9 percent,  re-
68spectively.  Even though any loss of productivity should not be lightly
dismissed,  the location  of the problem  is more  concentrated  than we
are led to believe.
Distribution of Subsidies
I do  not oppose  public  funding  for soil  conservation.  Rather,  I  am
concerned  about the way public funds are used and the priorities that
we  have  established.  It is  not time to ask  for  more funding  for  soil
conservation,  but rather, it is time to demand that existing monies be
better  spent.  The  Corn  Belt  states  have  36  percent  of the  cropland
identified by SCS as suffering moderate and serious productivity losses
from sheet and rill erosion.  (4) These same states receive less than 18
percent  of the cost-sharing  and technical  assistance  funds for  conser-
vation,  a smaller share than they received  40 years ago.
Urban states  of the Northeast have  less than 4 percent  of the  crop-
land,  output  and productivity-threatening  erosion,  and they  receive
more than  10 percent  of the conservation  funds.  The  distribution  of
ACP payments among states has remained almost unaltered since the
initiation  of the program  in  1936,  even  though crop  production  and
the associate  erosion problems have become more concentrated  in the
more productive  agricultural regions  (e.g., Corn Belt).
Distribution of Practices
Another  dimension  of soil conservation  spending  that demands  at-
tention is the present inefficient  use of cost-sharing dollars. The  1978
ACP evaluation  (4) found over 52 percent  of the erosion  control prac-
tices installed  on lands eroding at less than 5 tons per acre per year.
Less than  5 tons is  considered  tolerable and not threatening to  long
run  productivity  of the land.  Moderate  erosion  (5-14  tons/acre/year)
threats were  occurring  on  9  percent  of the farmland,  which  was  re-
ceiving  27 percent  of the soil  conservation practices.  Lands suffering
serious  erosion threats  received  21  percent  of the  practices  and  ac-
counted for  84 percent  of the excess erosion  but accounted  for only 4
percent  of the farmland.
Costs of Soil  Erosion Control
The  average  cost over  the life  of soil  erosion control  practices that
are  cost-shared  vary  significantly.  Practices  on land  eroding  at  less
than  5 tons per acre  averaged  $14.87  per ton based on the  1978 ACP
evaluation.  (4) Estimates  for  other erosion  rates include:  $2.69  at 5-
10 tons; $1.47  at 10-15 tons; $.62 at 15-30 tons; $.43 at 30-50 tons; and
$.22  over 50 tons. Based on these estimates, the study concluded that
three times  as much erosion  control  could be achieved  with effective
targeting and the same level  of funding.
69Distribution of Farm Size  and Conservation  Practices
Cost-sharing  subsidies  are  distributed  in  close  proportion  to  the
number of farms in various size  categories.  Based on the  ACP evalu-
ation (4), farms under 300 acres received 65 percent of the cost-sharing
practices,  contained  71  percent  of the  farms  and  17  percent  of  the
farmland. At the same time, farms over 500 acres received 20 percent
of the practices,  contained  16 percent  of the  farms and  72 percent  of
the land.
Soil  conservation  problems  are  distributed more  according  to land
area than to farm numbers.  The distribution of cost-sharing  practices
tend  to  coincide  more  closely  with farm  numbers.  A  $2500  per year
payment  limitation  at the time  of the  evaluation  may  contribute  to
the high correlation  between farm size  and practice use.  (4)
If we target conservation spending in the future, conservation efforts
may be  concentrated  on  larger  farms relative  to their smaller  coun-
terparts. Such a reallocation  of conservation  funds may be  unaccept-
able on distributional  grounds.
Policy  Implications
Given the economic justifications for soil erosion control funding and
the dynamic  nature  of the  soil erosion  problem  discussed  by Schultz
(3),  a strong case can be made for action at the national as opposed to
the state or local  levels. The following points are critical:
1. The  proposed  block  grants  will  be  even  less  flexible  than the
current  cost-sharing subsidies;
2.  If an  option demand  exists for  future  soil  productivity,  this de-
mand  is national  in scope  and has public  good characteristics;
3.  Many  of the  sediment  problems  are  pervasive,  crossing  state
boundaries.  Additionally,  these  problems  must be treated  on  a case-
by-case basis and they do not fall neatly  within state boundaries nei-
ther with respect to  demand nor to supply of environmental  quality.
Our national efforts need to be refocused both economically  and po-
litically.  The  Congressional  roadblock  to  reallocation  existing  funds
among states must be overcome. The lobbying efforts  by advocacy groups
(e.g., National Association of Conservation  Districts, construction con-
tractors)  for more money  for every  district, regardless  of conservation
need, must be tempered.
If we  continue  to  fund  soil  conservation,  we  must  recognize  that
erosion  is  a concentrated  problem  that  requires  a  targeting  of cost-
sharing funds. Also, sound criteria need  to be developed for targeting.
Presently, the targeting effort is too dispersed,  too small, and too  gen-
eral  with respect to criteria.  If our goal  in funding is improved  envi-
ronmental  quality, then the  focus  of our  efforts  should change.  Such
a focus doesn't require keeping soil on the hillsides, except as it affects
70upland habitat, but rather, requires keeping  sediment out of streams
(e.g., filter-strips,  impoundments).
Finally, if soil conservation programs  were not designed  to improve
allocative  efficiency,  should we be using efficiency criteria to evaluate
them?  Possibly, such programs  deserve  evaluation based on program
objectives,  as opposed  to imposing our values on the evaluation proc-
ess.  Unfortunately,  the programs  are not an efficient  approach  to the
desired equity  goals, either.
REFERENCES
(1.) Ciriacy-Wantrup,  S. V., Resource Conservation: Economics and Policies (3rd ed.) University of
California Press,  Berkeley,  CA,  1968.
(2.)  Rasmussen,  W. D., "History of Soil  Conservation,  Institutions and Incentives."  in H. Halcrow,
E. Heady, and M.  Cotner (eds.), Soil Conservation Policies, Institutions, and Incentive. Soil  Con-
servation Society  of America, Ankeny,  Iowa,  1982.
(3.)  Schultz,  T. W., "The  Dynamics of Soil Erosion in the United States:  A Critical  View."  Agri-
cultural Economics Paper  No. 82:8,  University of Chicago,  March  1982.
(4.)  U.S.  Department  of Agriculture.  National Summary Evaluation of the Agricultural Conser-
vation Program,  Phase  I. Agricultural Stabilization and Conservation Service. Washington, D.C.,
January  1980.
(5.)  U.S. Department of Agriculture. Soil and Water Resources Conservation  Act -1980 Appraisal,
Part  I. Washington,  D.C.,  March  1981.
71

Department of Agriculture. National Summary Evaluation of the Agricultural Conservation Program, Phase I. Agricultural Stabilization and Conservation Service.

MORE FEDERAL GOVERNMENT INVOLVEMENT IN SOIL CONSERVATION

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