Table Of ContentAgricultural Management and Economics
Co-ordinating Editor:
G. C. Rausser, Berkeley
Editors:
J. Anderson, J. Barnett, P. S. Carlson, B. Hallstrom,
S. R. Johnson, R. E. Just, T. V. R. Pillay,
D. Seckler, B. A. Stout, B. Yaron, P. Zusman
R. E. Just N. Bockstael (Eds.)
Commodity
and Resource Policies in
Agricultural Systems
With 49 Figures
Springer- Ver lag
Berlin Heidelberg New York London
Paris Tokyo Hong Kong Barcelona
Professor RICHARD E. JUST
Professor NANCY BOCKSTAEL
Department of Agricultural
and Resource Economics
University of Maryland
College Park, MD 20742, USA
ISBN-13: 978-3-642-75501-9 e-ISBN-13: 978-3-642-75499-9
DOl: 10.1007/978-3-642-75499-9
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© Springer-Verlag Berlin Heidelberg 1991
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Foreword to the Series
Agricultural Management and Economics is intended to present new
developments on the frontier of agricultural management and econom
ics. This series will focus on current and future developments that are
likely to make significant changes in production, natural resource sus
tainability, environmental quality, farming systems, food processing and
manufacturing, commodity markets, product distribution, nutrition and
diets, health risks, and the consumption of food throughout the
developing and developed world. The series is intended to serve a wide
audience of scientists, teachers, students of agricultural management
and economics, and agricultural industry decisions-makers.
Each volume, focusing on a particular problem area, will present an
integrated and clear perspective. The contributors to the volume will be
asked to analyze and summarize available knowledge on the specified
problem area. Conceptual frameworks for addressing the problem area
will be presented and empirical analyses needed to support specific solu
tions may be proposed. Contributors may also investigate current re
search needs and how these needs might be most fruitfully pursued.
They will report whatever findings they have generated in their research
and how these findings might be of significance to both developing and
developed economies. Accordingly, each volume will provide technical
guidance for researchers, academics and postgraduate students whose
interests coincide with the problem areas that are defined by each
volume.
The series is intended to appeal to interdisciplinary audiences and
should be useful both as an educational tool and for specialists in
various fields attempting to understand one another. The subjects that
will be covered in the first volumes of the series include: coordination
of agriculture and resource policies, food processing and distribution,
management of water resources, agricultural biotechnology, the GATT
negotiations and agricultural trade policy reform, management of
agricultural productivity in developing countries, the role of institutions
and organizations in the effective management of agriculturally related
natural and environmental resources, the design and implementation of
food security systems, etc. Suggestions for other topics are welcomed
from readers and leading scientists throughout the agricultural com
munity.
GORDON C. RAUSSER
Preface
Agricultural, natural resource, and environmental problems are becom
ing increasingly interdependent. For example, soil erosion is largely
determined by agricultural land use. Both water use and water con
tamination depend on land use and technology choice in agriculture.
In many areas, the fertilizers and pesticides used in agriculture are ma
jor pollutants of ground and surface water, having adverse effects on
drinking water and fisheries. Agricultural pollutants such as pesticides
also produce adverse health effects for agricultural workers and the
consuming public. On the other hand, the availability of water
resources and the value of competing land uses influence agricultural
production. Additionally, regional air quality problems may affect
crops and global environmental trends may have long-term implica
tions for farming.
Agriculture, natural resources and environmental quality are all
heavily regulated in the U.S., but they are done so by a vast array of
competing or unrelated agencies within the U. S. Departments of
Agriculture, Interior, and Commerce, the Environmental Protection
Agency; and numerous state agencies. Considering the large number of
bureaucratically remote public agencies involved and the pervasive in
terdependencies between agriculture, natural resources and the environ
ment, policies develop which are at best uncoordinated and at worst
conflicting and counterproductive. These policies have become sources
of controversy as different interest groups struggle to affect their im
plementation, as different agencies have fought for administrative con
trol and as legislative bodies have attempted to enact piecemeal
changes. The interdependencies and conflicts in agricultural and
resource policies are much talked about but studies which analyze them
are few and unsystematic.
This volume makes an assessment of which aspects of the interface
of agricultural and resource policy hold the most potential for increas
ed benefits from policy coordination. A variety of policy interactions
are examined - some from a conceptual viewpoint and others from an
empirical one. The institutional aspects of the problem are examined
in a chapter by Rausser and Foster who consider the role of institu
tional arrangements and special interest groups in influencing policy.
Conceptual papers by Gardner and by Antle and Just demonstrate the
importance that geographic heterogeneity has on the interaction of
VIII Preface
agricultural commodity programs and resource use. Empirical support
is provided in papers by Howitt, Johnson et ai. and Miranowski et aI.,
which come to different conclusions about the importance of coupling
commodity programs and environmental policies using analytical
frameworks characterized by differing levels of heterogeneity.
A second theme that emerges is the importance of the constantly
changing information base at the interface of agricultural and resource
policy. Wise and Johnson give evidence that changing information is
leading to a shift in groundwater polluting property rights reflected in
state pesticide policies. Cummings and Harrison discuss how the
definition of property rights for water in courtroom litigation has been
changing on a continuous basis as courts increasingly accept economic
analysis. An interesting extension of the importance of property rights
is provided by Horowitz and McConnell, who argue that the benefits
from pollution reducing policies in one sector can depend on the pro
perty rights in the resource sector. The role of information is the topic
of the paper by Chavas and the absence of information is a crucial ele
ment in Heal's paper on the greenhouse effect.
The empirical papers attempt to assess the magnitude of some of
the major interactions between agricultural and resource policy issues.
Just, Lichtenberg, and Zilberman show that commodity programs have
substantial effects on groundwater depletion in Nebraska. In another
paper, the same authors find large effects of the tobacco program on
public health. Strand and Bockstael show potentially large interactions
between agriculture runoff and fisheries in the Chesapeake Bay. Seger
son reports that benefits from air pollution reductions in agriculture
can depend heavily on policy regimes, and Leathers provides empirical
evidence from Maryland on the implementation of best management
practices. In summary, the results of the empirical papers suggest
several areas of significant potential benefits from increased coordina
tion of agricultural and resource policies, as well as from increased ef
forts to compile data necessary to quantify the crucial relationships.
RICHARD E. JUST
NANCY BOCKSTAEL
Contents
I An Overview of the Interface of Agricultural and
Resource Policy
1 Problems Confronting the Joint Formulation
of Commercial Agricultural and Resource Policies 3
Richard E. Just, Nancy Bockstael, Ronald G.
Cummings, John Miranowski, and David Zilberman
1.1 Prospects for Policy Coordination ................ . 4
1.2 Issues to Consider .............................. . 5
1.3 The Important Interfaces of Agricultural
and Resource Policy ............................. . 7
1.3.1 Water Conservation ............................. . 7
1.3.2 Soil Conservation ............................... . 9
1.3.3 Pesticide and Fertilizer Control ................... . 11
1.3.4 Surface Water Quality ........................... . 11
1.3.5 Public Health .................................. . 12
1.3.6 Regional and Global Air Pollution ................ . 13
1.4 The Challenge of Research at the Interface Between
Agricultural and Resource Policy ................. . 13
1.4.1 The Role of Natural Science in Resource
and Agricultural Policy Models ................... . 14
1.4.2 The Role of Institutions in the Agricultural-Resources
Interface ...................................... . 14
1.5 Complementarity and Consistency in Agricultural
and Resource Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
References ............................................. 16
2 The Evolution and Coordination of U.S. Commodity
and Resource Policies ........................... . 17
Gordon C. Rausser and William E. Foster
2.1 Introduction ................................... . 17
2.2 Historical Review ............................... . 18
2.2.1 Western Water Resource Development ............. . 20
2.2.2 Farm Credit System ............................. . 22
2.2.3 Environmental Pesticide Policy ................... . 22
x Contents
2.2.4 Federal Soil Conservation Policy .................. . 24
2.3 The Case for Coordination ...................... . 26
2.3.1 Illustrative Examples ............................ . 28
2.3.2 General Formulation ............................ . 32
2.3.3 Coordinated Commodity and Resource Policy Reform 36
2.4 The Limits to Coordination ...................... . 37
2.4.1 The Joint Production and Consumption Processes .. . 38
2.4.2 The Spatial Dimension of Commodity and Resource
Policies ........................................ . 39
2.4.3 The Temporal Dimension of Commodity and Resource
Policies ........................................ . 40
2.4.4 Public Sector Interagency Coodination ............ . 40
2.5 Conclusion .................................... . 41
References ............................................ . 43
3 A Comparative Analysis of State Regulations
for Use of Agricultural Chemicals ................. 46
Sherry Wise and Stanley R. Johnson
3.1 Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . 46
3.2 Background. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
3.3 State Policies .................................... 48
3.3.1 State Policy Instruments .......................... 52
3.4 Survey Design ................................... 56
3.5 Survey Analysis ................................. 60
3.5.1 Date for the Analysis ............................ 60
3.5.2 Results. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
3.6 Conclusion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
3.7 Appendix: Dependent Variable Description. . . . . . . . . . 68
References ............................................. 70
4 Policy Failures Arising from Multiple Jurisdictions:
Western Agriculture Water Resources, and the Role
of the Courts .................................. . 72
Ronald G. Cummings and Glenn W. Harrison
4.1 Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
4.2 Regulating and Controlling Natural Resources:
From State Jurisdictions to the Market ............. 73
4.2.1 Limitations on State and Local Jurisdictions
in the Control of Natural Resources .............. . 73
4.2.2 The Commerce Clause Extended to Groundwater ... . 76
4.2.3 Equitable Apportionment and Water Markets:
The Demise of the Prior Appropriation Doctrine? ... 77
4.3 A General Equilibrium Model for Measuring the
Efficiency and Equity Effects of Market Allocations
of Water ...................................... . 78
Preface XI
4.3.1 The Basic Model ................................ 79
4.3.2 The Treatment of Water .......................... 84
4.4 Empirical Results ................................ 86
4.5 Concluding Remarks ............................. 91
References ............................................. 93
II Analytical and Conceptual Perspectives
5 Effects of Commodity Program Structure
on Resource Use and the Environment ............. 97
John M. Antle and Richard E. Just
5.1 The Conceptual Framework. . . . . . . . .. . . . . . . . . . .. . . 98
5.2 The Disaggregated Model. . . . . . . . . . . . . . . . . . . . . . . .. 100
5.2.1 A Log-Linear Model.............. .... .... ....... 103
5.2.2 Modeling the Joint Distribution of x, ro, and z ...... 105
5.2.3 Truncation of Distributions ....................... 107
5.2.4 Censoring of Distributions ........................ 108
5.3 Policy and Input Use on the Intensive Margin. . . . . .. 110
5.3.1 Agricultural Policy on the Intensive Margin ......... 111
5.3.2 Environmental Policies and Behavior on the Intensive
Margin ........................................ . 112
5.3.3 Combining Commodity and Environmental Policies
at the Intensive Margin .......................... . 113
5.4 Policy Interaction on the Extensive Margin ......... . 114
5.4.1 Price Support .................................. . 116
5.4.2 Production Controls ............................ . 117
5.4.3 Pollution Tax .................................. . 118
5.4.4 Interaction of a Pollution Tax with Agricultural
Policy ......................................... . 119
5.4.5 Pollution Standards ............................. . 119
5.4.6 Interaction of Pollution Standards with Agricultural
Policy ......................................... . 121
5.4.7 Conclusions with Respect to Policy Interaction
on the Extensive Margin ......................... . 121
5.5 Policy Interaction at the Extensive and Intensive
Margins ....................................... . 122
5.6 Generalizations and Extensions of the Analytical
Framework .................................... . 125
5.7 Conclusions .................................... . 127
References ............................................ . 128
XII Contents
6 Redistribution of Income Through Commodity
and Resource Policy ............................. 129
Bruce L. Gardner
6.1 The Model . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 129
6.2 Distributional Tradeoffs .......................... 133
6.3 Political Economy of Distribution ................. 135
6.4 Generalization of the Model ...................... 139
6.4.1 Environmental Gains ............................. 139
6.4.2 Social Costs of Raising Taxes ..................... 139
6.4.3 Environmental Damage Caused by Nonland Inputs .. 140
6.5 Broader Policy Implications ....................... 141
References ............................................. 141
7 Sequential Coordination of Agricultural
and Resource Policy ............................. 143
John K. Horowitz and K. E. McConnell
7.1 Introduction ................................... . 143
7.2 A Survey of Relevant Agricultural and Natural
Resource Policy ................................ . 144
7.2.1 Agricultural Policies ............................ . 144
7.2.2 Natural Resource Policies ........................ . 147
7.3 Three Examples of Sequential Coordination ........ . 148
7.3.1 The Property Rights for Fisheries Influence
the Benefits of Water Quality .................... . 148
7.3.2 Agricultural Water Pollution:
The Case of Downstream Markets ................ . 151
7.3.3 Agricultural and Job Safety: The Case of Perfectly
Competitive Downstream Markets ................ . 156
7.4 Conclusion .................................... . 157
References ............................................ . 158
8 Information Issues in the Coordination
of Agricultural and Resource Policy .............. " 159
Jean-Paul Chavas
8.1 Introduction .................................. " 159
8.2 The Public Choice Model . . . . . . . . . . . . . . . . . . . . . . . . . 160
8.3 Optimal Policy .................................. 163
8.4 The Role of Information ......................... 164
8.4.1 The Informational Value of the States of Nature .... 164
8.4.2 Information and Policy Decisions .................. 166
8.5 Some Implications for Agricultural
and Resource Policies ............................ 167
8.5.1 Coordination Between Agricultural Policy
and Resource Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 168
