An Economic Perspective on Land Degradation Issues

Acknowledgments I would like to acknowledge the financial assistance provided by the Rural Research and Development Corporation for the project DAN92A, which partly funded this work. This report was prepared over a number of years and as is evident from the references some parts of the work led to joint papers with a number of other staff from NSW Agriculture including The objective of this report has been to review the perspectives from economics on the debate about sustainability in general and land degradation in particular. Land degradation is a concern because of the potential costs it imposes on present and future generations in terms of lost production, poor water quality, reduced biodiversity and other poor environmental outcomes. It is one component of a broader debate about the sustainability of natural and environmental resource use by the present generation. The focus of much economics research related to sustainability in agriculture has concerned questions of efficiency in resource use. The two main areas of contribution are first, in providing a framework within which the benefits and costs of alternative land management strategies can be evaluated and second, in providing an understanding of the incentives for efficient resource use that confront individual farmers and the community, particularly in the presence of externalities. Sections of the Report review techniques for assessing efficiency in resource use; studies of the cost of land degradation; and reasons for the slow adoption of landcare technology. In common with similar reviews, the conclusion here is that with its focus on valuing land degradation in terms of foregone production, most empirical work from the past provides little insight into how land degradation is best managed from the viewpoint of either farmers or the community. The main deficiency of this approach of valuing the potential benefit from ameliorating degradation as the value of foregone production is that this estimate of benefit is not related to any feasible management strategy to achieve it. Hence this approach provides little guidance as to where resources are best used to combat degradation. Other difficulties with the approach are discussed in the Report. An important source of market failure or inefficiency is the set of externalities associated with land degradation that arise through attenuated property rights. An important contribution of this Report has been to make clear the analogies between spatial and temporal externalities and, following Quiggin, to identify how the significance of externalities might …