Multifunctional Agriculture and the Preservation of Environmental Benefits
© Swiss Journal of Economics and Statistics 2007
Published: 2 January 2007
We investigate environmental aspects of agriculture from a welfare economic perspective and show that efficiency prices of agricultural and forest land include important amenity and non-use values that exhibit the character of undepletable externalities. To achieve a social optimum these must be internalised, while taking equity concerns into account. We propose compensation of farmers and forest managers according to the marginal external benefit of their land use and a combination of charges and subsidies to improve rural water quality. This is consistent with efficiency requirements and would not cause additional market distortions. Moreover, it would leave the property rights on the land with the farmers and assign the right on clean air and water to the consumers.