Chapter 22 - Payment for Unmarketed Agroecosystem Services as a Means to Promote Agricultural Diversity: An Examination of Agricultural Policies and Issues

Abstract

This chapter examines payment for unmarketed agroecosystem services as a means to promote agricultural diversity as well as payment for agricultural diversity as a way to increase the supply of wanted unmarketed agroecosystem services. The importance of treating agricultural diversity as a multidimensional concept is emphasized, and several of its dimensions are identified. After assessing generally policies for paying farmers for the supply of unmarketed agroecosystem services, particular attention is given to payments for on-farm product diversity as a means of sustaining or increasing the supply of desired unmarketed agroecosystem services. The importance of this diversification being integrated to achieve this end is stressed. Economic theory (despite its limitations) is shown to be helpful in identifying issues that need to be addressed when considering policies for paying farmers for their supply of agroecosystem services, for example, the importance of distinguishing the allocative and income distribution effects of such policies. The analysis of these matters is facilitated by the introduction of a simple social cost-benefit inequality and a specific economic model. The importance of taking account of public administration costs and legal barriers and their efficiency aspects when assessing the costs and benefits of agricultural policies is stressed because these aspects are frequently overlooked. Other relevant aspects of agricultural diversity, such as regional diversity, are also briefly examined. An alternative to paying farmers for the supply of wanted agroecosystem services is to penalize them for not doing so. This is examined. The prospect of greater agricultural diversity resulting in the short term in reduced supply of agricultural products (and an increase in their real prices) but a more sustainable supply of these products in the long term is raised.