Economic incentives for sustainable production

Abstract

Appropriate economic incentives for millions of households, farmers, and small producers are needed in the Third World to channel development activities into sustainable patterns that preserve the productivity of natural resource assets. Incentive problems now arise both from market failures, such as externalities and common property problems, and from policy failures, such as price distortions. Many opportunities are available to improve policies in ways that promote resource conservation, reduce environmental damage, and simultaneously raise economic productivity, decrease government budget deficits, and ameliorate rural poverty. Revising inappropriate pricing policies for agricultural output and such purchased inputs as pesticides and fertilizers would help. Reforming irrigation finance would improve the performance of public systems and promote better water use. Changing inappropriate forest revenue systems and incentives for the use of forest resources could discourage wastage of forest resources.