How behavioural and experimental economics can contribute to agricultural policy with an application to agri-emissions pricing

Abstract

ABSTRACT In this paper, I discuss the role that behavioural and experimental economics can play in improving agricultural policymaking. I do so by considering the development of an agri-emissions pricing policy in NZ. International literature shows that profit, as well as a range of other factors such as social norms and identity, drive farmer behaviour. This is particularly true for adoption of sustainable technologies and practices. A better understanding of farmer behaviour provides potential for: (1) an increased understanding of the uncertainty around policy modelling; (2) an increase in the accuracy of policy modelling, particularly when emission prices are low; (3) potential for new policy tools. Experimental economics provides a powerful methodology to build behavioural understanding and test policy tools. I argue that a behavioural economics perspective can contribute to agricultural policy, but add a note of caution that the gains to modelling accuracy and improved policy design are not guaranteed.