Whose Price Wins: Institutional and Technical Change in Agriculture

Abstract

The concern for environmental quality has become an increasingly dominant force for institutional and technical change in agriculture. More recently, surfaceand ground-water pollution from agriculture have generated public debate over the economic potential of alternative production systems and the structure of farm policies. However, the ability to alleviate environmental problems through technical change is predicated upon prices and institutions in agriculture, such as farm programs. Farm producers have little incentive to adopt new, more environmentally sound production systems if existing prices and institutions remain unchanged. They are more likely to adopt such technologies if institutions and prices adjust to reflect the concerns of environmental and consumer groups. In effect, whose wins in the struggle over environmental quality will influence the future direction of technical change in agriculture. Environmental regulation has been traditionally looser in agriculture than in other sectors of the economy (Leman and Paarlberg 1988, 50). Thus, the farm sector's price for environmental resources has prevailed, and farmers have had to worry little about internalizing the effects of their chemicals and soil erosion on ground and surface water stocks.' Low or zero shadow prices of off-site water sources have translated into low prices of other agricultural inputs that are linked to water pollution. As Antle and Capalbo (1988) conclude, agricultural and environmental policies have helped push U.S. farmers to adopt technologies that use chemicals and capital intensively. Partly because of water pollution from agriculture, over $16 million in federal and state funds have been allocated to 78 projects under the USDA's Low-Input Sustainable Agriculture (LISA) program (USDA/ CSRS 1990).2 This program is designed specifically to develop technologies that reduce the environmental impacts of agriculture production. However, as Ekey and Crosson (1988) found, currently available alternative farming systems are less profitable tha conventional methods given current prices and government policies. In the absence of and farm program changes, new innovations developed under he LISA program will probably face similar obstacles. Increasing public concern over water quality has sparked a new, perhaps stronger, conflict over whose will govern water use. Bromley (1988) and Howe (1980) suggest that the conflicting interests between those well served by existing institutions (the farm sector) and those bearing unwanted costs (the public, as represented by environmental and consumer groups) are important theoretical and policy issues. Since conflict is created and mitigated by existing and new technologies and