Efficacy of Standards vs. Incentives for Managing the Environmental Impacts of Agriculture

The environmental impacts of agriculture depend on both the longrun and shortrun production decisions of farmers. In the longrun, technologies and quasi-fixed factors are selected and put in place through investment. In the shortrun, production plans are made and implemented conditionally upon available technologies and quasi-fixed factors. An important implication is that the environmental effects of agricultural activities result from an integration of economic decisions, private good production practices and biophysical processes. Viewed from a system perspective, these processes transform a set of private and environmental inputs into a set of private good and environmental outputs. It follows from this logic that the environmental impacts or performance of agriculture result not only from the nature of available technologies, but also how those technical opportunities are exploited in response to market and public policy incentives and constraints. This paper presents results of an application of such an integrated model of biophysical and economic processes to evaluate the potential responsiveness of water quality impacts of agricultural field crop practices to changes in economic incentives.