Land, economic change, and agricultural economics

Agricultural and Resource Economics Review, Apr 2003 by Castle, Emery N

Suppose, however, the real reason a proposal is supported or opposed by someone in the policy process is that they wish to change indirectly one, or more, of the assumed conditions by means of the proposed policy change. Many, and perhaps most, policy proposals attract support or opposition arising from multiple motivations of proponents or opponents. In such circumstances, economic optimality measures, based on conditions proponents or opponents wish to change, may be either irrelevant or misleading to many people because they do not accept the determinants of the optimality test.

When resource economics first came into existence approximately a half century ago, an economic environmental problem was believed to exist if it was thought decentralized markets did not reflect incremental social costs and returns. The early legislation relied mainly on command-and-control measures to correct market failures. From the outset, economists called attention to the contribution market type incentives could make if used in conjunction with command-and-control measures. A fundamental change appears to have occurred in environmental policy. Instead of presuming markets have inherent limitations in dealing with environmental issues, the presumption appears to be that unless an "optimal" market solution is found, a policy failure has occurred.

Hausman has noted that economists have taken steps to preserve the "separateness" of core economic theory even when the "inexactness" of their assumptions has been demonstrated. (The term "inexactness," as used by Hausman, is a different concept than unrealism; see Hausman, 1992, chapter 15.) Something of this nature may have occurred in resource and environmental economics. Although fraught with theoretical and practical difficulties, a benefit-cost mentality may be implicitly accepted by many economists for a wide range of issues including, but not limited to, resource and environmental economics (Arrow et al., 1996). Many of us enjoy doing those things we believe we do well, especially those things we believe we do a bit better than others. And economists can measure economic optimality better than anybody, especially as we define it.

Consider again the Endangered Species Act. The Act has been interpreted by the highest court in the land to say that species protection is of the highest priority, regardless of the cost of doing so. Even though benefit determination is off the table, many have legitimate interest in knowing something about the cost of compliance. Economists have a high comparative advantage in supplying such information. Yet I submit the most important policy issues are of a different nature. For example, we need to know far more than we do about how the Act is being applied, or not applied, in different circumstances.

It is clear the Act is not being applied according to Congressional intent as stated by the Supreme Court. We know considerable negotiation occurs prior to the listing of particular species, and that political and economic considerations enter into this process (Huntsberger and Walth, 2002). Until there is knowledge of how the Act actually works, it is guaranteed there will be bitterness arising from particular applications. In addition, there is great need for debate and discussion of different approaches to species loss, such as habitat protection, rather than a single-species approach. Resource and environmental economists can be of great assistance in illuminating such questions. To do so, they will need to avoid sweeping under the rug information that is at variance with disciplinary assumptions. And they may need to surrender some disciplinary autonomy in order to work with other disciplines.