Optimal Provision and Remuneration for Environmental Attributes of Agricultural Landscapes seen from an Institutional Economics Point of View

Christian Lippert

Published: 01.11.1999  〉 Heft 11/1999  〉 Resort: Articles 
Submitted: N. A.   〉 Feedback to authors after first review: N. A.   〉 Accepted: N. A.

ABSTRACT

In the present contribution an institutional economics approach is applied to the problem of providing for environmental goods in agricultural landscapes. According to the theory various profitable at tributes are connected to every good or asset. The "production costs" of these attributes consist not only in (opportunity) costs of inputs but also in transaction costs for the definition, protection and enforcement of the corresponding property rights.Usually the property rights related to a certain attribute are defined and assigned to a private owner only when the transaction costs for their enforcement do not exceed the profits which may be derived from the attribute.The economically efficient distribution of the property rights related to the attributes of a good (or a resource) depends on who is most able to vary (to provide or to improve) the different attributes. The person most inclined to manipulate a certain attribute should become the residual claimant to the attributes' outcome. Due to specialisation and scale effects this leads to "divided ownership" of the attributes of a good or asset. As is shown by some examples, this is particularly relevant to agricultural land.With regard to the efficient provision of environmental attributes in agricultural landscapes the following conclusions are drawn from the institutional economics theory:- Payments varying according to the results of environmental improvement are useful if the value of the attributes concerned can be measured at justifiable costs. As long as this is not possible the production/improvement of environmental attributes which are of high value to society should be induced by granting cost covering payments for suitable measures or services.- If payments based on the results of environmental improvement seem to be useful and specialisation and scale effects can be expected, the creation of a so called "nature agent" should be examined. The latter should be the "residual claimant" to the outcome of his efforts.- Some environmental attributes (e.g. biodiversity) may be influenced in equal shares by different parties. If it is rather expensive to monitor all agents ("nature agent", farmers) involved in the "production" of the attributes in question, these attributes may best be provided by a co-operative "nature agent" as long as its members are sufficiently motivated. The second best solution would be to share the yield from improving the attributes among the different agents.- Other environmental attributes (e.g. landscape amenity) which mostly depend on the efforts (know-how, care) of one agent capable of monitoring all necessary inputs at low costs, should preferably be paid to this agent based on the principle of "attribute delivered".- The existence of spatial scale effects and gains from specialisation then lead to "devided ownership" of agricultural land. This means that the property rights to agricultural attributes of surfaces will be held by the farmers whereas the environmental attributes will finally belong to a "nature agent" who operates on a larger (surface) scale than the farmers.- Whether a "nature agent" is useful or not also depends on the transaction costs related to his implementation. Transaction costs may be reduced by distributing the property rights to the attributes of a surface in such a way as to minimize the number of transactions necessary to reach the optimal allocation of property rights. (This implies a different initial distribution of property rights in ecologically and agriculturally different areas.)Taking into account the respective "monitoring and measurement costs" related to the provision of a certain environmental attribute it should be thoroughly considered which form of remuneration is most appropriate (fixed payments to the farmers for certain measures or services versus variable payments, based on the attribute delivered, to the farmers and/or a "nature agent"). The contribution ends with some examples of existing organisations similar to a "nature agent".
CONTACT AUTHOR
Dr. agr. Christian Lippert, Wissenschaftlicher Mitarbeiter an der Martin-Luther-Universität Halle-Wittenberg, Professur für Agrarpolitik und Agrarumweltpolitik, D-06099 Halle (Saale).
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