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Economics of Integrated Pest Management • an Interpretive Review of the Literature

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Economics of Integrated Pest Management • an Interpretive Review of the Literature Economics of Integrated Pest Management • an interpretive review of the literature Special Report 636 August 1981 ARS1-1V, .. ea - OCT 1581 1..1P1,,.tso,..'111. oo,0--so;• LIBRARY t MEW/. STATE c univasurr Agricultural (4'0449% A' Experiment Station, International Plant Protection Center, and Department of Agricultural and Resource Economics OREGON STATE UNIVERSITY Cinnabar moth larvae attacking the weed Senecio jacobaea L. (tansy ragwort) in Oregon. ECONOMICS OF INTEGRATED PEST MANAGEMENT: AN INTERPRETIVE REVIEW OF THE LITERATURE Bruce A. McCarl PREFACE For a term and concept that was virtually unrecognized 10 years ago, integrated pest management (IPM) has leaped with amazing rapidity to the forefront of agricultural activities in many regions. The fact that it is not without merit nor free of controversy has doubtlessly contributed to its speedy emergence from obscurity. IPM as a concept, or a group of concepts, stems from agricultural science wrestling with the challenge of designing evermore effective tech- niques for protecting crops from a host of antagonistic pests. Added to biological shifts--resistance of some species to chemical applications-- have been social and economic evolutions that argued for expansion and innovation in the scope of crop protection practices. A body of literature, not surprisingly, has emerged. One segment, economic analysis of IPM, forms the basis for this review and appraisal. The ordering of sections somewhat reflects the author's inquiry pro- cess as he perused the literature. The first sections are general, offer- ing definitions involved, background to development of integrated pest management (IPM), and an overview of issues involved. A literature review follows, concentrating on economic aspects of IPM. The final sections appraise the literature and suggest future research. Several other documents serve some of the same purposes as this report: the annotated bibliography created at U.S. Department of Agriculture by Osteen, Bradley, and Moffet [1980]; the lists of references which arose from Darwin Hall [1975], Virginia Polytechnic Institute (obtained from Harry Baumes) and Marshall Martin (Purdue). There also are literature reviews on diseases (Carlson and Main [1976]) and systems analysis (Ruesnick [1976]). ACKNOWLEDGMENTS The author thanks the suppliers of literature and many others including Gerald Carlson (North Carolina State University), John Miranowski (Iowa State University), Harry Baumes (Virginia Polytechnic Institute and State Univer- sity), Bob Taylor and Ron Lacewell (Texas ABM University), Craig Osteen (U.S. Department of Agriculture) Marshall Martin, Chris Cashman, and Bob Burton (Purdue University), Ted Kuntz and Rob McDowell (USDA, Oregon State Univer- sity), Richard Norgaard (California-Berkeley), Arnold Aspelin (EPA), Vernon Ruttan (Minnesota), Darwin Hall, John Baratelle (California-Riverside), and especially Chuck Headley (University of Missouri) and Katherine Reinelderfer (USDA) for discussions, hints, comments, and/or materials. Colleagues at Oregon State University who also provided helpful discussion included Frank Conklin, Jim Cornelius, L.M. Eisgruber, Darrel Hueth, Gene Nelson, Bruce Rettig, and especially Stan Miller, Ted Kuntz, and Rob McDowell. Without the assistance of numerous individuals at OSU, the manuscript might never have been completed. Thanks for tangible assistance go to Bette Bamford, Patty Brown, Mary Connors, Allan Deutsch, Dick Floyd, Maureen Krissek, and Kay MacQuaid. While saluting those who offered commentary and assistance, the docu- ment--its concepts, biases, and conclusions--remains the product of the author. The publication was supported by the Agricultural Experiment Stations at Purdue University and Oregon State University and the International Plant Protection Center at OSU. CONTENTS Page Preface Section I - What is IPM? 1 Some Definitions 1 Comparison with Other Definitions 2 Economics of IPM 3 Section II Why Does IPM Exist? 4 Pest Damage 4 Pest Interactions 5 Pest Controls 5 Spillover Effects of Control 6 Pesticide Overuse 7 Benefits of Pesticides 7 What is Best? 11 Anti-Pesticide Initiatives 11 Institutional Factors 12 Government 12 Food and Income 13 Summary 13 Section III - Economic, Technical, Institutional and Environmental Aspects of IPM and IPM Associated Policy 14 Economic Aspects 14 Welfare 14 Distributional Impacts 15 Locus of Comparative Advantage 15 Induced Impacts 16 Spillover Impacts 16 Markets for Agricultural Inputs 17 Time Rate of Social Preference 18 Quality and Grading 19 Research and Development 19 Farm Level Decision-Making 20 Technology Adoption - Rejection and Obsolescence 20 Risk Management 21 Pest Intervention and Information 21 Farmer Spillovers 21 Scale Economies of Control Use 22 Diversification of Pest Controls 23 Economic Interrelationships in Input Usage 23 Substitution 24 Regulation 24 Technical Aspects 24 CONTENTS (continued) Page Pest Treatment Methods 25 Pest Dynamics 25 Pest Interrelationships 25 Treatment Effectiveness 25 Crop Livestock Dynamics 26 Risk 26 Spillovers 26 Pest-Predator Relationships and Resistance 26 Institutional Aspects 27 Institutions Requiring Pest Management 27 Institutions Fostering IPM 28 Other Institutions 28 Environmental Aspects 29 Summary 29 Section IV A Review of the IPM Economics Literature 31 Farm Level Economics 31 Design of an Optimal Strategy 31 Economic Thresholds 32 General Pest Control 33 Risk 34 Resistance 34 Multiple Treatments 36 Pest-Predator Relationships 37 Pest-Crop Dynamics 37 Spillover Impacts 38 Other Controls 39 Other Inputs 39 Choice Between Strategies 39 Financial Studies - Risk Free 40 Financial Studies - Risk 41 Resource Studies - Risk Free 41 Resource Studies - Risk 41 Data 42 Methods 42 Synthesis 49 Aggregate Studies 51 Benefits and Costs of Pest Control 51 Benefits of Pest Control 51 Value of Increased Output 52 Value of Resources Released 53 Willingness to Pay 53 Changes in Surplus 54 Alternative Benefit Measures 54 Benefits - Summary and Appraisal 54 CONTENTS (continued) Page Costs of Pest Control 55 Development Costs 56 Use Costs 56 Spillover Costs 56 Benefits of Controlling Pests 58 Benefits and Costs - Summary 59 Impacts of Regulations 60 Specific Analysis of Potential Regulations 60 Long Run Regulatory Impact 64 Crop Production Impacts 64 Pesticide Producer Impacts 64 Regulatory Alternatives 65 Alternatives to Sole Reliance on Pesticides 65 Alternatives to Pest Control 65 Data 65 Methods and Measures 71 Measures 71 Methods 71 Data Development 73 Deductive Accounting 73 Econometric Estimation 74 Data Using Methods 75 Budgeting 75 Mathematical Programming 76 Simulation 77 Section V - The Literature Versus the Issues 79 Welfare 79 Distributional Impacts 80 Locus of Comparative Advantage 83 Induced Impacts 84 Spillover Impacts 85 Markets for Agricultural Inputs 85 Time Rate of Social Preference 85 Quality and Grading 89 Research and Development 89 Farm Level Decision Making 89 Technology Adoption and Obsolesence 92 Risk Management 92 Pest Intervention and Information 94 Farmer Spillovers 94 Scale Economies 94 Diversification of Controls 97 Economic Interrelationships in Factor Use 97 CONTENTS (continued) Page Substitution 97 Regulation 97 Institutions 101 Section VI - Concluding Comments and Suggestions for Further Work 105 Section VII - Bibliography 107 SECTION I WHAT IS IPM? SOME DEFINITIONS Integrated pest management (IPM) labels a concept obviously referring to management of pests in an integrated fashion. However, within this broad framework, many different meanings can be, and have been, inferred to minim- ize confusion. Therefore, a single precise definitionis needed. Examining components of the term integrated pest management can help in arriving at a suitable working definition. A pest, according to Woods, [p. 1] is an organism which harms man or his property or is likely to do so. Further, the harm must be damage of economic significance. This far-reaching definition includes not only insects, but also weeds, animals, fungi, microorganisms, and viruses, any of which can cause crop damage. Excluded are those organisms involved with animal health as treated by veterinarians, human health as treated by physicians, or food spoilage as dealt with by food microbiologists. The definition, adopted herewith, coin- cides with a large segment of IPM literature. The next term, management, infers the act or manner of managing, con- trolling, directing, etc. Managing implies, in this context (again referring to Woods), man's action is intended to ameliorate the harm caused by pests. However, in the broader view, management also embraces the judgmental process. Therefore, pest management defines a process aimed at amelioration of pest- caused harm, but where man exercises the decision over whether to apply ameli- orating action. This broadened focus implies an active search for information as to whether control should be undertaken, but permits inactivity if control appears unnecessary. Integrated signifies the act of putting or bringing together parts into a whole, and, in this case, the combining of various pest management techniques. 2 Lastly, the setting in which IPM occurs, the farm, must be considered. A farm is a complex production entity utilizing multiple inputs (land, labor, fertilizer, pest contols, etc.) to produce multiple outputs as influenced by the farm environment (weather, pests, general economic conditions, etc.). Pest management necessarily must integrate with the total farm equation. Therefore, "integrated" here
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