• e' UNIVERSITY OF CALIFORNIA DAVIS SEP 8 1982 A Perspective That Strong Public Action Is Needed To Deal With Agricultural . Library The Problems of Soil Erosion

by

Lawrence W. Libby*

Introduction--Economists as the Enlightened Few

I am amazed at how adept we economists are at proclaiming, with a

patience borne of long suffering among the vulgar masses, that most so-

called problems of the world are really over-drawn. We have enormous

capacity to deny the importance of anything. This tendency has led to perni-

cious charges that we are dismal, uncreative, lacking in commitment, boring.

Not so. I say it takes enormous versatility to observe the irrelevance of

so broad a range of "problems".

We have consistently been least impressed with problems.

The typical pattern is that a resource problem--toxic intrusion into ground-

water, pesticide impacts on wildlife, even unnecessary farmland conversion--

generates political heat followed by "outrageous" proposals for public action.

We get endangered species laws, non-degradation requirements, farmland zoning

statutes. Then when the problem has subsided a bit we can remind the masses

that we knew the problem wasn't all that bad to begin with. Better still,

we can add up the cost of the outrageous solutions, and point the way to

more reasoned, sensitive policies. We maintain our intellectual virginity

by never having a meaningful relationship with anything. There is an obvious r•\\

*Professor of Agricultural Economics,Lchigan State University. Paper prepared forte symposium "Perspectives on the Vulnerability of U.S. Agriculture to Soil Erosion", AAEA Annual Meetings, Logan, Utah, August 1-4, 1982. ABSTRACT

There is substantial rationale for strong public programs for soil conservation. In the presence of uncertainty about erosion-yiel4conser- vation-revenue linkages and the relative importance of soil in future pro- duction technologies, government should exercise caution with the produc- tive capacity of soil. Government should protect the option of relying on the soil component of agricultural production. A non-marginal policy change in this area would be to establish the legal obligation of govern- ment to hold soil productivity in a "public trust" on behalf of all citizens. 2

inconsistency in all of this. Without the Rachael Carsons of the resource policy world nothing much would ever happen. No problem would be mitigated by outrageous solutions; we would have little chance to offer reasonable alternatives.

Now we economists all know that farmland preservation is a non-issue.

Recent articles by Julian Simon (12), Luttrell (9) and a most thoughtful book

by RFF (4) point that out effectively. I have said as much myself on occasion.

There are millions of poor misguided souls out there who think farmland pre-

servation is an issue and are passing all sorts of laws to guide land use

change in ways that protect farmland. Perhaps because these folks have

over-reacted for 35 years or so we can produce evidence that the problem

isn't really all that bad.

Our theme today is soil erosion. Once again we have heard that soil

erosion is not really a problem, just a redistribution of productive capacity.

If erosion were a problem, farmers, as pillars of rational thought, would do

something about it, to protect themselves if not the rest of us. Of course

all the folks out there think erosion is a public program, so we have soil

conservation programs. Most agricultural economists have only recently

discovered soil conservation policy as a new hot-bed of non-issues with

enormous potential.

At the risk of soiling my own nest, I would like to assert that there

is indeed a rationale for positive, aggressive public action to reduce soil

erosion. Some threads of that rationale are broadly economic within the

prevailing social institutions for resource use in this country. Other

logical bases for public action may imply major institutional change. 3

Others are more philosophical in nature. My comments are directed at on- farm impacts of erosion. There is little doubt that government action is

appropriate to reduce sediment damage off the farm where the external

impacts of private action are apparent.

Economics and the Rationale for Public Action.

One of the arguments often raised against public programs to conserve soil is that we lack evidence of on-farm pay-off to these activities.

We have inadequate data of the impact of conservation on productivity or on the profitability of the agricultural enterprise (8, 11). Thus, how can we know if the public dollar is being spent wisely? Further, there is historic evidence that the soil component of food production technologies is increasingly expendable, being replaced by various forms of capital. "There is little reliable evidence", the argument goes, "that this trend of substi- tuting capital for land and labor in food production will not continue in the foreseeable future". Within a technology soil loss likely affects yield.

But to freeze an existing mix of soil and capital might be inefficient, penal- izing both the present and the future. Risk and uncertainty are rampant in this area, as in others where future innovation or knowledge can only be anticipated. The policy question is who should bear that risk. The farmer clearly has a stake in any observable erosion impacts. If erosion reduces land productivity the farmer may lose income in the present and capital assets in the long run. If he is rational, he will protect himself. He will invest in soil conservation based on his own perception of the likelihood of future soil replacing technology, food demands, and other market conditions.

I agree with Crosson (5) that government should be cautious and prudent

with what is basically a fund resource, our productive soils. Maybe we will

conserve too much, but the consequence of that misjudgement will be less severe 4

than if we conserve too little. Fisher has pointed out that with exhaustible resources like soil, demand uncertainty will tend to shift the depletion rate towards the present in response to a rising discount rate on future returns (6). Uncertainty about supply of an exhaustible resource, on the other hand, tends to shift rate of depletion toward the future. It is this uncertainty that government should worry about for the rest of us. There is• both physical and economic supply uncertainty for the future, though economic supply can presumably expand with . Physical supply depends on land and soil capable of food production, and can be affected by erosion rates. A rational risk averse decision maker will use that fund resource cautiously, guarding against the possibility that erosion or irreversible conversion will deplete that component of food production technology beyond the optimal level. We want government to preserve the option for future soil use.

Our faith in the farmer's willingness to invest in soil conservation

assumes he or she will have at least as much information on the yield-

erosion-conservation relationships as government will, and then will act

"rationally". We know that information is short, but perhaps the consequence

of ignorance is greater for non-farmers than for farmers. In the absence

of good information, we should be cautious with our limited soil resources.

On the rationality side, farmers have many factors influencing their

willingness to conserve soil. Perhaps a particular farmer simply refuses to

conserve--for personal reasons. Maybe he justs wants to farm the land the

way his father did, or perhaps he distrusts SCS advice, or perhaps he is

temporarily unable to invest because of a bad year or high capital expenses

(3). Farmers come and go, but the rest of us have a real stake in a consis-

tent response to information about erosion. Among all the decisions a 5

farmer faces, conservation is likely not among the most pressing on a year to year basis. Yet sustained conservation is the only kind that really makes any sense. Vigorous public programs are necessary to smooth out the behavioral differences among farmers at any point and time, and for a single farmer over time.

We may perceive a sort of public good aspect to soil conservation. It represents a sense of long term security, of national economic and political strength. Sustained and managed agricultural productivity can represent a source of national pride and confidence in the future. Recent opinion polls suggest a strong stewardship motive among the American people even at some personal expense. Conservation creates social utility merely because it exists, beyond the measurable utility to individuals.

Another quasi-economic rationale for government action in this area is that previous government actions have created erosion through the unintended side effects of other programs. Only government can undo what government has created. Neil Sampson (10) has referred to various erosion sub- sidies as the primary problem in soil conservation today. Depreciation allowances encourage investment in large irrigation systems that cause wind and water erosion. There may be special credit subsidies for farm equipment that works best on straight rows, uninterrupted by any conserva- tion practice. Uncultivated land is worth less than cultivated. Thus the farmer trying to improve his equity situation to borrow in these times of high interest rates is encouraged to cultivate some very erosive land.

Commodity programs designed to increase farm outputs in particular years, or reduce risk of crop failure, discourage good soil conservation. 6

From a perspective, one could argue that there is and has been prevailing dissatisfaction with the rules and regulations that struc- ture opportunities and obligations in use of soil. Fee simple rights of ownership leave discretion with the landowner. Thus in most states the farmer has the right to permit erosion, if it does not cause problems for a land- owner downstream. He may choose to conserve if that fits his own needs or perception of his social obligations. Perhaps the sense of responsibility for protecting the option to use more soil in the future calls for creating obligation where privilege has existed. All of these rules, including fee simple ownership, are social institutions, designed to facilitate choices by governments and individuals that are consistent with the rights of others.

There is increasing evidence that voters and taxpayers will support some reallocation of the right to erode (7). Once the opportunities of decision makers are re-structured, choices and therefore land use will change as well. The concept of economic efficiency and related externalities in use of resources pertain to a particular set of institutions and rights. The usual application of economics to this issue of government action for soil conservation involves defining externalities--external economies or disecon- omies resulting from private decisions that affect others. But that implies that the role of government is to root out inefficiencies, so that private choices will be "optimal". The public choice is actually broader than that.

Conservation policy becomes an expression of social preferences in the rate of soil depletion, stewardship for future generations, and the appropriate

allocation of rights and obligations among the actors. There are different types of rule 'changes, from incentives to requirements, and each has impor- tant distributional implications (2). Thus, the logic of economics provides a few soft lines of argument for

strong public action to deal with the on-farm aspects of erosion. Perhaps

it is all just an exercise in self-justification--it gives us economists

some way to reconcile our personal and professional values. -Other Tleonle

do that, why not economists? Whether we approve or not, there are and will be

soil conservation programs. We economists can help by improving information

on the consequences of alternative rules and regulations, to improve the

chances for choice based on knowledge.

Soil Conservation and the Public Trust--Non-Marginal Policy Change.

Lawyers are much more adept at developing reasons for things than are

economists. In fact legal theory is basically just a consistent and logical

line of argument formulated on a few suppositions about the nature of things.

Unlike economists who often seem to be bullied around by their theory,

seeking to force the world into pre-cast molds, lawyers simply create a theory to deal with a particular problem. One of the more creative innova- tions of resource law to support an argument for vigorous public action is

Christopher Stone's notion that trees and selected other inanimate objects

have their own rights to exist. Government's role is to speak on behalf

of these silent citizens of the forest, as for certain categories of people

who for physical or mental reasons are unable to care for themselves (13).

Why not argue that government is in fact the trustee of the soil; that soil

has legal standing to be protected for its own sake in a legal action that

will involve conflicting rights of others. I am not sure what our role

would be then, but it is worth some thought. As economists, we generally

believe in human perception of value and utility functions, as precursors

to decision.

The public trust doctrine is grounded in human value. This legal doc-

trine is best defined in surface water policy and law, where states have the responsibility to restrict use by some on behalf of the common rights of

all. Public trust is basically an extension of nuisance law to include

public rights in certain resource patterns not generally parceled out to

people. Michigan's Environmental Protection Act creates, through the public

trust doctrine, the right of a citizen to sue a polluter whether or not that

citizen has experienced economic damage by the polluter. That law creates the public right to a clean environment, enforceable in court. It does not stop all activities that might cause pollution, but creates the obligation that tests of reasonable use be established for these common property resources just as is the case for nuisance claims by adjacent property owners.

Perhaps we should seek application of the public trust doctrine to the soil conservation case. Soil is a natural endowment of the earth, a funda- mental pre-requisite for human existence. As part of a producing farm, soil is too important to all the people to be destroyed by a few. I suggest that the common property resource here is really the productivity of soil rather than the soil itself. Soil, as land surface, can be appropriated by individuals for private gain, and others excluded from its use. That is the meaning of "real property". But perhaps the productivity of that soil should be held in public trust for all the people as a national asset one acquires with citizenship, regardless of economic status. Creating this legally sustainable public right in soil productivity would not mean that no produc- tivity could be lost, but that any such loss must be for good cause. Land would go out of agriculture and soil-replacing technologies could actually create productivity to offset its loss elsewhere. But beneficiaries of the trust would be protected against unreasonable or negligent destruction of the productive capacity of soil through erosion. As I understand them,

'Public Act 127 of 1970. 9

recent cases under the Iowa soil erosion and sediment control statute have

been steps toward creation of the public right to reduced .erosion. While

this and other such state laws generally require that other individuals

experience economic damage or inconvenience because of the eroding farmer,

recent court decisions have reduced or perhaps eliminated that requirement

as basis for legal action to stop erosion.

There is no obvious legal reason why a public trust approach would not

work for soil productivity, as it does foi water, air and other resources.

The notion that certain natural amenities of the United States should be

held in trust on behalf of the well-being, safety and security of all citizens,

and to protect the options for future generations has some real appeal. We

resource economists could help define "reasonable" losses of productivity

in terms of the economic consequences of certain productivity destroying

enterprises. But the burden of proof would be on the eroder, the right to erode converted to obligation.

Conclusions

The essential economic argument in soil conservation centers on the

relative consequences of Type I and Type II error on the hypothesis that

soil replacing technologies will continue to facilitate adequate response

to food demands in the long run. It assumes that any pending scarcity of

productive capability will be reflected in --of food, and land and other

related commodities. The consequence of accepting a false hypothesis could

be devastating compared to the consequence of rejecting a true hypothesis.

The choice depends on your risk preference. I happen to be chicken.

Then there is the Type III error--the probability of rejecting a false

hypothesis when it is too late to make any difference. 10

I believe that soil conservation policy may be headed toward a redefini- tion of property rights that involves reallocation of the current right to erode that goes with land ownership. Several local governments (1) and at least one state have partially recalled the tTright to erode." There is growing public sentiment for more to protect soil productivity (7).

Legal doctrines are products of the political environment and shape the real world within which we resource economists make our measurements in our rational, detached way. I suggest we make an effort to contribute at the evolutionary stage. 11

References

Conservation Policy: Local Action 1. Richard Barrows and Carol Olson. "Soil and Water Conservation. and Federal Alternatives". Journal of Soil November-December, 1981, pp. 312-316.

Policies:• Research Needs". 2. Sandra Batie. "Redirection of Soil Conservation Policy for Soil Conservation Research Needs and Establishing Viable Public Economics Committee, SNREC and Land Use. Southern. .Natural . Resource Publication No. 15, May 1981. pp. 20-32.

Perceptions, Attitudes, and Risk: 3. Lee Christensen and John Miranowski. Policy on Soil Conservation Overlooked Variables in Formulating Public Department of Agriculture. and Water Quality. Washington, D.C.: U.S. ERS Staff Report No. AGES82019.

Crisis: Myth or Reality? Baltimore, MD: 4. Pierre Crosson, (ed). The Cropland Future, 1982. Johns Hopkins Press for Resources for the

in Soil Conservation and Water Quality: . 5. Pierre Crosson. "Diverging Interests Attitudes and Risk: Overlooked Society Vs. the Farmer". Perceptions, on Soil Conservation and Water Quality, Variables in Formulating Washington, D.C.: Economic Research edited by Christensen and Miranowski, Service, U.S.D.A., 1982, pp. 50-67.

Environmental Economics. Cambridge, England: 6. Anthony Fisher. Resource and 49. Cambridge University Press, 1981, p.

Erosion by Rules and Regulations". Lawrence W. Libby. "Controlling Soil 7. Issues in Soil Conservation." Paper for "A Conference on Public Policy To be published by Soil Conservation Madison, Wisconsin, July 22-23, 1982. Society of America.

to Manage Supply: Conservation of Lawrence W. Libby. "Policy Alternatives 8. Understanding of Public Problems Soil and Water Resources". Increasing The Farm Foundation, 1981, pp. 96-98. and Policies--1981. Oak Brook, IL:

Farmland: Mirage or Potential Crisis?" 9. Clifton Luttrell. "Our Shrinking October, 1980, pp. 11-18. Federal Reserve Bank of St. Louis, 12

10. R. Neil Sampson. "Soil Conservation Programs: Present, Past and Future". Paper for the Conference on Public Policy Issues in Soil Conservation, Madison, Wisconsin. July 22-23, 1982. To be published by Soil Conser- vation Society of America.

11. W.D. Shrader and G.W. Langdale. "Effects of Soil Erosion on Productivity". Ames, Iowa: Agricultural and Home Economics Experiment Station, Iowa State University, Journal Paper No. J-9600, 1979.

12. Julian Simon. "Are We Losing Our Farmland?" The Public Interest. Number 66, Winter 1982.

13. Christopher Stone. Should Trees Have Standing: Toward Legal Rights For National Objects. Los Altos, California: William Kaufman, Inc., 1974.