Multifunctional Rural Land Management

Economics and Policies

Floor Brouwer, C. Martijn van der Heide, Floor Brouwer, C. Martijn van der Heide

• Publisher: Routledge
• Year: 2012
• ISBN:
  9781136560910
• Edition: 1
• Topic: Economics
• Subtopic: Environmental Economics
• Index: Economics

The increasing demand for rural land and its natural resources is creating competition and conflicts. Many interested parties, including farmers, nature conservationists, rural residents and tourists, compete for the same space. Especially in densely populated areas, agriculture, recreation, urban and suburban growth and infrastructure development exert a constant pressure on rural areas. Because land is a finite resource, spatial policies which are formulated and implemented to increase the area allocated to one use imply a decrease in land available for other uses. As a result, at many locations, multi-purpose land use is becoming increasingly important. This notion of multi-purpose land use is reflected in the term 'multifunctionality'.

This volume provides insights into viable strategies of sustainable management practices allowing multiple functions sustained by agriculture and natural resources in rural areas. It shows how the rural economy and policies can balance and cope with these competing demands and includes numerous case studies from Europe, North America and developing countries.

1

Natural Resource Management:
Globalization and Regional
Integration

Floor Brouwer and C. Martijn van der Heide

Introduction

Management of rural land currently attracts a considerable and almost obsessive popular interest, and dominates both the scientific and policy agendas. In the first half of 2008, many newspapers carried alarming headlines using pejorative terms, such as ‘skyrocketing food prices’, ‘world hunger’, ‘pasta strikes’ and ‘food insecurity’. All of these ‘threats’ are but one side of the coin whose other side bears the stamp of changing rural land use. And this change in land use, as we could read in the media, has occurred for various reasons, including the demand for biofuels, the growing populations in China and India that have developed Western tastes as their economies grow, climate change resulting in high temperatures and severe drought with loss of harvest in some major productive regions.

The intense and agitated attention on rural land use changes and the worldwide threats they entail evoked heated and sometimes emotional reactions. High food prices, for example, heated up the debate about the conversion of agricultural land into nature areas and fuelled concerns about agricultural land being used to produce biofuels. The issue of soaring food prices and the satisfaction of the world's seemingly insatiable appetite is, however, just one example of the challenges that rural areas are facing. In fact, due to the multiple functions of rural areas (to which we shall return hereafter) and the various actors – such as farmers, nature conservationists, tourists and inhabitants – involved, collisions between human demands and the capacity of rural areas to satisfy them are becoming daily events. These collisions are further complicated by the fact that land use in rural areas is characterized by a multifaceted interaction between ecological processes and socio-economic activities. The development of many rural areas has resulted in environmental degradation, and from an anthropocentric perspective, less productive, but more fragile ecosystems. Food production, for example, is affected, and is already being constrained by processes of soil degradation, water shortages and the effects of climate change.

We have already briefly mentioned that rural areas have many functions. Their main function is the production of food and other primary goods. As such, agriculture is by far the most important activity in rural areas (Brouwer, 2004) and plays a major role in stimulating the growth of the national economy, even in highly industrialized countries. Nevertheless, in most, if not all developed countries, the industrialization and the expansion of the service sector have led to a shrinking of the agricultural sector. As a result of this, the primary agricultural function of rural areas has decreased further and further in importance. This pattern is reinforced by changing social preferences. Nowadays, there is a growing societal demand for rural areas with more functions and with other activities on offer than merely agriculture.

These new, emerging functions include agro-tourism, leisure and living. Rural areas provide the available space for these human activities and they contribute to human well-being by providing opportunities for cultural, intellectual and spiritual inspiration. Moreover, rural areas have the capacity to supply essential ecological processes and services that contribute to the maintenance of a healthy environment, for example, by biogeochemical cycling, providing clean air, water and soil and by providing carbon storage and waste absorption.

Although the importance of the various functions varies between localities, regions and countries, many rural areas fulfil many functions simultaneously. This is captured neatly by the term ‘multifunctionality’, which implicates the existence of multiple functions in rural areas, including the production of agricultural goods and the preservation of biodiversity. As such, multifunctionality represents a shift from a rather traditional agri-centric view of rural areas to one that incorporates non-food outputs that are beyond the private domain.

Usually, the term multifunctionality refers to multifunctional agriculture. According to Vatn (2002, p309) multifunctional agriculture ‘implies that several public goods or positive externalities are attached to agricultural production’. In fact, multifunctional agriculture refers to a situation where agricultural production comprises both market goods, such as food and fibre products, and non-market goods, such as environmental and social functions. Or, in the words of Vatn (p324), the term applies to ‘a situation where goods have both private and public attributes, or where private and public goods are interrelated in production’.

This volume, however, goes beyond this more or less ‘traditional’ view of multifunctionality. That is, it focuses not only on the phenomenon of multifunctional agriculture, but also on changes in rural areas that reveal the contours of a development trajectory that is based on multifunctionality. To explain this somewhat cryptic formulation, let us turn back to the notion that recent rural developments consist of a wide variety of ‘new’ activities, such as agro-tourism and the production of region-specific products. These new activities have led to a reconfiguration of the way rural resources, such as land, water and forests, are used within the farm and between agriculture and other rural activities. Because this reconfiguration of resources can only be perceived at aggregate, regional levels (see Knickel and Renting, 2000), our analysis goes beyond the level of the farm gate.

Thus, in addition to agricultural multifunctionality, this volume also deals with multifunctionality of the rural space. As such, the volume distinguishes itself from many economic treatments of multifunctionality, which are entirely or mostly restricted to the ‘agricultural’ realm. This, however, does not alter the fact that the issue of agricultural multifunctionality has resulted in some relevant and interesting literature. A recent example is Wilson (2007), who shed an original and excellent light on agricultural multifunctionality from a transition theory perspective.

The purpose of this chapter is twofold. First, it briefly provides the theoretical background for understanding how economics and policies can play a role in multifunctional rural land management. The emphasis is on ‘briefly’, because much of the background material is discussed in greater detail in the various chapters of this book. Its second purpose is to describe the objective of the book and provide an overview of the contents. The remainder of this chapter is organized according to these two purposes. That is, the next section presents the theoretical background, including economic tools for decision making, externalities and the public good dimensions of rural activities, and the final section covers the key objective and the structure of the book.

Theoretical background: the role that economics can play in policies for multifunctional rural land management

This section provides an economics perspective on the policies regarding multifunctional rural land management. In fact, it discusses which theoretical and methodological approaches can assist in the analysis and formulation of these policies. The next subsection focuses on decision-making tools, such as the well-known cost–benefit analysis (CBA), for quantifying and evaluating rural land policies.¹ Then, a second subsection deals with externalities and the public good character of rural activities.

Economics as a guide to policy making

In a world where land for farming, nature, housing and other uses is scarce and becoming more so, decisions made about rural land can have substantial impacts on the landscape and its visual characteristics. Economics can facilitate these difficult decisions that affect rural areas. Economic analysis, for example, can demonstrate the potentially high benefits of nature conservation and landscape management in rural areas, and clearly reveal the economic and social pressures that threaten biological diversity in these areas. In order to make a trade-off between environmental and social functions on one hand – for which in most cases no markets exist – and economic interests on the other, it is necessary to estimate the value of these environmental and social functions so that they can be included in decision making frameworks, such as a CBA. The economic techniques of monetary valuation provide a tool to assist in decision making as they help decision makers to reach informed decisions about rural land policies where there may be several alternative ways of allocating scarce financial and other resources.² Moreover, the budget for rural land policies is often limited, so it is also the task of economists to assist in setting priorities among alternative rural land policy and management options.

CBA is widely used by planners and decision makers who have to choose between two or more alternative programmes or policies, usually denoted by the term ‘projects’. As such, it is the conventional neoclassical economic approach to quantifying and evaluating projects. Traditionally, CBA has been defined in terms of what the gains and losses of a project are to society. In this regard, the CBA tool provides a consistent procedure for evaluating decisions in terms of their consequences.

Other economic decision making tools are cost-effectiveness analysis (CEA) and multi-criteria analysis (MCA). The purpose of CEA is to create a basis for sound decisions about the allocation of scarce resources. CEA can take two forms. The first is the called the ‘least cost method’. Where there are alternative options for achieving a specific target, CEA can be used to assess which is the cheapest option. The second method is known as the ‘constant cost method’. It assumes a fixed budget and seeks the alternative that will result in the maximum effect on a specific target variable from those given resources. A CEA should not be confused with a CBA, which evaluates a project by comparing its costs and benefits, both measured in monetary terms. In fact, the benefits in a cost-effectiveness study need not be measured in terms of money.

The purpose of MCA is to indicate the best alternative that satisfies a predetermined set of objectives (Van Huylenbroeck, 1988). It can be used to identify a single most-preferred option, to generate a ranking or simply to distinguish acceptable from unacceptable alternatives. In contrast to CEA, MCA allows the comparison of projects that seek to reach different objectives. For the set of objectives, the policy maker has established measurable criteria to assess the extent to which the objectives have been achieved. MCA makes explicit the alternative options and their contribution to the different criteria. The technique usually provides an clear relative weighting system for the different criteria (Janssen and Munda, 1999).

CBA in particular appears to be a widely practised tool for project appraisal. However, there are a number of difficulties posed by applying it to issues related to multifunctionality, mostly due to the public good character of rural activities. This will be discussed further in the next subsection.

Externalities and the public good dimensions of rural activities

As indicated earlier, much work on multifunctionality focuses on treating externalities or public goods as by-products of agricultural production. But what exactly are these externalities and public goods? Using the words of Boardman et al (2006, pp84–85), an externality can be defined as ‘an effect that production or consumption has on third parties – people not involved in the production or consumption of the good. It is a by-product of production or consumption for which there is no market.’ Externalities can be positive, i.e. they benefit others, or negative, i.e. they harm others. Positive externalities from agricultural production include the conservation of agro-biodiversity and the benefits derived from scenic beauty generated by rural landscape and open space. Well-known examples of negative externalities are pollution, endangered animal health and odours from livestock.

Of course, in any analysis of multifunctionality, it is essential to consider not only beneficial externalities associated with agriculture, but also negative externalities. Failure to consider both types of externalities can lead to erroneous and counterproductive policy recommendations (Abler, 2004). Moreover, many externalities are territorially specific, providing mainly local benefits and local harms. This means that policies set at the national level may not always target negative externalities efficiently; neither may they ensure the optimum provision of positive externalities. Therefore, policy decisions relating to multifunctionality should reflect local needs and circumstances, which ultimately implies that local governments are key actors in the formulation and implementation of policies that facilitate multifunctional rural land management (Kallas et al, 2007).

Most externalities associated with agricultural production have a public good dimension. Pure public goods have two attributes that distinguish them from other economic goods: non-rivalry (or joint consumption) and non-exclusion (see, for instance, Slangen et al, 2008). Non-rivalry implies that, once the good is provided to a consumer, it can be made available to other consumers at no extra cost; that is, the marginal social cost of supplying the asset to an additional individual is zero. Non-exclusion means that one user cannot prevent consumption by others. Due to the non-exclusion attribute – that is, due to the fact that it is impossible or at least very costly to deny access to rural areas – markets fail to allocate resources with public good characteristics efficiently. This may be understood by noting that prices do not then signal the true scarcity of the asset (Hanley et al, 1997).

Although many by-products of agricultural production differ from private goods because they possess the characteristics of public goods, it needs to be stressed that many public goods are not pure public goods. For example, natural assets in rural areas, such as wild game for hunting, are ‘common-pool resources’, as are many grasslands, lakes and forests (see Table 1.1). It is difficult or costly to exclude or limit users from these, while one person's consumption reduces resource availability for others (Ostrom, 1999; Ostrom et al, 1999).³ Also agro-tourism can be regarded as a common-pool resource, because it includes the phenomenon of congestion (or overuse): one individual's consumption reduces the quality of service available to others.

Table 1.1 A general classification of economic goods

Excludability	Low/absent	Rivalry	High
Easy	Toll or club goods		Private goods
Difficult	Pure public goods		Common-pool resources^*

Note: * Rivalry does not necessarily need to be high. In certain cases, such as rivers, large bodies of water or groundwater basins, rivalry is medium rather than high.
Source: Moretto and Rosato (2002, p5).

A unit of a common-pool resource harvested by one user is thus not available for others. As is shown in Table 1.1, this rivalry of resource units is shared with private goods. The difficulty of excluding users, however, is typically a public goods property. Table 1.1 also shows that the benefits of both toll goods and pure public goods are non-rival so that the consumption by one user does not necessarily detract from the benefit still available to other users. However, whereas the toll good is restricted to people who pay the producer or the holder of the good, the benefits of a pure public good are shared by all consumers, whether they paid for them or not.

The concepts of externalities and pub...

Table of contents

• Front Cover
• Half Title
• Title Page
• Copyright
• Contents
• List of Figures and Tables
• List of Contributors
• Preface
• List of Acronyms and Abbreviations
• 1 Natural Resource Management: Globalization and Regional Integration
• Part I Setting the Stage: Challenges and Reviews
• Part II Appreciate the Prerequisite: Perspectives on Land
• Part III Reorientations and Openings: Agri-environmental Programmes
• Part IV Creating a Common Currency: Landscape Values
• Part V Outlook: Emerging Perspectives of Resource Management in Rural Areas
• Index