Agroecosystem Modeling and Optimal Economic Decisions: Implications for Sustainable Agriculture

Abstract

We adapt a biogeochemical model of an agroecosystem to account for optimal economic behavior on the part of agricultural producers. Two institutional management regimes are considered: one in which a representative producer does not account for stock pollution caused by use of agricultural inputs, and one in which the externality is internalized. Comparative statics of the steady state of the former problem are analyzed in order to gain insight into effects of potential policy and technological changes. Results show that a more realistic ecosystem component that includes nutrient cycling can qualitatively change optimal management practices relative to a one-state representation, potentially rendering systems "unsustainable" under some criteria and leading to policy instruments that exacerbate, rather than mitigate, external damages or the resource base. Moreover, the qualitative effect of changes in model parameters are not necessarily uniform across different agricultural systems, implying that a prescription for so-called "sustainable" management under one system may have unintended consequences for another system.

Keywords: Agroecosystem, dynamic model, optimal control, stock externality, comparative statics, technological change

JEL Classification: C61, Q16, Q24, Q53