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Book Chapter
Microeconomic Responses to Macroeconomic Reforms
The Optimal Control of Soil Erosion
This chapter aims to determine precisely how macroeconomic and sectoral policies influence soil conservation with the use of an optimal control model. It shows that in general, it is not possible to predict how policy reforms affect soil conservation. Knowledge of the technical details of agricultural production is needed to predict how policy reforms affect soil conservation. Though this conclusion may seem unsatisfying, it compels us to rethink the premise that policy reforms are good if they conserve soil and bad if they don't. The flaw in this view is that our concern should not lie with soil per se. Unlike many other environmental resources, soil does not contribute to well-being directly; its value is as an input in agricultural production. Even if policy reforms cause further depletion, the ability of the land to yield an income may still be greatly enhanced. This conclusion relates only to the on-site impacts of soil erosion. There could be other externalities due to eroded soil to downstream and other users. Correcting such externalities may be difficult because shadow prices are not directly observable and are location-specific.