The Economics of Sustainable Agriculture Joseph V. Balagtas Department of Agricultural Economics Purdue University

“Sustainable development recognizes that growth must be both inclusive and environmentally sound to reduce poverty and build shared prosperity for today’s population and to continue to meet the needs of future generations. It must be efficient with resources and carefully planned to deliver immediate and long-term benefits for people, planet, and prosperity.” The World Bank statement on “Sustainable Development” Mandela Washington Fellowship, June 30, 20162

What is SUSTAINABILITY? sustainable 1. Capable of being maintained or continued at a certain rate or level ( But what does that mean in practice? Mandela Washington Fellowship, June 30, 20163

Q: What processes, characteristics, features do you associate with sustainable systems? Organic Green (Not) Genetically Modified Local Renewable Labor-friendly Fair Natural Market-driven Mandela Washington Fellowship, June 30, 20164

Words need to mean something. These various processes, features, characteristics may be part of a sustainable system. Or not. Society needs to evaluate their effects on any given system’s ability to endure (with essential features maintained), and think about potential trade-offs. And because the world changes, features of sustainability may change. Thus we should be resist redefining “sustainability” to mean any of these features. Mandela Washington Fellowship, June 30, 20165

So what is SUSTAINABLE AGRICULTURE? Long-term economic viability of agricultural production. Long-term maintenance and improvement of environmental and resource consequences of agriculture. Acceptable social outcomes of agriculture, including reduction of poverty, industry structure, animal wellbeing, as well as output characteristics such as food security, food safety, and nutrition. Mandela Washington Fellowship, June 30, 20166

So what is SUSTAINABLE AGRICULTURE? Long-term economic viability of agricultural production. Long-term maintenance and improvement of environmental and resource consequences of agriculture. Acceptable social outcomes of agriculture. (What might these be?) Mandela Washington Fellowship, June 30, 20167

Economic sustainability Probably the most straightforward of the 3 criteria, and the one to which farmers and others involved in agriculture most readily relate. Relatively easily observed. Q: How do you know if an agricultural sector is economically sustainable? Dynamic: economic viability of production ag does not mean economic viability of every farm, firm, or industry in its present size and location. Attempts to preserve an industry typically have the opposite effect. Mandela Washington Fellowship, June 30, 20168

Environmental sustainability Becomes an issue when environmental consequences of production are not fully reflected in decisions of producers and consumers. (externalities) Environ. policy may attempt to incorporate external costs or benefits into decisions, but are often difficult to measure (e.g., fertilizer run- off leading to dead zones in the oceans). Improved environmental outcomes may come at the expense of other dimensions of sustainability. Mandela Washington Fellowship, June 30, 20169

Social sustainability Least well understood of the 3 criteria: disparate, complex, controversial. Q: What are the important social outcomes of a food/ag system? Perceptions of desirable social outcomes differ by preferences, location, time. Currently: reduction of poverty, industry structure, animal wellbeing, as well as output characteristics such as food security, food safety, and nutrition Challenge is to include social criteria in the mix without simply defining ag sustainability as conducive to an arbitrary list of popular outcomes. Mandela Washington Fellowship, June 30,

The (sometimes) competing goals of sustainability Economic Viability Resource & Environmental Maintenance Social Responsibility Mandela Washington Fellowship, June 30,

The role of ECONOMICS Economics 1. the study of how society manages scarce resources Key insights: we face tradeoffs; we respond to incentives; our actions typically have unintended consequences Resource scarcity (land, water, labor, human capital) causes many of the tradeoffs among the three components of ag sustainability. How do we use these resources to achieve the (sometimes) competing goals of sustainability? Mandela Washington Fellowship, June 30,

Two examples Are local foods part of sustainable agriculture? Is GM technology part of sustainable agriculture? Mandela Washington Fellowship, June 30,

Local food Mandela Washington Fellowship, June 30, Food systems can be divided into two major types: the global industrial food system, of which there is only one, and sustainable/local (or regional) food systems, of which there are many.

Features of local food (?) Proximity (but what does this mean?) Personal relationships between consumers and sellers/producers Small farms More variety? More safety? Better for the environment? More nutritious? Better for the (local) economy? Mandela Washington Fellowship, June 30,

Comparative advantage and gains from trade Society can be made better off if we allow specialization and trade. Benefits come from efficient use of resources….producing in the least-costly manner Lower food prices and lower expenditure Less environmentally damaging Life-cycle studies show a large percentage of global-warming impact of the food system occurs at the production stage. Mandela Washington Fellowship, June 30,

Is local food sustainable? Maybe Should governments promote local-ness? How? Mandela Washington Fellowship, June 30,

Food safety and genetically modified organisms Nearly all foods come from plants and animals with genes that have been modified through human intervention On-farm seed selection Scientific plant breeding GM refers to plants or animals modified through genetic engineering. Modifying genetics not through sexual reproduction, but by physically moving individual genes from a source organism directly into the living DNA of a target organism. Benefits: precision, availability of a larger genetic pool E.g., Genes carrying specific trait to resist insect damage can be moved from soil bacterium (Bt) into a corn or cotton plant….Bt corn, Bt cotton Mandela Washington Fellowship, June 30,

Applications of GM in agriculture First generation of technologies used to enhance production Pest resistance Herbicide resistance Drought resistance Flood resistance Longer shelf life Second generation of technologies targeting consumption attributes Improved nutrition Mandela Washington Fellowship, June 30,

Regulation and safety of GM Responsibility of national governments US National Academy of Sciences: no “unique hazards” of modification of plants using GM versus other methods GM subject to biosafety inspection (safety to biological environment) environmental safety inspection Safety Over 20 year history of extensive consumption in the U.S., no evidence of human or environmental harm. Mandela Washington Fellowship, June 30,

Is GM a consistent with sustainable agriculture? Economic viability? Environmental and resource outcomes? Social outcomes? Mandela Washington Fellowship, June 30,