What exactly are the externalities supposed to be here? If the farming land is privately owned and the property rights secure in the long run, the cost of soil depletion is fully internalized. Or is there some wider-scale process going on that presents a collective action problem for farmers?
Internalizing future negative externalities without accounting for them now doesn’t solve the problem, especially if people aren’t aware of it. In a larger sense, the negative externalities of climate change are fully internalized to the human race, but as long as they don’t affect us yet, we have little individual incentive to care.
Which is to say that a farmer that may go bankrupt in 20 years because the farm will no longer be able to sustain production is not going to increase prices unless the farmer is quite cognizant of the fact and is planning for it. Most won’t.
Which is to say that a farmer that may go bankrupt in 20 years because the farm will no longer be able to sustain production is not going to increase prices unless the farmer is quite cognizant of the fact and is planning for it. Most won’t.
So, new American tractors are now satellite-driven to ensure they don’t take the same path, in order to decrease the amount of soil they kick up and erosion that happens. I find it unlikely many American farmers are oblivious to these issues.
Part of my reply to Vladimir addresses your question; I think [North] American farmers aren’t all that oblivious, but I suspect that they are still more optimistic than they ought to be. 20 years also might be too short a time window; 50 years might be more appropriate, and the problem still remains.
If nothing else, psychology tells us that once we start talking about a 50 year time window, we should have a very high prior for people being overly optimistic and insufficiently discounting future costs.
Which is to say that a farmer that may go bankrupt in 20 years because the farm will no longer be able to sustain production is not going to increase prices unless the farmer is quite cognizant of the fact and is planning for it. Most won’t.
But why? In countries with stable governments and secure property titles, plenty of economic activity takes place with time horizons of this magnitude, and even much longer ones. What is it that makes landowners so irrationally shortsighted?
Poverty. If you have no income, and $X in savings that produce 5% interest, if 0.05X isn’t enough to live on, you’re still going to live on the money you have, even if you’re aware that it will run out.
I think farmers in developed nations are much better off, but that farmers in the developing world are depleting topsoil faster than we can afford to have it depleted, to say nothing of the future cost to themselves. I further am under the impression that topsoil depletion is still a problem in the US, and its current resolution is forcing faster topsoil depletion in the rest of the world. If you have specific information that this is not the case, I’m basing this impression off a large number of things that I’ve read that all might be out of date, or collectively too pessimistic about current conditions.
Edit: also note the last paragraph of my reply to Vaniver.
What exactly are the externalities supposed to be here? If the farming land is privately owned and the property rights secure in the long run, the cost of soil depletion is fully internalized. Or is there some wider-scale process going on that presents a collective action problem for farmers?
Internalizing future negative externalities without accounting for them now doesn’t solve the problem, especially if people aren’t aware of it. In a larger sense, the negative externalities of climate change are fully internalized to the human race, but as long as they don’t affect us yet, we have little individual incentive to care.
Which is to say that a farmer that may go bankrupt in 20 years because the farm will no longer be able to sustain production is not going to increase prices unless the farmer is quite cognizant of the fact and is planning for it. Most won’t.
So, new American tractors are now satellite-driven to ensure they don’t take the same path, in order to decrease the amount of soil they kick up and erosion that happens. I find it unlikely many American farmers are oblivious to these issues.
That’s pretty cool.
Part of my reply to Vladimir addresses your question; I think [North] American farmers aren’t all that oblivious, but I suspect that they are still more optimistic than they ought to be. 20 years also might be too short a time window; 50 years might be more appropriate, and the problem still remains.
If nothing else, psychology tells us that once we start talking about a 50 year time window, we should have a very high prior for people being overly optimistic and insufficiently discounting future costs.
But why? In countries with stable governments and secure property titles, plenty of economic activity takes place with time horizons of this magnitude, and even much longer ones. What is it that makes landowners so irrationally shortsighted?
Poverty. If you have no income, and $X in savings that produce 5% interest, if 0.05X isn’t enough to live on, you’re still going to live on the money you have, even if you’re aware that it will run out.
I think farmers in developed nations are much better off, but that farmers in the developing world are depleting topsoil faster than we can afford to have it depleted, to say nothing of the future cost to themselves. I further am under the impression that topsoil depletion is still a problem in the US, and its current resolution is forcing faster topsoil depletion in the rest of the world. If you have specific information that this is not the case, I’m basing this impression off a large number of things that I’ve read that all might be out of date, or collectively too pessimistic about current conditions.
Edit: also note the last paragraph of my reply to Vaniver.