Cost–Benefit Analysis of Soil Degradation and Restoration - Principles of Sustainable Soil Management in Agroecosystems - page 229

relatively undisturbed area. Another contributor to watershed erosion and sedimen-
tation is deforestation. This may initially be by large-scale legal (or illegal) logging,
but a deforested state is often maintained by subsequent agricultural use including
extensive livestock grazing in many areas. Other important contributors to sedimen-
tation include stream bank cutting and what Sanches (1979) calls “civil engineering
erosion” from improper location, construction, and maintenance of roads, culverts,
bridges, and channels.
The exploitation of natural resources, perhaps even more so in developing coun-
tries, continues in large part because these resources are not priced at their marginal
social values. This underpricing in turn occurs because many centrally planned as
well as private market economies, with imperfectly defined and enforced property
rights, fail to fully internalize the external costs of environmental service benefits
related to the use of these natural resources. Examples of environmental services
include raw material supply, assimilative capacity of natural systems for the residu-
als of economics production and consumption activities, esthetic values, human and
wildlife habitat, and genetic biodiversity. This suggests the need for more compre-
hensive measures of the social benefits and costs of resources or their related envi-
ronmental services (Hitzhusen 1993). Environmental economists usually talk about
four categories of marginal social costs, including (1) direct costs to current users,
(2) external costs borne by others now and in the future, (3) foregone benefits of
future users from a depleted resource, and (4) existence values for the sustainable
maintenance of a given resource.
The planned economy or private market imperfections at the microeconomic or
watershed level, in the case of soil erosion, also manifest themselves as imperfections
in national income accounting at the macroeconomic level. Repetto and Faeth (1990)
argue that by ignoring natural resources (or the broader notion of environmental ser-
vices), statistics such as the gross national product (GNP) can record illusory gains in
income and mask permanent losses in wealth. As a result, a nation could exhaust its
minerals, erode its soils, pollute its aquifers, and hunt its wildlife to extinction—all
without affecting the measured national income. For example, Indonesia's high 7.1%
economic growth rate as measured by gross domestic product (GDP) from 1971 to
1984 is only 4.0% when GDP is adjusted for unsustainable soil erosion, forest harvest
in excess of annual growth, and oil reserve depletion.
The economic costs of soil erosion and degradation have been generally but not
comprehensively established. Reduced agricultural food production and recreation
and habitat losses as well as dredging, water treatment, and other cleanup costs from
erosion and downstream sedimentation are often cited in the literature. Less evidence
exists for the economic benefits, particularly those not traded (bought and sold) in
well-functioning markets from restoration of soils. Economists often refer to these
as nonmarket or extra market benefits and prescribe a range of estimation methods
under the rubric of benefit-cost analysis (BCA). It is understandable that nonecono-
mists in particular might be a bit skeptical about the validity of these methods, even
though they have a relatively long history and are being discussed more frequently
in popular trade publications (see Corn and Soybean Digest , January 2012). Thus,
the following section provides a detailed development of their conceptual basis and
estimation protocols.