Cost–Benefit Analysis of Soil Degradation and Restoration - Principles of Sustainable Soil Management in Agroecosystems - page 239

Resource Institute 1986). The appropriate economic incentives may include increas-
ing agricultural prices to the competitive level, reducing taxation on agricultural
production, establishing effective property rights, providing subsidies and assistance
for conservation practices, and eliminating input subsidies.
Correcting farm level disincentive problems is inadequate because soil erosion
causes major off-site impacts that are not borne by farmers. In addition, farmers'
time horizons are much shorter and their discount rates much higher than the society
at large. Therefore, public interventions and national actions are usually required
to ameliorate the effects of soil erosion and degradation including better defined
property rights, government regulations on land use, and the traditional approach to
environmental problems—public authorities investing in reforestation and pollution
control projects.
Price distortions result in great losses of agricultural production in many devel-
oping countries. Thus, to have a high economic growth and at the same time have
a high agricultural growth, “getting prices right” is a necessary condition. In some
sense, “getting prices right” also applies to the argument for a sustainable pattern of
growth. One of the most important causes of environmental degradation is that envi-
ronmental services are undervalued. Activities that exploit soil and land resources
and cause degradation are not fully priced or taxed, or, at least, not valued at their
marginal social valuation. This in turn leads to faulty measures of national income
and economic wellbeing. The problem of inadequate soil and water management or
exploitation of soil and water resources is similar to the undervaluation of commodi-
ties or credit—the natural resources are overused and they are undervalued. Thus,
the arguments for well-defined property rights, pollution taxes, revised national
income accounts, and implementation of conservation measures is “getting prices
right on environmental services.”
10.4.1.3 Follow-Up Analysis
In 2006, Enver and Hitzhusen completed a follow-up analysis to the earlier Zhao et
al. (1991) effort. Data from the Global Assessment of Soil Degradation (GLASOD)
in 1991 attempt to assess the diverse causes, processes, and consequences of soil
degradation on a globally consistent basis (Wood et al. 2003). These data were uti-
lized by Enver and Hitzhusen (2006) to estimate a production function based on
the earlier Zhao formulation combined with a spatial mixed autoregressive model
and a spatial error term. The authors found that a reduction of soil quality from the
GLASOD estimates of percent of agricultural land degraded in each country due to
poor agricultural practices resulted in an average of 9% reduction in productivity on
these lands. However, spatial autocorrelation in the error term of the model suggests
that unobservable factors are spatially correlated across neighboring countries. More
analysis is needed to address this concern.
10.4.2 dr V aldeSia h ydro r eSerVoir S ediMentation (C aSe 2)
To illustrate some of the concepts introduced in the BCA concepts section of this
chapter, this case summarizes an earlier evaluation of soil conservation project for
a hydroelectric watershed located in the DR. After some background information