SOCIAL RESPONSIBILITY ASPECTS OF AGRICULTURAL EXTERNALITIES ECONOMICAL REGULATION

Abstract

In the latter years various scientists have analysed multifunctional character of agriculture. Attention is focused on the fact that agriculture not only produces commodities, but also makes influence on environment. Intensive non sustainable agriculture damages environment. The negative environmental impacts of agriculture may be characterised through the harmful contribution of agricultural activities to soil, water and air quality, bio-diversity, wildlife and semi-natural habitats, rural landscape. The results of positive agricultural externalities are public goods. Agriculture contributes to fulfilling societal goals like viability of rural areas and their development, food security, preservation of cultural heritage. Agriculture may also have positive external effects on other economic sectors such as tourism.

The problem of agricultural externalities is that externalities do not appear in the revenue and cost accounts of the farmer. According to this farmers have no motivation to create positive externalities (so it is necessary to compensate for the benefits of the amenity provided) and to bear the cost of environmental harm. It raises the necessity to substantiate the implements, which could stimulate positive externalities and restrict negative ones. In this article welfare economic theory is used to analyse agricultural externalities and principles of their economical regulation. The aim of this research is to examine theoretical, methodological and analytical questions of agricultural externalities regulation.

Methods of economic regulation of agricultural externalities were described by M. Bohman (1999), J. Pretty (2001), P. Paarlberg (2002), J. Lankoski (2003), L. Casini (2004), S. Prestegard (2004), E. Romstad (2004), G. Boody (2005), A. Randall (2007). Mostly used methods for economical regulation of negative agricultural externalities are environmental taxes, ecological licences. Expecting positive agricultures’ impact on environment, it requires state regulation and support through subsidy related with agri-environmental requirements or other policy mechanisms.

If agricultural externalities could be easily measurable, there would be possible to construct rational system of agricultural externalities regulation and to provide society‘s desirable extent of agricultural goods. This could be implemented in such way: having positive externality to farmers income including external social benefit, on the contrary, having negative externality to farmers costs adding external social costs. Unfortunately, scientists face difficulties evaluating agricultural externalities. Valuation problems raises due to such factors: agricultural economic processes are coherent with biological processes, production proceeds in large territory, etc.

The object of the research – agricultural externalities and their economical regulation.

The purpose of the article – to validate the necessity of agricultural externalities economic regulation seeking positive social and environmental influence for rural areas.

Case study revealed that effective implement for regulation negative externalities in agriculture could be creation of property rights market for externalities. Unfortunately due to complicated bureaucratic control ecological license the same as Pigou tax is rarely in agriculture.

Importance of subsidies for agricultural externalities regulation is emphasized – economically it’s more effective to support environmental technologies and ways of farming than spending for degrading natural resources recreation. Though subsidies related with production extent should be avoided because they stimulate intensive farming and often influence negative externalities.