Cost-benefit analysis of soil conservation

The situation in developing countries is particularly acute because of their dependence on agriculture. Despite the high level of concern over soil degradation, very little empirical analysis has been carried out on the actual severity of these problems, their causes, and the best ways to address them. Moreover, what work has been done has been largely theoretical, with little emphasis on practical methodologies to examine the economics of soil conservation under specific, practical conditions. This paper describes one such practical methodology -- an application of cost-benefit analysis to soil conservation problems. The basic principle of the methodology, as in all cost-benefit analysis, is to compare the flows of costs and benefits with and without the proposed intervention -- in this case some kind of soil conservation activity. The approach taken here is to consider the proposed interventions from the standpoint of the farmers themselves. Although the primary result of the analysis concerns the profitability of the specific measure, this approach also allows detailed examination both of the alternatives open to farmers and the constraints they face in undertaking soil conservation, and of numerous policy issues. The most difficult problems in the analysis of soil conservation arise because of the issue"s specific data requirements. Two basic sets of information are required: (1) bio-physical data on the effect of activities on soil, and the effect of degradation on yield; and (2) economic data on costs and prices. While the latter are often easily available, the former pose considerable -- sometimes insuperable -- problems. Since much of the theoretical work comes to the conclusion that whether conservation pays or not under specific conditions is dependent on those conditions, addressing the data problems is fundamental to applied analysis. Many of the principles developed herein will be more broadly applicable to numerous other natural resource problems; some, however, are relatively specific to soil conservation problems. The report begins with an overview of the principal aspects of soil degradation problems, bringing out its salient features from an economic viewpoint. The report then discusses how a cost- benefit analysis of these problems might be structured. The following section examines different approaches to obtaining the necessary data on the bio-physical aspects of the problem. A detailed example from Kenya [Pagiola 1990a] is used to illustrate the methodology. A final section examines some possible extensions of the methodology. (Author abstract)