chapter  13
10 Pages

Economics, agriculture, and the environment

Natural resources and environmental quality are increasingly important. This is particularly true in agriculture, which is heavily dependent on land, agrochemicals, and water. This chapter explores how rational actors can overuse, or exploit, resources such as cropland, water from an underground aquifer, or grazing land. Externalities such as air and water pollution from agricultural production and processing can result in suboptimal outcomes for society. Possible solutions to the externality problem include bans, taxes, quantitative standards, and subsidies. Private bargaining can also lead to effi cient outcomes, under certain circumstances.