ABSTRACT
Agricultural economics is a vast field, and even the interface between agriculture and environmental issues is too large to cover in just one chapter. I have selected a few issues to highlight, primarily because of their importance and because they illustrate interesting applications of principles that are crucial for the design of environmental policy instruments. 1 Nonpoint-source pollution (NPSP; see Chapter 13) is a pervasive feature of agriculture. The economics of poor households that depend on natural resources such as small-scale agriculture or forestry typically are very different from the simple neoclassical textbook case of a profit-maximizing firm. The case is not that they do not care to maximize profit, but missing markets and information, a lack of reliable titles, and constraints in various markets (labor, credit, insurance, and input and output markets) routinely lead to “corner solutions” in which the simple first-order conditions of maximization do not hold.
