Assigning Economic Value to Natural Resources (1994) / Chapter Skim
Currently Skimming:
6 Natural Resource and Environmental Accounting in U.S. Agriculture
6 Natural Resource and Environmental Accounting in U.S. Agriculture
Pages 111-131
The Chapter Skim interface presents what we've algorithmically identified as the most significant single chunk of text within every page in the chapter.
Select key terms on the right to highlight them within pages of the chapter.
From page 111... ...
agriculture had impressive success in reducing the economic costs of production- measured by declining real prices of farm commodities despite an almost two-fold increase in crop and animal production. The combination of lower prices and expanded output conveyed substantial economic benefits to consumers of American farm output, both at home and abroad.
|
From page 112... ...
. Similarly, sediment eroded from farmland and deposited in floodplains and river deltas can increase soil productivity, and hence may generate benefits reflected in lower farm commodity prices.
|
From page 113... ...
Net Income as an In(licat;or of Sustainability The net social income provided by the agricultural production system is the difference between the value of gross production and the on-farm ant] off-farm production costs.
|
From page 114... ...
4The U.S. Department of Agriculture, for example, measures changes in the total productivity of American agriculture as changes in the ratio of an index of total farm output to an index of total farm input (USDA, 19911.
|
From page 115... ...
The decline in net farm income- equal to the increased outlays for fertilizer measures the cost of the erosion-induced decline in soil productivity. In this example farm productivity, measured by net income, declines because erosion increases on-farm production costs in the form of higher outlays for fertilizer.
|
From page 117... ...
Nor does gross farm income include the off-farm benefits of farming or production expenses of the off-farm costs of environmental damage. Net income is the difference between gross income and production expenses.
|
From page 118... ...
the estimates of gross farm income and production costs do not include the off-farm benefits en c! costs of farming.
|
From page 119... ...
combined with cleclining physical productivity of the lanct. In such a case, the notion of a capital consumption charge against the land would seem to make little sense since the economic capacity of the land is not consumed but in fact is rising.
|
From page 120... ...
The important point is that the capital consumption allowances charged against gross farm income must be sufficient to maintain the total farm capital, and hence the stream of net farm income over time. Given this condition, the precise form the capital takes is not important.
|
From page 121... ...
By this principle, the estimates of farm production costs in Table 6-l, which are part of the U.S. national income accounts, are underestimated ant} net farm income is overestimated by the same amount to the extent that, over the period shown, the capital value of land and water resources was in fact diminished by use of them.
|
From page 122... ...
In American agriculture, however, subsidies show up as government payments added to net farm income (Table 6-~. In Table 6-2 these subsidies are included in item 3.
|
From page 123... ...
Human-made capital b. Natural resource capital Gross farm input adjusted for the environment; 10.
|
From page 124... ...
Net environmental benefits, the absolute difference between items 10 ant] 15, would be $5000, raising total gross farm input also to $995,000.
|
From page 125... ...
Land0 Watera-$10,000 Air- 0 Total -$10,000 Gross input minus environmental inputs $990,000 Net environmental benefit $5,000 Adjusted gross farm input $995,000 Gross farm output before adjustment for environmental outputs: $1,000,000 Environmental output Landb+$10,000 Water c-$15,000 Air- 0 Total -$5,000 Adjusted gross farm output$995,000 NOTES: aTo dispose of sediment; bscenic amenities; CLoss of recreational values because of sediment damage to water quality. SOURCE: See text.
|
From page 126... ...
In summary, the accounting framework presented in Table 6-2 offers a way of dealing with the two principal limitations of current representations of the farm sector in the national income accounts: (~) it specifically includes an item for consumption of on-the-farm natural resource capital; (2)
|
From page 127... ...
S A GRICUL7VRE 127 CONSUMPTION OF NATURAL RESOURCE CAPITAL: HOW TO REPRESENT IT'S Recall the definition of capital consumption: it is the amount of money which must be withdrawn from annually gross income and reinvested to replace the capital used up in production.
|
From page 128... ...
All of them reflect the negative effects of erosion-induceci losses of soil productivity on net farm income. Presumably farmers choose among the alternatives, or among some mix of them, to minimize the loss of net farmer income.
|
From page 129... ...
Accordingly, net farm income (or profit) will always be less by the amount of the costs of capital consumption, as it should be.
|
From page 130... ...
If they do nothing, the output sicle of the accounts will decline and a corresponding capital consumption charge must be made on the input side and subtracted from farm income. The negative income effect of the loss of soil productivity thus will be properly reflected in the accounts.
|
From page 131... ...
1989. Wasting Assets: Natural Resources in the National Income Accounts, World Resources Institute, Washington, D.C.
|
Key Terms
This material may be derived from roughly machine-read images, and so is provided only to facilitate research.
More
information on Chapter Skim is available.