Comparison of profit maximization and multiple criteria models for selecting farming systems

ABSTRACT:

The rationale for subsidizing soil and water conservation practices is that farmers would not adopt farming systems incorporating these practices to the extent desired by society without cost sharing subsidies. Premises underlying this rationale are that profit maximization is the sole criterion for selecting farming systems and farming systems incorporating soil and water conservation practices are less profitable than systems that exclude these practices. Validity of the profit maximization model is evaluated by comparing the selection of farming systems based on profit maximization and a general multiple criteria decision-making (MCDM) model. Preferences for criteria were obtained from a survey of 20 farmers in Missouri's Goodwater Creek watershed. The MCDM model was used to evaluate five farming systems in terms of five economic and environmental criteria: increasing net return (profit), reducing economic risk, reducing soil erosion, improving drinking water quality, and enhancing aquatic ecosystems. Three method were used to estimate the weights for the criteria: fixed point scoring, paired comparisons, and judgment analysis. Weights represent farmers' preferences for the five criteria. Values of the five criteria are determined using a watershed simulation model. Weighs and values for the criteria are used to calculate utility scores, which are then used to rank the five farming systems. The top ranked and most profitable farming systems are different. Three possible interpretations of this discrepancy and their implications for conservation subsidies are discussed.