An optimal control model of dynamic externality with applications to problems of soil erosion
Abstract
Farm soil erosion leads to off-site damages estimated at $2.2 Billion annually in this country, including \$50 Million for cleaning soil out of drainage ditches. These damages have often been classified as "nonpoint-source" pollution, because it is prohibitively costly to trace these pollutants back to their sources. At the federal and state levels, policy-makers, unable even to consider using traditional economic cures for externality problems, have been favoring more and more regulations that restrict farm erosion and do not insure that the off-site damages avoided are worth the losses farmers incur. At the county level, surveyors and others charged with administering drainage ditch cleanup would like to see erosion reduced, but are not certain how they can or should use what power they have to change farmer behavior. This dissertation develops a dynamic optimal control model of a farm drainage system that would allow damages to drainage ditches to be treated as point-source externalities that could be traced to specific farms, and could therefore be treated with traditional policies to correct externalities. In theory, it is argued, the results of such policies would be to reduce dredging costs and other off-site costs of erosion originating on drained farmland, and at the same time increase total farm profits. In practice, the costs of calibrating and updating the model might overwhelm the benefits to be gained from the policies. The dissertation therefore includes a proposal for practical modifications of two policy ideas, the optimal choice of dredging time and the optimal cost-sharing rule. The modified policies should appeal to county surveyors and others who administer drain maintenance programs and would like to see erosion under better control. The policies should also appeal to farmers, because they stand to gain profits, and by reducing erosion voluntarily, they might avoid harsher regulation.
Degree
Ph.D.
Advisors
Fletcher, Purdue University.
Subject Area
Agricultural economics|Environmental science
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