WHOSE PRICE WINS - INSTITUTIONAL AND TECHNICAL CHANGE IN AGRICULTURE

The concern for environmental quality has become an increasingly dominant force for institutional and technical change in agriculture. More recently, surface- and ground-water pollution from agriculture have generated public debate over the economic potential of alternative production systems and the structure of farm policies. However, the ability to alleviate environmental problems through technical change is predicated upon prices and institutions in agriculture, such as farm programs. Using as an example the current conflict over water use between the farm sector and environmental groups, this paper analyzes the dynamic and recursive process of institutional and technical change in agriculture. A conceptual framework is presented which emphasizes that: conflict between groups, created by the environment, institutions, and technology, is central to the environmental problem; and institutional change through new regulations and stronger enforcement of existing regulations implies a resolution of conflict. Conflict between groups creates the economic incentives for change. Two general processes are analyzed by which conflicts are resolved: one leads to Pareto-efficient and the other leads to Pareto-non-comparable resolution of conflict. We conclude that Pareto-efficient conflict resolution, represented by bargaining within the existing institutional structure, will continue to play a minor role in reducing environmental problems from agriculture. -from Authors