Management Theory and Studies for Rural Business and Infrastructure Development, Volume 20

Regulation of agricultural public goods provision on the basis of economic value

Bernardas Vaznonis

Abstract

Public attitude to countryside and agriculture has been changing recently in Europe.
Countryside is regarded as space of consumption but not only production, while the role of agriculture
is not only production of commodity goods but also formation of open space and active
cultural landscape, nurturance of monuments and living expression of etnoculture. Changes in
the opinion of the European society about agriculture when „quantity for the lowest price“ yields
the grounds of paramount importance to such things as food quality, consumers‘ health, value of
biodiversity, rural landscape and environmental resources as well as preservation of family farms
and local cultural and rural traditions have led scientists and politicians to search for new tools
that enable internalization of agricultural externalities and security of optimal provision of agricultural
public goods. In two last decades research on economical regulation of agricultural externalities
and provision of public goods has developed significantly.
Unfortunately regulation of agricultural externalities faces serious difficulties. Most agricultural
externalities are not included into market relations. Agricultural production prices often
reflect commodity production costs incurred by private producer but do not show costs and benefit
of the externality. In the case of positive externalities demand for agricultural products undervalue
the benefit of agriculture. In the case of negative externalities supply of agricultural products
fails to reflect all costs. Inefficient distribution of resources is evident – overproduction of
the stuff determining negative externalities and underproduction of that with positive externalities.
Combination of marketable and not-marketable production maximizing welfare of the society
members is not secure in the market. Thus, public regulation is needed, but both theoretical
background for achievement of the desirable result and rational measures of economical policy
are lacking. Absence of scientifically reasoned methodological principles and concrete methodic
for agricultural public goods valuation doesn‘t allow to rationalize economical regulation of agricultural
public goods provision and to secure the extent of society desired agricultural public
goods.

Keyword(s): agriculture, economic regulation, externalities, public goods


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Management Theory and Studies for Rural Business and Infrastructure Development eISSN 2345-0355

This journal is published under the terms of the Creative Commons Attribution-Noncommercial 3.0 Unported License. Responsible editor: Dr Audrius Gargasas.