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by Prof David Pannell Full details see:
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www.RuralPracticeChange.org
Department ofPrimary Industries
www.RuralPracticeChange.org
Department ofPrimary Industries
Policy perspectives on rural practice change
David PannellARC Federation Fellow
School of Agricultural and Resource EconomicsUniversity of Western Australia
www.RuralPracticeChange.org
Key messages
Think systematically about choice of policy mechanism for practice change
The public: private benefits framework can help choose
Focus extension efforts onto practices that are adoptable
www.RuralPracticeChange.org
Practice change: Why worry?
Why not leave the whole thing up to farmers and their business advisors?
www.RuralPracticeChange.org
Market failure
Externalities Relative advantage diverges from public benefit
Public goods – free rider problems e.g. Weak incentives for private sector to research
practices that can be easily copied
Information asymmetry Government may have better knowledge about a
practice Mainly relevant to new practices
www.RuralPracticeChange.org
Importance of adoption factors by adoption phase
Social Technology:
relative adv.
Technology:
trialability
Awareness ***
Non-trial evaluation
*** * **
Trial eval. ** ** ***
Adoption * *** *
Revision * *** *
Disadoption * ***
www.RuralPracticeChange.org
Department ofPrimary Industries
www.RuralPracticeChange.org
Department ofPrimary Industries
Choosing policy mechanisms
Public: Private Benefits Framework
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Definitions
“Private benefits” relate to the landholder making the decisions (internal) ≈ relative advantage or “adoptability”
“Public benefits” relate to all others (external) neighbours, downstream water users, city
dwellers interested in biodiverity
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Pu
blic
ne
t be
ne
fits
0 Private net benefits
Possible projects
Each dot is a set of land-use changes on specific pieces of land = a project.
LucerneFarm A
LucerneFarm B
Forestry in water catchment
Current practice
Which tool?• Incentives• Extension• Regulation• New technology• No action
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Category Specific policy mechanisms included
Positive incentives Financial or regulatory instrumentsA to encourage change
Negative incentives Financial or regulatory instrumentsA to inhibit change
Extension Technology transfer, education, communication, demonstrations, support for community network
Technology change
Development of improved land management options, e.g. through strategic R&D
No action Informed inaction
AIncludes polluter-pays mechanisms (command and control, pollution tax, tradable permits, offsets) and beneficiary-pays mechanisms (subsidies, conservation auctions and tenders).
Alternative policy mechanisms for seeking changes on private lands
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Simple rulesfor positive incentives
1. No positive incentives for land-use change unless public net benefits of change are positive.
2. No positive incentives if landholders would adopt land-use changes without those incentives.
3. No positive incentives if costs outweigh benefits overall. Private net benefit
Pu
blic
net
ben
efit
0
A
B
C
D
E
F
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Simple rules for extension
4. Not extension* unless the change being advocated would generate positive private net benefits (the practice is ‘adoptable’).
5. Not extension* where a change would generate negative net public benefits
* Extension as the dominant tool
Private net benefit
Pu
blic
net
ben
efit
0
A
B
C
D
E
F
www.RuralPracticeChange.org
Simple public-private framework
Private net benefit
Pu
bli
c n
et b
enef
it
0
Positive incentives or technology change
Extension
No action (or flexible negative
incentives)
Negative incentives
No action(or extension or negative incentives)
No action
Technology change (or no action)
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That was based only on simple rules
The following version accounts for additional complexities Costs of learning/transition Lags to adoption Partial effectiveness of extension Transaction costs Need for higher BCR
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-100
-50
0
50
100
-100 -50 0 50 100
Private net benefit ($/ha/year)
Pu
bli
c n
et b
enef
it (
$/h
a/ye
ar)
Positive incentivesor technol
change
Extension
No action
Negative incentives
No action
No action(or extension or negative incentives)
No action (or flexible negative incentives)
Technology change (or no action)
Complex version
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Implications for policy
Choice of policy tool depends on individual situation
Best projects have private net benefits around zero (+ve incentives) or slightly positive (extension)
Relative advantage (“Adoptability”) is a key
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AdoptabilityIs the innovation adoptable?
Yes.Then why is it not adopted?
No.What to do?
It is new.
Adoption will occur.
Promote Awareness
.
Learning failure.
Target that
failure.
Lack skills, resources.
Training.
Wait for good year.
Develop a better
technology: one that
is adoptable.
Public benefits?
Financial payments.
Regulation.
No action.
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Implications for policy
Don’t default to extension to promote practice change First check adoptability
Promoting practices with poor adoptability … erodes credibility wastes time and resources burns up good will
www.RuralPracticeChange.org
Key messages
Think systematically about choice of policy mechanism for practice change
The public: private benefits framework can help choose
Focus extension efforts onto practices that are adoptable
