Use of Biophysical Simulation in Production Economics

Simulation has become a standard methodology in agricultural economics with models being used in all aspects of the profession. Johnson and Rausser identify two major types of production simulation models in their recent survey of the topic—firm and process models. Firm models, especially those concerned with growth, are most prominent in the agricultural economics literature. However, Johnson and Rausser also review some application of process models, which emphasize specific types of firm decisions. Biophysical simulation models are a specific form of these models concerned with the interaction of weather, soil, and/or biological processes in agricultural production and/or environmental loadings. In the recent agricultural economics literature, these models often are identified as bio-economic simulators. However, similar models are being utilized to evaluate erosion. Since erosion is largely a physical process, biophysical simulation seems more appropriate for the general classification of models considered in this paper.