Whole farm considerations in the design of management agreements

Management agreements for the delivery of environmental services by farmers typically relate to that part of the farm that is of immediate public interest. However, the decision-making unit with which the farmer is primarily concerned is the farm business as a whole. This provides the context within which any particular area of the farm is managed. In this paper, the importance that a focus on the wider farm context might hold for achievement of conservation outcomes is shown by drawing on economic theory as well as recent case studies of farm businesses. Factors likely to influence conservation outcomes are: motives and other behavioural influences, character of production processes and farmer routines, potential to define alternative farm futures, uncertainty, capabilities of the farm manager and resources available to them. These factors have implications for how economists approach key issues in design of management agreements - information asymmetry, cost (including transaction cost) and encouraging proactive rather than reactive behaviour by the economic agent. Whole farm considerations will be taken into account by farmers in their decisions about whether to participate in management agreements, and in the terms of that participation. In this paper, explicit attention is given to opportunities that the principal has to address whole farm considerations. These opportunities can be addressed in the assessment process, in preconditions, as part of the management agreement, or as complementary mechanisms. The purpose of the paper is to highlight these opportunities, and to discuss their pros and cons. Tentative conclusions are drawn, and further research into this previously unexplored topic is proposed.