IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Framework For Assessing Sustainability Of Farms

  • Hrabrin Bachev

    (Institute of Agricultural Economics, Sofia, Bulgaria)

The traditional approach for assessing farm sustainability (based on indicators of “productivity”, “profitability”, and “financial dependency”) fails to explain why there exist highly sustainable farms with different levels of “efficiency” such as low productive subsistent and part-time farming, non-for profit and cooperative enterprises, small commercial farms and large agro-corporations, etc. In this paper we adapt the New Institutional and Transaction Costs Economics perspective to agrarian sphere, and suggest a new framework for assessing sustainability of farms and farm structures. Firstly, an analysis is made on various approaches for defining sustainability of agricultural systems: as “an ideology”, as “a set of strategies”, as “the ability to fulfill a set of goals”, and as “ability to continue”. The “problem of sustainability” in the economic model (mainly associated with “negative externalities”, “tragedy of commons”, “jointness of farm production”) is also presented, and the “institutional” solutions of that problem discussed. Second, we prove that analysis of institutions and transacting costs is important for proper understanding the farms sustainability. Institutional environment is the crucial factor, which determines the restrictions and costs of farm activities, and eventually - the level of sustainability of different farm organizations. In the specific institutional setting, agrarian agents use (or develop) a great variety of effective (cost economizing) market and non-market modes for governing of their exchanges. Therefore, studying the farm as a governance (rather than production) structure is the key for understanding the farm efficiency and sustainability. Third, we define sustainability of farm as a state when it manages all transactions in the most economical way – that is the situation when there exist no transaction, which could be carried out with net benefit. When a farm experiences high costs and difficulties meeting institutional restrictions and carrying out transactions, comparing to other feasible modes, it will be unsustainable. That is because there will be strong incentives for exploring the existing potential (adapting to sustainable state) through reduction or enlargement of farm size, or via reorganization or liquidation of the farm. Thus the farm potential for adaptation to changing (market, institutional, technological etc.) environment is to be the main indicator for farm sustainability. Furthermore, the most effective form for organization of farm transactions will depend on individuals’ characteristics (preferences, entrepreneurial abilities, risk aversion etc.) and specific attributes of each transaction (uncertainty, frequency, assets specificity, and appropriability). Consequently, effective farms of different type and size could persist (sustain) in agriculture. Finally, we develop a principle matrix with the effective modes for governing of agrarian sustainability. Discrete structural analysis is used to define the transactions for which market, contract, and integral forms are efficient (sustainable). We also determine the situation(s), where there is strong need for a third-party public involvement in agrarian sphere - that is for transactions with low appropriablity, and high uncertainty and asset specificity. In later case, there are no sustainable market and private modes to organize such transactions effectively (e.g. supply of environmental goods). Next, we specify the spectrum of possible public forms for intervention in market and private transactions - assistance, regulation, hybrid and in-house organization, international cooperation, property rights and institutional modernization. The comparative efficiency of feasible modes for public involvement is to be assessed taking into account the overall costs and benefits. Sustainable agrarian development is compromised when both market and private forms fails, and no effective public intervention takes place.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://128.118.178.162/eps/mic/papers/0511/0511003.pdf
Download Restriction: no

Paper provided by EconWPA in its series Microeconomics with number 0511003.

as
in new window

Length: 18 pages
Date of creation: 06 Nov 2005
Date of revision:
Handle: RePEc:wpa:wuwpmi:0511003
Note: Type of Document - pdf; pages: 18
Contact details of provider: Web page: http://128.118.178.162

No references listed on IDEAS
You can help add them by filling out this form.

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:wpa:wuwpmi:0511003. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (EconWPA)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.