Downstream Water Pollution Research

(Project Leaders: Gary Lynne, Natalia Czap, Hans Czap, and Mark Burbach)

Background/Justification. Agrichemicals in streams and groundwater are a continuing human health concern. Despite major efforts at the local, state, and federal levels, the concentration of agrichemicals has remained the same or increased in many streams and aquifers across the nation since the early 1990s [Dubrovsky, et al. 2010]. Historically, the operant policy and programming (including educational programming) to influence the levels of pollutants have focused on various kinds of cost reducing and financial incentives. Attention has recently turned to more direct regulation. This strategy to use detailed, intrusive, individualized farm level plans as recently proposed by the USDA/EPA is problematic. However, Minnesota just announced a field experiment to study the effect.

This continuing policy failure is due to not adequately recognizing the complex motivational structure and heterogeneity of famers, pointing to the inherent problems in presuming a representative producer in policy design. This has been confirmed in studies conducted by members of CAFIO-PRG going back to the late-1980s, including two recent USDA-funded research efforts. The first study, Consortium for Agricultural Soil Mitigation of Greenhouse Gases, focused on conservation technologies and practices leading to on-farm carbon sequestration and participation in carbon offset markets. The second study,  Targeting Watershed Vulnerability and Behaviors Leading to Adoption of Conservation Management Practices, focused on technologies and practices potentially leading to enhanced water quality downstream. Both of these behavioral and experimental economic-based studies [Ovchinnikova (now Czap) et al., 2009; Sautter et al., 2011; Sheeder and Lynne, 2011; Czap et al., in review a, b], while confirming the more primal tendency to maximize profits and thus respond to financial incentives, also found that this tendency is often tempered and conditioned by other forces within the farmer. This includes findings of considerable heterogeneity among farmers on a number of fronts [Chouinard et al., 2008 and Bishop et al., 2010; Sheeder and Lynne, 2011]. In particular, the latest finding shows the importance of the projection of the individual self into the situation of others affected by on-farm practices. This has not been considered previously in policy design or in models that predict farmer response to policy, although it is quite possibly playing a substantive role [Ovchinnikova (now Czap) et al., 2009; Sheeder and Lynne, 2011; Czap et al., in review a, b]. It could prove especially critical in designing a new, more cost-efficient conservation policy.

Objectives. Project leaders will experimentally investigate the downstream water pollution problem (DWPP) pertaining to the specific case of the Blue River watershed encompassing both Nebraska and Kansas. The project team will use a Coasian-style approach with different property rights allocation regimes and investigate additional aspects of economic behavior of involved parties (recognizing heterogeneity in the effects of communication, non-monetary incentives, and projection into the situation of others). The results will re-assess the application of the Coase Theorem, based as it is in voluntary participation, in this case by farmers and the downstream users affected by deteriorating water quality. The outcomes will include policy recommendations for designing efficient and less costly downstream water quality control and suggestions for modifications needed in economic models used at policy research centers that work to predict policy response.

Objective 1: Assess the Coase Theorem as a solution to the Downstream Water Pollution Problem (DWPP). The Coase Theorem provides the prediction that once property rights are assigned, or otherwise designated, individuals will voluntarily participate in markets, or market-like processes, resulting in optimal and efficient outcomes to negative externality and common pool resource problems at a low cost. Intriguingly, the predictions of the Coase Theorem are unlikely to hold due to the complex and heterogeneous motivational structure of real farmers. Once the complexity and heterogeneity of farmer choice is included, this study will provide a critical, experimentally based assessment of Coase Theorem violations.

Objective 2: Develop and test alternative theories and models regarding solutions to the DWPP. Based on previous experimental results and expected findings in Objective 1, theoretical extensions and alternatives to existing rationality-based modeling strategies in the majority of existing policy research centers will be developed and tested. Mounting evidence suggests that the more primal behavior of economic agents reflected in rational, self-interest-based profit maximization is part of the motivational structure, but by no means describes the entirety of real farmer-based choices. The experiments herein provide another rigorous experimental test in the context of the DWPP and builds on our earlier experimental work represented in Ovchinnikova et al. (2009) and Czap et al. (in review a, b).

Objective 3: Develop substantive policy recommendations for more efficient downstream water quality control. Non-pecuniary and less intrusive (i.e., individual farm level plans and requirements) approaches to externality and common pool resource problems offer the advantage of being both highly effective and less costly. Building on earlier experiments, the proposed effort will provide further insight into how local, state, and federal agencies and entities (including university extension educators) can utilize such non-monetary schemes/mechanisms/approaches in the context of the DWPP to improve on purely market-based and/or purely regulatory outcomes.