By David Abler

The primary function of agriculture is to supply food, fiber, and industrial products. However, agriculture can also be a source of several public goods and externalities. Rural and urban populations often value agricultural land as open space and as a source of countryside amenities. Agricultural land is a frequently a habitat for wildlife species. The agricultural sector can contribute to the economic viability of many rural areas and to food security. On the other hand, conversion of forest and wetlands to agricultural production can damage ecosystems. Agricultural nutrients, pesticides, pathogens, salts, and eroded soils are leading causes of water quality problems in many countries. Water used for irrigation in agriculture is water unavailable to non-agricultural sectors or ecosystems. There is concern about the negative effects of livestock production on animal welfare. On both the positive and negative side, agriculture can be both a sink and a source for greenhouse gases.

The term multifunctionality refers to the fact that an activity can have multiple outputs and therefore may contribute to several objectives at once. As applied to agriculture, the term first came into use in the late 1990s in the European Union for, it is often argued, protectionist reasons. Some governments have attempted to justify agricultural price and income support programs and trade restrictions as a means of preserving the multifunctional attributes of their countries’ agriculture.

This paper addresses two questions. First, do price and income support policies promote a multifunctional agriculture in an effective manner? Second, would policies targeted more directly at multifunctional attributes be more efficient than price and income support policies? The answer to the first question is no, at least for policies targeted at agricultural outputs (price supports, import tariffs, export subsidies, etc.). Public goods are not directly linked to production but rather land use and agricultural structures. Evidence on the second question is sketchier, at least with respect to policies targeted at land.

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