Economic methods for comparing alternative crop production systems: A review of the literature

New crop production technologies developed in response to growing concern over environmental contamination from agriculture may be neither more profitable nor higher yielding than the systems they replace, but they often reduce environmental contamination or improve soil and water quality. Systems designed with environmental objectives cannot be evaluated fairly just by productivity, which is what often is done in economic studies of alternative systems. We review 58 recent studies comparing alternative crop production systems to identify the key criteria for system comparisons, the system characteristics important in designing the analysis, and the methods most suited for comparing alternative systems.The four key criteria we looked for in system comparisons are expected profit, stability of profits, expected environmental impacts, and stability of environmental impacts. Most economic studies of crop production focus exclusively on profitability, and incorporate neither environmental criteria nor the dynamic characteristics inherent in alternative systems. We identify promising new approaches that take account of specific environmental characteristics and attempt to balance the objectives of profitability and environmental risk management. Balanced environmental-economic analysis is most likely to be achieved by integrating biophysical simulation models with economic optimization methods to model the trade-offs among profitability, environmental impact, and system stability (both financial and environmental).