A dynamic optimization model is used to analyze the effects of tax law changes instituted by the Economic Recovery Tax Act of 1981 on farm firm decision making. The model incorporates the integrated nature of the firm's production, investment, and financing decisions. Because of interactions between tax provisions, the tax changes had the unexpected effect of reducing optimal investment in machinery and land.

The impact of progressive income taxes on output and risk-taking behavior for five large California farms is analyzed within a utility-maximizing risk framework. Utility functions and "before" and "after" tax E-V frontiers are derived for each farm. Results suggest that current income tax provisions encourage increased output and risktaking behavior. Decision-makers with the highest degree of risk aversion demonstrated the largest output and risk effects. It appears that decreases in income tax rates during the last decade have had little effect on agricultural output, but proposals to require capitalization of development expenses for all orchard crops would be expected to reduce output.

Production economics literature contains many studies which assume that the producer's goal is to maximize profits. This study tests the hypothesis that Bernoullian and lexicographic utility are more accurate predictors of farmer behavior than profit maximization. Six large California farms were used to test the hypothesis. After-income tax E-V (expectation-variance) boundaries were developed for each farm and utility, and profit maximizing crop plans were determined for each. A goodness-of-fit criterion showed that Bernoullian utility formulations provided the greatest accuracy in predicting actual and planned crop patterns, followed by the lexicographic formulation. Profit maximization showed the poorest predictive power.

Conventional demand based approaches to recreational economics are reviewed and found unsuitable for analyzing the effects of changes of the quality of recreation. An alternative approach using a simulation model is proposed, which allows the use of both quantitative data and subjective input on the qualitative effects. The critical economic variables are found to be fishing recreation visitor days and investment in recreational facilities at the Salton Sea, California.

A production function relating irrigated crop yield to the quality and supply of irrigation water is developed. It was found that the adverse effects of saline irrigation water can be offset by application of additional water over and above that required for plant transpiration. Results indicate that a degradation of the water supply in the Colorado River at Imperial Dam from the existing level of electroconductivity of 1.50 mmho to the projected level for the year 2000 of 2.0 mmho would cause a decline in the return to land and water of about 14% for farmers in the Imperial Valley of California. Because of the relatively elastic demand for irrigation water at the current price, any attempt to ration water through a market price mechanism would have no effect, unless water rates were about double their current levels.

New high-yielding varieties of crops are now available in developing countries. Their potential for improving food and fiber supplies is limited by the availability of inputs such as fertilizer, irrigation, and pesticides. The effects of present, projected, and nonrestrictive supplies of fertilizer are estimated for Punjab State, India. Results indicate that large amounts are needed over and above current plan targets in order to maximize food output and farm incomes. Further, changes in price policy will be necessary to maintain production of crops where no improved-yield-potential varieties are available. Uniform allocations of scarce fertilizer supplies within a state will not maximize agricultural production and incomes.

Author Institution: Department of Geology, The Ohio State University, Columbus 10 ; Columbus, Ohio ; Standard Oil Company of Texas, Houston Texas and Lion Oil Company, Denver Colorado