We observe that identification of the discount rate from experimental data requires an assumption about the consumption period, the length of time over which a payment will be turned into utility-providing consumption. We show that the optimal consumption period is substantially longer than assumed in previous studies. When the consumption period is allowed to take on more reasonable values, the discount rates implied by experimental choices are unreasonably large and relatively insensitive to assumptions about utility curvature.

Agriculture is a source of greenhouse gas emissions that could be included as offsets in a cap-and-trade system. This paper describes offset rules that could be applied to reduced nitrogen fertilizer application on wheat, a source of nitrous oxide emissions. Unlike other papers that have examined offset rules, we do not assume that farmers' business-as-usual nitrogen emissions can be perfectly predicted. We construct a structural model of wheat production and use this, along with Agricultural Resource Management Survey data, to model or estimate participation in the offset market, offset supply conditional on participation, and business-as-usual emissions. We find that roughly two-thirds of the supplied offsets would be non-additional at an allowance price of $15/tonne CO2-e. Under assumptions about the social damages from greenhouse gas emissions, we find that allowing nitrogen offsets would marginally pass a standard benefit-cost test.

Weitzman's (2009) famous dismal theorem argues that “fat tails” in the distribution of warming may pose problems for cost–benefit analysis as it may imply that society might be willing to exchange today's consumption for future consumption at an infinite rate. His analysis is based on the stochastic discount factor. We show that in situations in which the stochastic discount factor is applicable, it is optimal for society to devote only a finite amount of resources to protect against climate change. For general assumptions on the investment returns, cost–benefit analysis must consider the joint distribution of the marginal utility of future consumption and marginal returns to investment in the different future states of nature. We explore the range of situations under which challenges for applying cost–benefit analysis under uncertainty remain.

We present a model of additionality for offsets sold from agriculture to industrial sector sources regulated by cap-and-trade. We consider a potential policy where agricultural sources would not be covered by cap-and-trade requirements but would be eligible to receive offsets whenever their emissions fall below a policy-specified baseline, and would not be penalized for emissions above their baseline. Major results are: (1) The optimal baseline should be set above the average counterfactual emissions of participating farms, an unexpected result that has been missing from the literature. (2) The optimal trading ratio should be greater than one (a ton of offsets counts for less than a ton of covered emissions) even under emissions certainty. Previous research has justified such trading ratios by emissions uncertainty. (3) Emissions uncertainty does not justify a change in the baseline if the accompanying emissions model is unbiased. (4) An optimal combination of policies is to subsidize offsets and tighten the baseline relative to the no-subsidy case.

We elicit time-discounting behavior from U.S. farmers that are broadly known to be either late or early adopters of farming best management practices. Using a single-choice experiment, we estimate the mean discount rate for each farmer group and find that late adopters have a mean discount rate that is thirteen percentage points higher than the mean rate of early adopters. We argue through simulations that this difference is likely due to differences in time preference rather than risk aversion.

This paper uses a lottery-choice mechanism to measure farmer preferences over money-denominated risks. We look at the ability of these choice data to predict farming decisions for an in-person sample of 68 farmers. A coarse version of our risk preference measure has substantial explanatory power but in an unexpected direction: a farmer who was more risk averse under our measure was less likely to have diversified his operation and less likely to have a crop insurance contract. A fine version of our risk preference measure has essentially no explanatory power. We conclude that despite their widespread use in the lab, lottery-choice measures of risk preferences are unproven for predicting real world farming behaviour.

A large number of both state and federal agricultural policies are designed to pay farmers and ranchers to undertake conservation practices that have off-farm environmental benefits or long-run farm-productivity payoffs. These supported actions can include implementing a nutrient management plan, installing stream-side or field-edge buffers, adopting no-till, or retiring cropland to grass or tree cover. Payments can take the form of cost-sharing for explicit costs incurred by the farmer, specified payment amounts meant to capture the cost of transitioning to the new practices, or lost income, particularly when land is taken out of production. In fiscal year 2012, USDA spent nearly US$5.5 billion through voluntary payment programs to support the adoption of conservation practices.

American Journal of Agricultural EconomicsVolume 94, Issue 2 p. 451-456 AAEA Meeting Invited Paper Session Farmer Discount Rates: Experimental Evidence Eric Duquette, Corresponding Author Eric Duquette [email protected] Economic Research Service, USDA, 1800 M Street N.W., Washington, DC, 20036-5831[email protected][email protected][email protected]Search for more papers by this authorNathaniel Higgins, Corresponding Author Nathaniel Higgins [email protected] Economic Research Service, USDA, 1800 M Street N.W., Washington, DC, 20036-5831[email protected][email protected][email protected]Search for more papers by this authorJohn Horowitz, Corresponding Author John Horowitz [email protected] Economic Research Service, USDA, 1800 M Street N.W., Washington, DC, 20036-5831[email protected][email protected][email protected]Search for more papers by this author Eric Duquette, Corresponding Author Eric Duquette [email protected] Economic Research Service, USDA, 1800 M Street N.W., Washington, DC, 20036-5831[email protected][email protected][email protected]Search for more papers by this authorNathaniel Higgins, Corresponding Author Nathaniel Higgins [email protected] Economic Research Service, USDA, 1800 M Street N.W., Washington, DC, 20036-5831[email protected][email protected][email protected]Search for more papers by this authorJohn Horowitz, Corresponding Author John Horowitz [email protected] Economic Research Service, USDA, 1800 M Street N.W., Washington, DC, 20036-5831[email protected][email protected][email protected]Search for more papers by this author First published: 25 October 2011 https://doi.org/10.1093/ajae/aar067Citations: 40 The views expressed are those of the authors and should not be attributed to the Economic Research Service or the USDA. The authors would like to thank Ann Sorensen, Teresa Bullock, and Brian Brandt for crucial contributions to this research. This article was presented in an invited paper session at the 2011 AAEA annual meeting in Pittsburg, PA. The articles in these sessions are not subjected to the journal's standard refereeing process. Read the full textAboutPDF ToolsRequest permissionExport citationAdd to favoritesTrack citation ShareShare Give accessShare full text accessShare full-text accessPlease review our Terms and Conditions of Use and check box below to share full-text version of article.I have read and accept the Wiley Online Library Terms and Conditions of UseShareable LinkUse the link below to share a full-text version of this article with your friends and colleagues. Learn more.Copy URL References AbdulkadriA. O., LangemeierM. R. Using Farm Consumption Data to Estimate the Intertemporal Elasticity of Substitution and Relative Risk Aversion Coefficients Agricultural Finance Review 2000 60 1 61– 70 AndersenS., HarrisonG. W., LauM. I., RutströmE. E. Elicitation Using Multiple Price List Formats Experimental Economics 2006 9 4 383– 405 AndersenS., HarrisonG. W., LauM. I., RutströmE. E. Valuation Using Multiple Price List Formats Applied Economics 2007 39 6 675– 682 AndersenS., HarrisonG. W., LauM. I., RutströmE. E. Eliciting Risk and Time Preferences Econometrica 2008 76 3 583– 618 BarryP. J., LindonJ. R., NarteaG. V. Changing Time Attitudes in Intertemporal Analysis American Journal of Agricultural Economics 1996 78 4 972– 981 CollerM., WilliamsM. Eliciting Individual Discount Rates Experimental Economics 1999 2 2 107– 127 DufloE., KremerM., RobinsonJ. 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EconomicaVolume 79, Issue 313 p. 204-205 Book Review Environmental Economics, Experimental Methods. Edited by T. Cherry, S. Kroll and J. Shogren. Routledge, Abingdon. 2008. xxi+486 pp. $39.95. John K. Horowitz, John K. Horowitz University of Maryland and US Department of AgricultureSearch for more papers by this author John K. Horowitz, John K. Horowitz University of Maryland and US Department of AgricultureSearch for more papers by this author First published: 13 December 2011 https://doi.org/10.1111/j.1468-0335.2011.00880.xRead the full textAboutPDF ToolsRequest permissionExport citationAdd to favoritesTrack citation ShareShare Give accessShare full text accessShare full-text accessPlease review our Terms and Conditions of Use and check box below to share full-text version of article.I have read and accept the Wiley Online Library Terms and Conditions of UseShareable LinkUse the link below to share a full-text version of this article with your friends and colleagues. Learn more.Copy URL Share a linkShare onFacebookTwitterLinked InRedditWechat No abstract is available for this article. Volume79, Issue313January 2012Pages 204-205 RelatedInformation

Most U.S. farmers prepare their soil for seeding and weed and pest control through tillage—plowing operations that disturb the soil. Tillage practices affect soil carbon, water pollution, and farmers’ energy and pesticide use, and therefore data on tillage can be valuable for understanding the practice’s role in reaching climate and other environmental goals. In order to help policymakers and other interested parties better understand U.S. tillage practices and, especially, those practices’ potential contribution to climate-change efforts, ERS researchers compiled data from the Agricultural Resource Management Survey and the National Resources Inventory-Conservation Effects Assessment Project’s Cropland Survey. The data show that approximately 35.5 percent of U.S. cropland planted to eight major crops, or 88 million acres, had no tillage operations in 2009.

One way of gauging how global warming will affect an economy is to look at the economic performance of countries that are warmer. This paper looks at the income-temperature relationship for a cross-section of 156 countries in 1999. As is well known, hotter countries are poorer on average. The widespread belief is that this relationship is mostly historical; that is, due to a past effect of climate. Acemoglu, Johnson, and Robinson have recently made great gains in identifying a specific historical path. They posit that mortality rates of early colonizing settlers had a profound effect on the institutions that were set up in those colonies. These institutional differences persist to this day, they argue, and have strong effects on current incomes. Because colonial mortality and average temperature are highly correlated, the mortality-income relationship also manifests itself as an income-temperature relationship. There is, however, sufficient evidence to warrant continued examination of the income-temperature relationship. First, we find a strong income-temperature relationship within OECD countries, a result that does not appear to be predicted by the colonial mortality model and that various authors seem to disavow. Second, we find that the income-temperature relationship is essentially the same within the OECD and non-OECD countries, a striking yet unremarked and as-yet unexplained result. Third, we find an exceptionally strong income-temperature relationship within the fifteen countries of the former Soviet Union, where colonial institutions would seem to have been wiped out. Our best measure of the effect of temperature on income, after accounting for the influence of colonial mortality, is that a one percent increase in temperature leads to a -0.9 percent decrease in per capita income. Thus, a temperature increase of 3 degrees Fahrenheit would result in a 4.6 percent decrease in world GNP.

Policy makers have turned to competition-based voluntary-enrollment programs as a cost-effective way to achieve preferred land uses. This paper studies bidder behavior in an innovative auction-based program in which farmers compete to sell and retire the right to develop their land. We derive a reduced-form bidding model that includes private and common values. This model allows us to estimate the role of bidder competition, winner’s curse correction, and the underlying distribution of private values. We estimate that the auction enrolled as many as 3,000 acres (12%) more than a take-it-or-leave-it offer would have enrolled for the same budgetary cost. (JEL Q24, Q28)