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Stress, shock and the sustainability of optimal resource utilization in a stochastic environment

Charles Perrings

Discussion paper, 33 pages

The degradation of resources in agriculture in many low-income countries is increasingly argued to reflect an adverse economic environment - the product of ill-advised intervention. Implicitly, this questions the compatibility of the economic and ecological environments within which economic activities take place. While this is an issue of general importance, it has attracted little attention in the past. This paper considers the theoretical problem of the role of an economic environment on optimal resource utilisation in a stochastic ecological system. It does so in the context of a bioeconomic feedback control model of range management in semi-arid areas: a management problem characterised by a high level of uncertainty associated with a high variance in rainfall, and the interdependence of the dynamics of herd size and carrying capacity. The paper pays particular attention to the conditions in which optimal resource utilisation may be sustainable, and to the link between the unsustainable optimal policies and the economic environment.

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