Introduction
Economic evaluations are important in diagnosis and design of AF technologies, working out cost: benefit ratios and for rationalisation of choice of technologies to be researched or disseminated for development. To understand the role of economic consideration in selecting an AF system and its modification, some of the existing AF systems, such as home gardens and wood lots can be examined, which are deeply rooted in the past.
Cost/Benefits analysis
Whenever input/output data are available, computations may be made to evaluate proposed/existing systems. Optimization requires a large amount of data, presently lacking in AF technologies, and hence the non-optimal method, better known as cost: benefit analysis is used.
Inputs, sometimes called resources, are goods or services used to produce an output. The main categories are land, labour and capital, which include buildings, equipment, livestock, seeds, fertilisers, chemicals etc.
Outputs can be defined as goods or services produced by an activity. The main categories are land, labour and capital, which include buildings, equipment, livestock, seeds, fertilisers, chemicals etc. Major goods are crop, livestock products, firewood and timber. Usually the smallest scale of analysis is the farm or a farm activity and the largest the nation as a whole. In a public economic analysis, inputs are valued at their opportunity cost/value to society as a whole, usually referred to as shadow price. In a private economic analysis, inputs are valued depending in whether they are purchased or withdrawn from alternative uses on-or off-farm. A special case are inputs provided by the government of community.
Land
In a private economic analysis, a distinction should be made as to whether new land has been obtained for the introduction of AF component or a change been affected in a present land resource. In the first case, land is costed at its purchase price, or, if the rented, the annual rent may be incorporated as an operating cost. In the second case, the cost will depend on its productivity in its existing use. The most common way of dealing with land cost if there is a change in existing land use is to include it in the combined opportunity value to family resources in the non-agroforestry use. In a public economic analysis, the shadow price of land is usually the same as the opportunity cost of land in a private analysis.
Labour
In a private economic analysis, all hired labour is valued at its market price, while all family labour is valued at its opportunity cost, which differs depending on length of time required, the type of labour. The hired labour wage rate as an approximation of opportunity cost, increasing the price by 25% under the peak season and decreasing it by 25% under off-season conditions. In a public economic analysis, the shadow price of labour in most analyses is based on the opportunity cost, increasing the price by 25% under the peak season and decreasing it by 25% under off-season conditions. In a public economic analysis, the shadow price of labour in most analyses is based on the opportunity cost principle.
Valuation of outputs
Outputs are valued at the market price or opportunity cost in a private economic analysis and at shadow prices in a public economic analysis.
Fuel wood
In a private economic analysis, fuelwood is valued at the local market price if commonly sold and/or purchased by the farmers concerned. The price to be used should be the net of the cost of labour for collecting it and transport cost. In a public economic analysis, all market and opportunity prices should again be adjusted to reflect the true economic value to society as a whole. Also, in considering substituting existing fuels, the choice for society as a whole may be wider than in private economic analysis.
Tree fodder
In a private economic analysis, tree leaves may be valued at market price if they can be sold locally. However, if leaves are not sold, they can be evaluated on the basic energy or protein value. A public economic analysis requires adjustment of market and opportunity prices, subsidies and taxes.
Leaf litter
Leaf litter from trees and shrubs may be used to add nutrients and organic matter to the soil. The market price may be derived, however, on the basis of nutrient content and prices of commercially available fertilisers (organic/inorganic). It can also be valued through the agricultural production system.
Environmental outputs
AF technologies with environmental output are tree-based soil and water conservation measures, soil improvement through nitrogen fixing trees, wind protection through shelter belts and preservation of forest areas or woodlands. The valuation of environmental outputs may be handled
1. Difference in output stream of the production system affected by the environmental activity.
2. Cost of preventing/reducing the damage done to the environment due to the lack of an environment due to the lack of an environmental activity;
3. Purchase price of the land affected by the environmental activity.
Distribution of costs and benefits
This raises an important issue with regard to the distribution of costs when viewing such an environmental activity from a community of costs when viewing such an environmental activity from a community or public viewpoint.
The general principle underlying contributing to the inputs required for the environmental activity which, in a community could be through taxation and subsidies. The amount of tax funds utilised should not exceed the off-site benefits obtained from the environmental activity. Subsidizing the environmental activity on individual farms may be done through reduction of the cost of seedlings or direct subsidies based on work completed.
In agroforestry, such project outputs include timber, fuelwood, fodder, and fertiliser and food crops. The by-products or residuals from an AF project may be positive or negative. Positive by products includes reduced erosion, improved water-retention capacity of the soil and reduced leaching. Negative by products could include aggressive seedling and plant spread of fast-growing trees or shading of food crops. AF should be designed to have positive effects. Recognize the potential for personal economic benefits from a new or changed system such as AF before they will accept it. For this reason, factors that influence their decision-making, such as credit, size of holding land tenure and discount or interest rates, must be considered explicitly. Any plan, to be accepted by farmers, will have to be both persuasive and beneficial to each of them, as well as capable of achieving a desired long-run cumulative result.
Ag.
Technologies
(Agro Forestry)
