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Analyzing incentive mechanisms behind the provision of ecosystem services delivered by soils (ECOSOL)

Analyzing incentive mechanisms behind the provision of ecosystem services delivered by soils (ECOSOL)

Summary
Soils deliver several valuable ecosystem services to human communities. Nevertheless, human
activities frequently disturb these services both qualitatively and quantitatively. The ECOSOL project
starts from the premise that the human behaviour is at the root of the problem. Consequently, a better
understanding of drivers of human behavior can usefully inform policymakers seeking to influence
agents’ behavior. The ECOSOL project aims at investigating some non-classical drivers of human
behavior in order to design policies that can reinforce the provision of soils services, especially in times
of severe resource constraints.
We investigate contractual arrangements for water quality services between municipal water
organizations and farmers. Our study uses a transaction cost framework, in conjunction with detailed
case studies of two water quality payment schemes, to examine the factors that increase and decrease
transaction costs. Factors such as the lack of rural/urban antipathy, homogeneous land use, utilization
of well-developed organic standards, and strong demand for organic products decreased the
transaction costs in the Munich case relative to the New York case. Factors that decreased transaction
costs in both cases included: some highly sensitive land was purchased outright and there was one
large “buyer”, the municipality, which interacted with farmers. Time and flexibility of water quality
regulations allowed negotiation over and development of the watershed programs.
Moreover, we use insights from behavioral economics to explain why promises of soil related policies
are not fulfilled and why results differ so much from expectations. Our analysis considers an alternative
model of human behavior that includes the use of mental shortcuts and heuristics in decision making.
This model based on the influence of contextual factors offers original recommendations regarding soil
related policies. It contrasts with the rational model, which considers rational agents who analyze
incentives offered to them and behave in ways that reflect their best interests.
We study several biases related to soil policies. We emphasize that status concerns can interfere with
economic calculus and lead agents to refuse win-win innovations because of their detrimental impact
on their status in a reference group. We also show that the systematic use of monetary incentives to
influence some behaviours can generate a crowding-out effect on preexisting motivations. To avoid or
attenuate this risk, we propose an original mechanism, which is based on the heterogeneity of
motivations among agents.
Departing from standard applications of utility theory where only outcomes matter, we show that past
states and alternative causes of an environmental problem affect respondents’ interest and
willingness-to-pay to improve it. We also argue that the qualification and perceived origin of monetary
incentives are not neutral and can significantly affect their ability to generate the desired behavior. We
emphasize that ‘minor’ contextual elements can significantly shape the performances of soil related
policies and constitute good leverages.

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Contact
INRA Montpellier (Gilles Grolleau)

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