Two main approaches can be distinguished in assessing the non commodity values of agriculture: a more direct approach as used in ecological sciences trying to measure the physical outcomes (e.g. the biodiversity or quality of amenities) and a more social science approach trying to estimate the contribution to the utility of people either indirectly (e.g. hedonic pricing) or directly by asking people (for an overview see Randall, 2002; Vanslembrouck and Van Huylenbroeck, 2005). Although often criticised (Kahneman and Knetsch, 1992; Jacobs, 1997; Spash, 2000, 2002; Kumar and Kumar, 2004; Zhang and Li, 2005; Howarth and Wilson, 2006) the social valuation method results are often the only ones existing.
On the supply side (positive approach towards multifunctionality) evidence of the involvement of (professional) farmers in more multifunctional activities is difficult to gather, precisely because of the complex definition of multifunctionality. Authors such as van der Ploeg and Roep (2003*) give some indication of how many farmers in Europe are involved in different diversification categories such as (1) agri-tourism, on-farm processing activities, nature and landscape management, (2) organic farming, high quality production and regional products or selling through a short supply chain (Figure 5*). Their numbers vary between 30% of all farmers in the U.K. to 59% of all farmers in Germany. Similar research done in Belgium (in the fringe of Brussels and the coastal area, respectively a densely and less populated area) shows that 19% of all farmers are involved in some kind of diversification and 11% are active in nature or environment conservation (Vandermeulen and Van Huylenbroeck, 2006a). Both studies also reveal that the decision of a farmer to diversify depends not only on location or regional characteristics, but also on the characteristics of the farm and farmer himself. It appears that some farm types are much more appropriate to have multifunctional activities than others (Gilg and Battershill, 1999*; McNally, 2001*; Vanslembrouck et al., 2002*; Loureiro and Jervell, 2005*; Jongeneel et al., 2005*). However, although the figures cited above are linked to multifunctionality, they do not really measure the amount of non-commodity outputs produced (see the distinction between diversification and multifunctionality in Section 2). This amount can only be assessed by looking at the demand side.
On the demand side more evidence is published. This evidence can be categorised according to the economic, social and environmental function (Hall and Rosillo-Calle, 1999).
- The economic function: agriculture remains a principal force in sustaining operation and growth of the whole economy, even in highly industrialised countries. Valuation of the various economic functions requires assessment of short, medium and long-term benefits. Important determinants of the economic function include the complexity and maturity of market development and the level of institutional development.
- The social function: the maintenance and dynamism of rural communities is basic to sustaining agro-ecology and improving the quality of life (and assuring the very survival) of rural residents, particularly of the young. On another level, the capitalisation of local knowledge and the forging of relationships between local and external sources of expertise, information and advice are fundamental to the future of existing rural communities. Social viability includes maintenance of the cultural heritage. Societies still identify intensely with their historical origins in agrarian communities and rural lifestyles.
- The environmental function: agriculture and related land use can have beneficial or harmful effects on the environment. The multifunctional approach can help to identify opportunities to optimise the linkages between agriculture and the biological and physical properties of the natural environment. It is relevant to a number of critical global environmental problems including biodiversity, climate change, desertification, water quality and availability, and pollution.
The three functions are clearly interrelated. Their relative importance will depend on strategic choices at the local and national levels. The multiple functions may as already indicated be relevant at many scales, from local, over national and regional, to global, and operate over different horizons – indeed some innovations and transformations may have short-term disadvantages, such as lower productivity, before leading to longer-term, overall economic and environmental benefits. This also explains the difficulty to find empirical evidence.
With respect to the economic values we concentrate on the indirect economic benefits of non-commodity production. These are mainly captured by other stakeholders such as inhabitants of rural areas, the real estate sector, the tourism sector or other economic agents in rural areas such as drinking or bottled water companies or companies using the image of rural areas in their publicity or marketing. Most evidence about spill-over effects of agriculture exists with respect to real estate values and rural tourism. Not included in our overview are benefits captured by the food sector that also may capture extra rents from territorial or labelled products as we assume these benefits are partly transferred to farmers in the prices of primary agricultural products.
Empirical results from literature show that the presence of agriculture and in particular of agricultural amenities has a positive influence on real estate values (housing sector). Using hedonic pricing methods Garrod and Willis (1992), Cheshire and Sheppard (1995), Irwin (2002), Tyrväinen and Miettinen (2000) Irwin and Bockstael (2001) and Ready and Abdalla (2005) among others, give empirical evidence that a landscape consisting of agricultural open space increases nearby residential property values. The numbers obtained highly differ according to the research method, the area, the hypotheses, the agricultural amenities considered, the data set used and so on. But in general, the existing literature shows that more extensive forms of agriculture (farmland, grassland) have a positive influence while intensive forms of agriculture (large animal or mushroom farms) reduce nearby property values (Palmquist et al., 1997). Geoghegan (2002) shows for Maryland (U.S.A.) that, although the presence of agriculture nearby housing increases in general the willingness to pay higher prices for a house, permanent farmland has the highest positive impact. He defines permanent farmland as land owned by a farmer who has sold his development rights. Roe et al. (2004) are more convinced that it is not the difference between permanent and developable land that explains the pull effect of farmland on household location decisions, but the individual’s trade-off between rural amenities and other attributes of housing and location.
Second, there is clear evidence that the rural tourism sector captures some benefits of agriculture (Figure 6*). Rural tourism is increasing and able to persuade every year a higher number of people (Roberts and Hall, 2001; Garrod and Whitby, 2005). Hedonic price analyses of rural accommodation show the clear link between the presence of agricultural amenities in the landscape and the price that can be charged to rural tourists. This is indicated inter alias by some recent studies of Fleischer and Tchetchik (2005) and Vanslembrouck et al. (2005) who show that prices of rural accommodation are significantly higher in areas with more agricultural amenities. An interesting study is also the study of Fleischer and Tsur (2000) who show for two regions in Israel that of the total estimated consumer surplus of rural tourism 10% to 20% is generated by the presence of agricultural landscapes. Their estimates also reveal that the landscape value of farmland is far in excess of the commodity returns in farming. An even more positive result was discovered by Chang and Ying (2005) through a contingent valuation method resulting in households willing to pay about 3.57-fold of the intrinsic economic value of rice for sustaining paddy fields in Taiwan. Although such studies can be criticized as overestimating these values, they indicate at least that there are positive spill-over effects of agriculture on tourism. Part of these benefits can be captured by farms offering farm accommodation or engaged in direct selling or marketing of regional products. In a recent study for the coastal area of Belgium we found that over 5% of total income in the farming sector comes from diversification activities of which a major part is linked to agro-tourism and direct selling (Van Huylenbroeck et al., 2006).
On other spill-over effects such as the rents captured by firms using territorial images there is no clear evidence available, but such economic rents exist as is proven by the number of cases in which agricultural landscapes are used for image building and this not only in the food sector, but also in other sectors. Of course such spill over effects require a suitable region with a certain (potential for creating a) territorial identity and are therefore less valid for highly remote or unattractive areas. To a certain extent, the same holds for the social functions discussed in the next section.
With respect to social values, most empirical research concerns rural viability. It is shown that, in general, agriculture contributes to rural viability and might revitalise rural areas (Sharpley and Vass, 2006). This has been studied either through general surveys on what citizens expect from agriculture or appreciate in rural areas or through more specific contingent valuation studies estimating people’s willingness to pay for the maintenance of farming in rural areas. Hall et al. (2004) give a nice meta-analysis overview of what the public expects from agriculture and the countryside. Most studies reviewed indicate that respondents see a definite role of agriculture as an intrinsic value provider of rural environmental goods, cultural heritage and expect a contribution to safe food, environmental conservation, landscape amenities and so on. Also an own study (Van Huylenbroeck et al., 2005) shows that citizens, in particular the higher educated part, value the positive contribution of agriculture in rural areas. A number of studies also tried to measure the economic willingness-to-pay for the presence of farming in rural areas. Poe (1999) gives an overview of studies in the U.S. showing that all studies indicate a positive value ranging from 7 US$ to 252 US$. Bennett et al. (2004) use the Choice Modelling technique to estimate the society’s willingness to pay for maintaining viable rural communities in Australia. They found that respondents are willing to pay an implicit price to prevent farmers to leave the agricultural sector related to the positive contributions to the viability of rural areas. Hyytiä and Kola (2006) come to the conclusion that an important proportion of Finnish citizens have a positive attitude towards externalities and joint products of agriculture. Also a Spanish study (Kallas et al., 2007) shows in a Choice Experiment that citizens of Tierra Campos in Spain are willing to pay for agricultural multifunctionality. They found positive signs for employment in the agricultural sector and for the percentage of farmers living in the area. Many of these studies also reveal that the willingness-to-pay increases with shifts to more multifunctional farming systems (e.g. integrated or organic farming) or that there is an extra willingness-to-pay for specific services (e.g. Moon et al., 2005).
There are further indications that agriculture can have a significant contribution in the health sector as contact with nature and farming is shown to have a positive effect for disabled persons or people with mental or psychological problems (see Di Iacovo, 2003).
Other evidence of the increasing societal interest in multifunctional attributes from agriculture comes from emerging and expanding markets for products from alternative production systems, (e.g. organic farming) the growth of regional labels and the growing interest in initiatives promoting local agriculture (e.g. community agriculture or local food teams) (Batie, 2001).
And last but not least, sustainable agriculture does not only contribute to economic and social viability, but also provides environmental values by conserving agri-ecological and agro-environmental systems, which have an impact on society as a whole. Brodt et al. (2006) show that the link between these last two aspects of sustainability is not often studied. Even more, the ecological impact of multifunctional agriculture is not much studied in literature and hard data are scarce. It is clear of course that intensification of agriculture has caused negative externalities on the environment and biodiversity (e.g. by reducing habitat heterogeneity as shown by Benton et al., 2003). On the other hand, there is also evidence that a withdrawal of agriculture has a negative impact on landscapes and agri-ecological systems (MacDonald et al., 2000). Although there is a general believe that agri-environmental schemes (AES) and conservation practices are contributing to the maintenance of agricultural ecosystems, it is difficult to assess the success of AES because monitoring their impact has generally been poor (Kleijn and Sutherland, 2003). However, when appropriately designed and targeted (Evans et al., 2003), such schemes are capable of providing measurable benefits to wildlife populations over wide geographical areas (an overview is given in Donald and Evans, 2006). Field margins, hedgerows, pollard willows, and other non-crop habitats that are important elements of agricultural landscapes have different ecological benefits (Figure 7*). They support more diverse invertebrate communities (Denys and Tscharntke, 2002), provide important nesting and feeding habitat for birds (Fuller et al., 2004), serve as corridors or islands to facilitate the dispersal of birds (Hinsley and Bellamy, 2000), result in greater floral diversity (Swetnam et al., 2004; Marshall et al., 2006) and reduce herbicide drift (Aude et al., 2004). Furthermore, there is also evidence that multifunctional agriculture may contribute to a solution for carbon sequestration (West and Marland, 2003), flood control and water conservation (Mitsh and Gosselinck, 2000; Scrase and Sheate, 2005).
Although the above overview is probably not complete and not overwhelming – there is certainly a need for more empirical research in this area – the evidence given shows that agriculture has both directly and indirectly important contributions to the welfare of society and thus a role in the maintenance of rural areas. However, most studies also indicate that this requires a shift in farming systems, practices and models. It is generally accepted that intensive and large scale production systems contribute less to non-commodity production than more extensive and adjusted scale production systems (see e.g. Gibson, 2005, for grassland systems). However intensification and scale expansion will continue in a liberalizing market where non-tradable outputs are not valued. The question is then whether other strategies, policies and farming models exist, able to create incentive systems for a multifunctional agriculture and a restructuring of the farming sector towards a more socially desirable production model and output bundle. This does not mean that farming systems need not to be competitive but it means that we need to find public or private arrangements in which efficiency and competitiveness are measured not only in terms of tradable but also in terms of non-tradable outputs. Therefore, in the next Section 5 we first review what multifunctionality can mean as a policy paradigm. Next we give some thoughts on institutional network arrangements and rural development discourses that could be used to stimulate multifunctional farming practices.