In the context of the European academic and institutional debate, the relations between agriculture and the associated public goods have been acknowledged by the concept of multifunctionality. It is possible to distinguish two analytical approaches on multifunctionality of agriculture (see Aumand et al., 2006; Van Huylenbroeck et al., 2007): the first one focuses on the supply side issue (positive approach) while the second one on the demand side issue (normative approach).
The supply-side approach is well synthesised by the working definition of the OECD (2001), which defines multifunctionality as ‘the existence of multiple commodity and non-commodity outputs that are jointly produced by agriculture and the fact that some of the non-commodity outputs exhibit the characteristics of externalities or public goods, with the result that markets for these goods do not exist or function poorly’. This definition includes the core elements to understand the relation between the agricultural activities and public goods provision from a supply side perspective, both in terms of theoretical development and in terms of policy definition. Indeed, this approach conceptualises public good provision in terms of joint outputs of an activity or of a combination of activities, where ‘the term multifunctionality refers to this nexus between commodity and non-commodity output production in agriculture’ (OECD, 2008). The analysis of this jointness is at the core of this approach, since this concept involves important implications in terms of public support to the primary sector and on the evaluation of the public policies implemented with the objective of providing public goods through agriculture. As showed by Vereijken (2001), the level of jointness of different public goods with agriculture activities is very complex and it is usually characterised by high variability across areas, countries and specific environmental and social goods.
On the opposite, the demand-side approach looks at multifunctional agriculture as societal objective and at the demand of society for the multiple functions of agriculture. This approach involves a concept of multifunctional agricultural more territorially embedded and related to rural areas rather than to the agricultural sector. Indeed, according to this vision, multifunctional agriculture must satisfy societal expectations and meeting societal demand and needs not only in relation to the agricultural sector, but also according to agricultural production processes and the spatial extent of agriculture.
In this approach, the characteristics of non-rivalry and non-excludability of goods are straightened by the ‘non-user values’ or ‘option values’, which reflect the interests of citizens in securing the provision of public goods, such as habitat preservation or the protection of endangered species, and who are willing to bear the costs, even though they are not immediate users and the goods concerned may be far distant from them
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(ENRD, 2010). This approach is usually characterised by economic analyses that aim at assessing the demand of external benefits produced by the agriculture in monetary terms, both through indirect methods (contingent valuation method) and through direct methods (hedonic pricing method) (i.e. see Randall, 2002).
According to Van Huylenbroeck et al. (2007), the main difference between the supply vision and the demand vision lies on the implicit treatment of externalities: while the supply definition considers negative and positive externalities as good and bad outputs respectively and treat them equal, the demand approach privileges the positive contributions of agriculture to public goods, usually emphasising the positive contribution and benefits that agriculture may deliver to society.
The need of a more integrated approach, which could adopt a more territorial vision of multifunctional agriculture has been also highlighted by the OECD in its publication on the ‘new rural paradigm’ (OECD, 2006) and is a model which is increasingly influencing the EU academic and institutional debate.
The recent studies on the CAP and public goods provision (Cooper et al., 2009; RISE foundation 2009, ENRD, 2010; Hart et al., 2011) have made an effort to integrate some issues related to the demand side approach in the policy analysis, in order to obtain a sound theoretical framework which takes into account in a more exhaustive way both the positive and normative approach on multifunctional agriculture.
However, besides the supply vision and the demand vision, there is also a third and more holistic interpretation of the concept of multifunctionality. According to this ‘wider’ perspective, multifunctional agriculture is the result of a transformation process in the relations between agriculture, rural society and society at large. According to this vision, the growing attention to multifunctional agriculture is not considered a direct response to market failure, but a consequence of the changing needs and demands of consumers and society in combination with the failure of conventional, productivist farm development models (see Van Huylenbroeck and Durand, 2003; Renting et al., 2005; Wilson, 2007).
The theoretical framework developed by these scholars, based on the study of multifunctional agriculture by looking at this wider institutional relations of the farm with social networks, markets, consumer groups and policy frameworks (Ploeg at al., 2000; Ploeg and Roep, 2003), provides a sounded conceptual basis to explore the role of collective action in the provision of environmental goods associated with agriculture.
Acording to this wider vision, new institutional arrangements are becoming more and more relevant in order to achieve important results concerning the new priorities attached to rural areas, since it is necessary to articulate the demand for countryside goods, establishing incentives for resources managers and co-ordinating resource
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management across space (Hodge, 2001). This emphasis towards the territorial provision of countryside goods does not remove the requirement to promote supply at minimum cost, but it also emphasises the need for new institutions with the difficult task of providing a diverse range of goods according to the public goods characteristics and to the range of environments within which they are to be supplied. According to Hagedorn et al. (2002, p. 7), there are many reasons for conceiving the multifunctionality of agriculture as an institutional problem. Indeed, the different types of public goods that agriculture may produce differ in aggregation and scale, usually representing complex aggregates of different scale and nature that claim for different coordination mechanisms. In this context some institutions and governance structures may be designed intentionally by economic and political actors, while in many cases such structures may evolve not intentionally or are self-organised.
With regard to public goods provision, the analytical focus of this approach is not restricted to pure public goods (biodiversity, landscape, sustainable water management), but also includes private goods and services (energy, tourism, social farming) and ‘functions’ that are provided by agriculture as distinctive product attributes on specific food markets (food quality, animal welfare, organic products etc.). Finally, functions and services that are not directly linked to agricultural production are also considered, such as the vitality of rural areas, rural viability, and the maintenance of settlement patterns in remote rural areas.
According to this wider perspective, the degree of farms multifunctionality is highly influenced by a wide range of – often interrelated – institutions and policies, and for this reason it is necessary to go beyond the livelihood strategies, by analysing the institutional arrangements necessary to implement successful local actions which enhance the multifunctional role of agriculture. According to this approach, ‘jointness of production’ is not defined in relation to the production functions, but regarding the economic and institutional arrangements which may deliver a combination of commodities and non-commodities, private and public goods and in many cases may also deliver other types of non-private goods, such as club goods and common-pool resources. Thus, it is necessary to explore how the various local actors (farmers, politicians, bureaucrats, agricultural organisations, environmental NGOs, national and EU institutions) can arrange relevant economic activities related to the primary sector in order to make use of the multifunctional capacities of agriculture (Hagedorn, 2004).
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