Adverse Selection in the Environmental Stewardship Scheme: Does the Higher Level Stewardship Scheme Design Reduce Adverse Selection?

The Environmental Stewardship Scheme provides payments to farmers for the provision of environmental services based on foregone agricultural income. This creates a potential incentive compatibility problem which, combined with information asymmetry about farm land potential, can lead to adverse selection of land into the Scheme and therefore a less cost‐effective provision of environmental goods and services. However, the Higher Level Stewardship (HLS) Scheme design includes some features that potentially reduce adverse selection. This paper studies the adverse selection problem of the HLS using a principal‐agent framework at the regional level. It is found that, at the regional level, the enrolment of more land from lower payment regions for a given budget constraint has reduced the adverse selection problem through contracting a greater overall area and thus higher overall environmental benefit. In addition, for landscape regions with the same payment rate (i.e. of the same agricultural value), differential weighting of the public demand for environmental goods and services provided by agriculture (measured by weighting an environmental benefit function by the distance to main cities) appears to be reflected in the regulator’s allocation of contracts, thereby also reducing the adverse selection problem.     

Microeconometric analysis of wine grape supply contracts in Australia*

This paper examines wine grape supply contracts used in the main grape growing regions of Australia. An empirical analysis provides insight into specific aspects of contract design and implementation. Statistical analyses of sample data reveal differences between regions in contract specifications. Lower quality grape growing regions place a greater reliance on grape quality assessment to determine bonus/penalty payments compared to higher quality regions. Contracts in higher quality regions place greater emphasis on explicit winery involvement and direction in vineyard management. Results indicate that longer duration contracts are more inclusive in terms of the number of clauses included. Evidence of risk shifting (i.e., winery to grower) for high quality grapes is reported, where the price received by growers is determined by the bottle price of the wine produced.     

Demand Estimation in the Presence of Stochastic Trend and Seasonality: The Case of Meat Demand in the United Kingdom

If budget shares have stochastic trend or seasonality or both, then demand equations based on the assumption of deterministic trend and deterministic seasonality will be mis-specified. We test this proposition by estimating a Linearized Almost Ideal (LAI) demand system for meat demand in the United Kingdom using Harvey's structural time series methodology. We demonstrate that the model specification allowing for stochastic trend and deterministic seasonality performs best in terms of diagnostic tests and goodness of fit measures. It is also shown that the model with stochastic trend is better at out-of-sample forecasting.     

A defense of utilitarian policy processes in corporate and public management

The growing awareness that corporate and public policy forming processes are intensively utilitarian has provoked a variety of criticism. The procedural difficulties of utilitarianism are well known; less well known but potentially more devastating is a set of charges that utilitarian policy processes intrude upon important relationships and societal processes. This paper defends utilitarian methods against these charges.More specifically, two criticisms are singled out for examination. The first is the claim that utilitarian policy processes systematically discriminate against the rights of non-human life and suppress any feelings of sympathy or obligation humans might have for animals or plants. The second is the argument that utilitarianism ultimately circumvents considerations of process which are essential for the development of individual and societal identity.Given these criticisms, the goal of this paper is to defend the role of utilitarian techniques in corporate and public policy processes against such charges. F. Neil Brady is Assistant Professor of Management at the College of Business Administration, San Diego State University. He is the author of Feeling and Understanding: A Moral Psychology for Public Servants, Public Administration Quarterly 7, and Ethical Theory for the Public Administrator: The Management of Competing Interests, American Review of Public Administration 15, pp. 119–126.