Activities Investments and Values

Miracle Farm Blueprint

Organic Farming Manual

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Economists make a distinction between use and non-use, or existence, value. Table I.2 depicts relationships among activities or investments and four types of use values and non-use values. The activities associated with PGRs require real economic resources or investments and each of these activities is designed to add economic value to them. It is important to note that the 'natural' value of PGRs (e.g. the value of farmers' rights) is the value of the final product (e.g. a new variety of rice) minus the valued added by each activity.

Our main concern in this volume will be with the direct use value of PGRs for breeding. We will also be concerned with the indirect use option value

Table I.2. Plant genetic resource activities and values.

Direct use value

Indirect use value

Non-use existence value

Activities Breeding

Recreation

Option

Diversity

Genetic resource in nature

X

X

X

Inventorying

X

X

X

X

Collection

Ex situ

X

X

In situ

X

X

X

X

On-farm

X

X

X

X

Evaluation

Agronomic

X

X

X

X

Genetic

X

X

X

Exchange

Information system

X

X

Restriction

X

X

Pre-breeding

Landrace combination

X

X

Advanced lines

X

X

Breeding

IARCs

X

X

NARs

X

X

Private

X

X

associated with possible future breeding use. Indirect use diversity values will also be considered (Part II). It is important, however, to note that PGRs have recreational values in specialized parks, nature preserves, etc, and that these are significant. Existence values are also important, although they are probably confined to PGRs in in situ collections.

Proponents of existence value argue that genetic resources are priceless in an economic sense and support the preservation of biodiversity as a moral and ethical issue and as a matter of the long-term sustainability of human life. Proponents of use value argue from a more utilitarian claim: biodiversity should be preserved, it is argued, because it can confer benefits on humans. This can be characterized as the utilitarian view of genetic resources.

The utilitarian approach in turn generates several further strands of argument. Many biological scientists advocate the viewpoint that all - or almost all - genetic resources are potentially valuable and hence should be conserved. Wilson (1988) is a notable proponent of this view; McNeeley et al. (1990) also speak from this perspective in calling for 'a global strategy for conserving the greatest possible biological diversity'. This viewpoint rests on the assumption that all genetic material has potential value; without knowing what technologies will be available in the future, and without knowing what environmental conditions the world may face in the future, it is argued, we have little basis for distinguishing 'useful' genetic resources from any others. As a result, the only sensible strategy is to seek the greatest possible preservation of diversity.

An alternative viewpoint, drawn largely from economics, suggests that the costs of preserving genetic resources should be viewed seriously, and that the benefits should be quantified to the greatest possible extent (see, for example, Brown, 1990; Evenson, 1993; and Wright, 1995). This literature takes seriously the tradeoffs between the current and future well-being of society and tends to focus on diversity in the economically important cultivated species. Economists in general are more sceptical than biologists concerning the need to protect all forms of genetic diversity. As Brown (1990) notes, 'if we can't save all species, we need a ranking based on one or more criteria, from which we select the highest ranked for preservation'.

Plant Genetic Resources: Sources of Value

Before it is possible to assign a value to any collection of genetic resources, it is necessary to agree on the source of value. Some have argued for a non-utilitarian approach to valuing genetic resources. For example, Oldfield (1989), Busch et al. (1989) and Shiva et al. (1991) are among those arguing that the value of genetic resources lies fundamentally in an environmental ethic.

As Shiva writes, 'the conservation of biodiversity ... is based primarily on the ethical ground that all life forms have value in themselves, independent of the value that man puts on them'. This viewpoint received special note in the 1982 World Charter for Nature of the United Nations, and from the International Union for the Conservation of Nature (IUCN) which affirmed support for an ethical foundation to biodiversity conservation (McNeeley et al. 1990).

There is undoubtedly merit to this argument. Nonetheless, as Brown (1990) points out, this is an unsatisfying framework to bring to policy decisions. Given that human actions do affect the environment, and given that human actions can bring about the extinction of other species, on what basis should people guide their actions? Preserving biodiversity entails choices: about which species or habitats to preserve, and about how much current consumption to forego in order to realize future benefits. These choices should be made explicit. To ignore such tradeoffs is to ignore the fact that humans will inevitably make choices that affect biological systems. As Swaney and Olson (1992) write, 'We are valuing biodiversity. We can choose to continue to undervalue [biodiversity], or we can change our valuations, but we cannot choose to not value it'.

What then are the sources of economic value? Evenson (1993) distinguishes between 'consumer good' (existence) values and 'producer good' (use) values of genetic resources. In this taxonomy, most genetic resources are directly valued by consumers only to the extent that people derive pleasure or satisfaction from knowing that genetic resources exist. Thus, people may derive value simply from knowing that elephants exist or that rainforests are being preserved. This contrasts with the 'producer good' value that people gain when producers use genetic resources to produce consumer goods: for example, for the use of genetic materials to produce cheaper grain or better-tasting tomatoes.

Other researchers develop more complicated taxonomies for understanding the value of genetic resources. For example, Brown (1990) allows for the 'indirect production value' that species can add from their services to the ecosystem; for example, earthworms help to aerate soil, and certain birds and bugs control pests. Likewise, Brown explicitly considers the 'future non-consumption use value' that is derived from preserving genetic resources as a form of insurance against an uncertain future.

Thus, although the categorizations differ slightly, economists agree on a utilitarian approach to valuing genetic resources. The value of genetic resources and biodiversity reflects the increased well-being that people derive from them - whether directly or through their use in production. In this volume we relate the breeding value of genetic resources to the activities shown in Table I.2.

The Cost of Extinction

Biologists argue that the extinction of a species imposes losses on humans. Two distinct effects are noted. First, an extinct species is 'lost' for future use, in the sense that its genetic materials cannot be put to utilitarian purposes. If a species is extinct, we can never know whether it might have offered a cure for cancer or - more prosaically - a gene that could be used in crop improvement. Second, the loss of any species can perturb the delicate ecological balance of a natural system. This in turn can cause damaging effects for humans.

In both cases, however, the costs of extinction can be overestimated if we do not recognize the opportunities for people to find substitutes. As Simpson et al. (1996 and Chapter 3) point out, people can often find alternative sources of naturally occurring pharmaceutical products. There are arguably very few cases where a particular pharmaceutical product can be found only in a single species. More commonly, the compound occurs in several closely related species; or perhaps various related compounds are found in (related or unrelated) species occupying similar ecological niches. People can develop synthetic compounds with the same attributes as the natural material, and so forth. The scope for humans to substitute and adapt to the extinction of species is remarkable and should not be underestimated. From the woolly mammoth to the passenger pigeon, humans have survived the loss of economically important species without irreparable material losses.

The case of the passenger pigeon is instructive. It has been argued (e.g. Oldfield, 1989) that as populations of passenger pigeons were decimated by commercial hunters, markets did not adequately respond to the population shifts by driving up the price of passenger pigeons. A primary reason for this was the widespread availability of consumption substitutes: North American consumers were not greatly distressed to switch their consumption of fowl from passenger pigeons to chickens. Since chickens could be raised at a relatively modest cost, the market price of passenger pigeons remained comparably low. The principle of substitution operates more generally. The extinction of a species for which many close substitutes exist matters much less than the extinction of a species with no close substitutes. Thus, for most people (though perhaps not for entomologists), the loss of one species of ant probably causes less loss of utility than the loss of a species with fewer close substitutes, such as African elephants.2

Even if a major crop species were to become extinct, humans could partially adapt to the loss by cultivating and consuming other crop and animal species. Much harm might result, and many people could potentially face catastrophe, but losses would be neither universal nor immeasurable.

The Cost of Genetic Uniformity in Commonly Used Species

Within the agricultural sciences, a common justification for preserving germplasm is the need to be prepared for potential outbreaks of diseases or pests. Large collections of germplasm - often at the intra-species level - give scientists the resources with which to respond to emerging disease and pest problems. Anecdotal evidence supports the idea that disease and pest resistance are often distributed sparsely across a population. Thus, small collections may not offer adequate protection against potential problems.

A related issue is the role of genetic uniformity in the susceptibility of crops to massive failures. Where cultivated varieties of a crop are closely related, it is suggested, new pests and diseases can spread rapidly and with enormous destructive potential. Several historical episodes are cited as evidence: the Irish potato famine, the Southern corn leaf blight epidemic in the United States, and a handful of other well-documented cases (e.g. Hargrove et al., 1990; Ryan, 1992).

As Wright (1995) points out, however, such episodes are indeed rare. The Irish potato famine did lead to disaster, but the Southern corn leaf blight epidemic barely caused a ripple. Where reasonable substitutes are available, the failure of a single crop is not necessarily a grave disaster. Even in developing countries with no formal futures markets, producers can rely on a variety of ex post consumption smoothing techniques to make up for the income losses associated with crop failures. (See, for example, Rosenzweig and Stark, 1989; Alderman and Paxson, 1992; Rosenzweig, 1992; Rosenzweig and Wolpin, 1993; Townsend, 1995; and Udry, 1990.) Similarly, consumers can readily switch to available substitutes and take advantage of various consumption smoothing mechanisms to deal with any related price rises. As Sen has shown in his seminal study of famines (1981), crop failure does not correspond to famine. Famine instead depends on a variety of other institutional and market failures - often involving war, violence or deliberate exploitation.

Taken together, these findings suggest that preservation of germplasm collections offers only one of a number of forms of production and consumption insurance. There is no particular reason to think it is economically efficient to insure future consumption with gene banks. Certainly it is a mistake to assign a value to gene banks on the basis that they are the sole source of insurance against crop losses.3

Part II of this volume includes two studies of field diversity and the role of modern varieties. Also, see Chapter 4 for a discussion of land conversion.

Choices Across Species and Individuals

Most economists agree with biological scientists that genetic resources have value. Most economists could be convinced, given supporting evidence, that there is a case for the collection and preservation of many 'useful' species, such as rice, wheat and their wild relatives. A question on which economists might differ with biologists is how many species to conserve or how far to extend conservation efforts.

Wilson (1988), for example, argues that the potential value of genetic materials, combined with inherent uncertainty about the future, justifies preserving essentially all known species, including insects and presumably microorganisms. Myers (1988) suggests that the loss of species today could not only decrease human welfare in the near future (due to emergent pests and diseases) but could also lead to cataclysmic effects on the future course and pace of evolution.

Many scientists also view with scepticism the prospect of preserving biodiversity in ex situ collections. Oldfield (1989) summarizes some of the arguments against exclusive reliance on ex situ conservation. While acknowledging the usefulness of ex situ storage for plant breeders and researchers, biologists point out that known species constitute only a small proportion of the species that exist. By definition, it is not possible to develop ex situ collections of unknown species. Thus, the logical alternative, as Wilson (1988) argues, is to preserve habitat - and particularly those habitats, such as tropical rainforests, that support large numbers of species.4

A problem with this viewpoint, however, is that it is costly to preserve genetic materials, whether in situ or ex situ. Although ex situ collections may have relatively low operating costs, there is an enormous number of species that could potentially be preserved. Within species, there is additional variation that may merit protection. For example, many of the world's most prominent gene banks focus on protecting intraspecies diversity (in wheat, rice, maize and other agricultural commodities). Perhaps in situ collections could be more cost-effective under some circumstances, but nonetheless, the cost of protecting all of the world's genetic resources would be prohibitive.

The costs of conserving germplasm thus necessitate some implicit ranking of the value of different species, and even of the value of individuals within plant and animal species. This value must be based on current and future consumption and production values, as described above.

Even if we accept the argument that many species may eventually find economic uses, some will not be used for years or decades. But as Brown (1990) notes, 'the positive interest (discount) rate signifies that a good event has more value today than the same good event in the future'. This suggests to most economists that it would be sensible to place a higher value on conserving the genetic resources of currently useful species than on protecting species that have no immediate use. At the very least, there is a reason to think hard about which species merit conservation.

Inter-species Diversity vs. Intra-species Diversity

A related issue is the tradeoff between conservation of different species and the conservation of individuals within species. Many of the world's largest gene banks are dedicated to preservation of very small numbers of species. For example, the International Rice Germplasm Collection (IRGC) at the International Rice Research Institute (IRRI) in the Philippines contains a collection of over 80,000 types of landraces of rice. But almost all of these types belong to two species, Oryza sativa and Oryza glaberrima. Relatively small numbers are specimens of approximately 20 wild species of rice (Hodgkin, 1991). Similarly large gene banks for wheat, maize and other major food crops are found in major producing countries and international agricultural research centres.

Such large resources are devoted to major crop plants because intra-species genetic variation has proved extremely valuable in the past (see, for example, Chapters 9-13). Plant breeders have traditionally drawn on intra-species diversity to improve crop yields, protect cultivars from diseases and pests, and otherwise raise productivity.

Efforts to preserve intra-species genetic diversity inevitably compete, however, with efforts to preserve inter-species diversity. Should scarce funds for conservation of genetic resources be used to safeguard intra-species diversity in a few widely used plants and animals, or should it be used to expand the number of species whose genetic material is saved for posterity?

Most of the non-agricultural literature on biodiversity implicitly assumes that protecting inter-species diversity is the most urgent priority. For example, Schucking and Anderson (1991) refer to the 'biodiversity crisis' in terms of rapid loss of species. Similarly, McNeely et al. (1990) acknowledge the importance of genetic diversity at the individual level but focus on species diversity and ecosystem diversity.

To date, however, relatively small numbers of species have been used for economic purposes. Oldfield (1989) cites figures showing that only 150 species of plants have been commercially cultivated in the history of agriculture, out of some 250,000 plant species known to exist. Oldfield uses these figures to argue that humans have grown to rely on a dangerously small base of genetic material and should take steps to preserve the remaining species. Alternatively, however, it can be argued that over several millennia humans have discovered the subset of species of most value to human welfare.

Values and Breeding Activities

Referring again to Table I.2, note that several activities are entailed in plant breeding. First, some type of inventorying activity is required before PGRs can be systematically collected. Collections are vital to breeders. They must be maintained and must have some basic information systems to be used by breeders. Ex situ collections are the dominant form of collection for plant breeders. Many advocates of preserving biodiversity favour in situ or on-farm collections on the grounds that they are 'dynamic'. They are often thought to be natural, but farmer-created PGRs are not natural and in situ collections of them cannot be natural. Breeders are increasingly designing on-farm or in situ collections to actually force dynamic change in diversity. Animal breeders are increasingly using ex situ cryopreservation for sperm and ovum, but they continue to rely on in situ and on-farm breeding herds.

Next we note that collections are more valuable to breeders when they are evaluated. Evaluations range from basic 'passport' evaluations to agronomic and genetic evaluations. For most crops, important 'traits' such as host plant resistance to plant diseases and insects or host plant tolerance to abiotic stress (cold, drought) are controlled by single (or few) genes. Agronomic (phenotypic) evaluation of collection accessions to identify these traits is valuable to breeders. As biotechnology techniques are increasingly used, genetic evaluations become more important.

PGRs must be exchanged between collection organizations and breeding programmes. This requires resources, and in some cases it may be subject to restrictions. Some of this exchange is direct, as when international agricultural research centres (IARCs) send landraces to national agricultural research system (NARS) breeders. Some is indirect as when NARS breeders identify promising parental breeding materials in international nurseries (see the rice study below). Many PGRs are proprietary (i.e. held privately) and may or may not be exchanged for a price.

Pre-breeding is increasingly becoming important in breeding programmes.5 This is illustrated in rice breeding where the breeding programmes at the International Rice Research Institute produce pre-bred advanced lines, selected combinations of landraces that are then used in NARS breeding programmes, thus saving extensive efforts by NARS breeders. (See Chapter 7 for pre-breeding in maize.) Pre-breeding is subject to serious market failure (see below).

Breeding activities may take place in IARCs, NARS or in private sector programmes. All breeding programmes benefit from the antecedent activities. Under conditions of perfect markets, each of these activities (or products thereof) would be priced, and we could determine the value of PGRs by determining the value of new plant cultivars or of superior livestock and subtracting the value added by each activity to reach a residual natural PGR value.

But perfect markets do not exist for all of these activities (though imperfect markets exist for some and improved markets could be created through stronger intellectual property rights (IPRs)). The most fundamental reason for this is that the PGRs embodied in a plant or animal can be replicated or reproduced at low cost in other plants and animals. This gives them a 'non-rival good' quality similar to an invention. An invention may be embodied in a second machine or good without altering its performance in the first machine or good in which it is embodied. The same is effectively true for PGRs although a reproduction process is entailed.

If the 'owner' of an invention or PGR can control the use of the invention or PGR, a market for the invention or PGR will exist. For crops a natural form of control exists for hybrid crops where farmers do not save seed from their harvest and thus purchase new seeds each season. Private sector firms can earn a return to plant breeding activities through seed sales. In fact, markets for pre-bred inbred lines exist and proprietary PGR collections have value (as reflected in the sales values of companies). When farmers can save seed from harvest, the new seed market is typically not large enough to justify private breeding investments. IPRs, patents or breeders' rights, are designed to create seed markets by giving the IPR holder a (limited) 'right to exclude' others from using the protected seed without permission. IPRs are being strengthened, and private sector breeding and pre-breeding activities are growing. But many countries do not have and could not enforce IPRs for plants. (See Chapters 14-17 for discussions of farmers' rights.)

Option values, as noted in Table I.2, are largely associated with breeding values because this is the potential use value from PGRs. Naturally occurring unknown PGRs have options value, as do incompletely known PGRs.

Diversity values refer to the public goods nature of diversity in farmers' fields. Note that this is not due to the risk-averse behaviour of farmers. Farmers will directly value crop varieties with 'stability' under changing weather conditions, etc., in their planting decisions. But stability and diversity may have public-good value as well because of reduced danger of pest outbreaks, etc. Plant and animal breeders can incorporate these features into breeding programmes, but some regulation (or subsidy) may be required to achieve the desired effects in farmers' fields.

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