Skylark Patches and Behavioural Economics

In ‘Fighting for Birds’, and also on his blog, Mark Avery expresses frustration at a reluctance amongst farmers to take advantage of funding for skylark patches ( 16m² areas of arable land left unfarmed) under the Entry Level Stewardship Scheme.  Having recently read the fantastic ‘Thinking, fast and slow’ by Daniel Kahneman, ‘Nudge’ (Thaler and Sunstein) and ‘Predictably irrational’ (Dan Ariely) I am convinced that conservation can learn from behavioural economics, the study of the ways in which individuals act irrationally (from the perspective of classical economics).  In this blog I will outline a series of experiments to identify whether farmers are more concerned with maximising their profits or the size of their farm’s yield.  I will also present an idea for a way to address individuals’ overestimations of the size of skylark patches (if this is a problem as Mark Avery suggests).

Behavioural economics is based on the observation that humans are not economically rational.  An economically rational individual would always act to maximise their utility (or overall wellbeing).  In the case of the farmer, making the assumption that farmers attribute no benefit to increased on farm biodiversity resulting from the incorporation of skylark patches, a rational farmer would incorporate skylark patches if they increased his (or her) (predicted) profits.  It has been shown that skylark patches do increase profits, see Mark Avery’s blog.  So why, when presented with this evidence, do all farmers not rush to incorporate skylark patches?

The first possibility is that farmers are not interested in maximising their profits.  Instead they may be 

interested in either A)maximising the area of land which they use to produce crops or B) they may evaluate the success of their farming efforts by calculating the total yield of the farm each year.  If farming is a vocation and farmers care about producing crops then this would make sense.  To test between these hypothesises the following scenarios would be used; each scenario concerns a different fictional farm.

Scenario	Area (hectares)	Yield (tonnes Per Hectare)	Total Yield	Profit per tonne (£)	Total Profit (£)
1	40	8	320	400	128000
2	40	9	360	350	126000
3	45	8	360	350	126000
4	35	8	280	450	126000
5	40	7	280	450	126000
6	35	9	315	400	126000
7	45	7	315	400	126000

Farmers would be shown scenarios in pairs or threes (with and without the ‘Total Profit’ column, removed in different experiments) and would be asked which of the farms they would prefer to be theirs.  It would be explained that they will not be able to alter the yield, which reflects the quality of the land or the profit per tonnes which reflects a deal with a local crop buyer which cannot be altered.  An economically rational farmer, if presented with all scenarios would prefer scenario 1 to every other scenario but would not have no preference between other scenarios. 

Experiment A: the farmer would be offered scenario 1 and 2 (in a randomised order e.g. scenario 1 presented first 50% of the time).  If the farmer chose scenario two then this would signal that they would rather run a farm with higher yields.  Next scenario 1 and 3 would be presented.  If a farmer chose option 3 then this would signal that they would rather run a farm which had a larger area producing crops.  Both options 2 and 3 offer the same yield which is greater than that offered by scenario 1 but offer a lower total profit.  If farmers attempt to maximise the quantity of crop they produce they should prefer scenarios 2 and 3 over scenario 1.

Experiment B and C: individuals would be presented with scenario 1, 4 and 5 and then 1, 6 and 7.  This time individuals would be asked to rank the scenarios in order of preference (with the option of 2 or more scenarios being equally preferable).  If individual preferred 4 to 5 and 6 to 7 then it would be possible to conclude that individuals would rather maximise their yield than the area of their farm and vice versa for individuals who preferred 5 over 4 and 7 over 6.

Experiment D: farmers would be given the option of the following 4 farms and would be asked to rank them from highest to lowest preference with the option of applying equal preference to 2 or more scenarios.

Scenario	Area (hectares)	Yield (tonnes Per Hectare)	Total yield	Profit per tonne	Total Profit
A	40	8	320	400	128000
B	40	8	320	450	144000
C	40	9	360	400	144000
D	45	8	360	400	144000

These two sets of experiments would make it possible to see if farmers prefer to maximise the quantity of crops they produce when total profits are equal and, if this is the case, if farmers prefer to do this by maximising the area of land they farm or by maximising their yield per area.  If farmers do prefer to maximise the area they farm then this will help to explain reluctance to take up skylark patches.  The inclusion of skylark patches means a reduction in area farmed.  These experiments could be extended to offer scenarios in which the total area farmed, or yield per area, were increased but total profit decreases due to a decrease in profit per unit of crop.

If farmers do want to maximise the quantity of crops produced then conservation can learn from Thaler and Benartzi’s ‘Save more tomorrow’ scheme.  Thaler and Benartzi recognised that individuals should be saving more for their pensions than they were but did not like to see a drop in their paychecks.  The authors trialled an arrangement whereby upon receiving a payrise workers increased their monthly contribution to their pension (without seeing their paychecks shrink).  The scheme was highly successful but how does it apply to farmers?  Once the currency that farmers use to evaluate the wellbeing they gain from farming (area of farm, yield per area, profit per tonne of crop or total profit) has been identified then skylark patch scheme can advertised so that individuals increase the number of skylark patches when this does not result in a decrease to the relevant aspect of their farming.  For example, if farmers are most concerned about the size of their farm then skylark patch uptake may be highest when targeted at individuals increasing the total area of their farm.

Mark Avery also writes that the patches look as if they occupy more space than they do.  I suggest offering farmers the feedback they need to improve their estimation of the area of skylark patches.  This could be achieved as follows:  Using aerial photographs or the following type of diagrams (with labelled axis), ask individuals to estimate the size of the red squares and the proportion of the total (blue) area which they occupy:

If mark is right then individuals will over estimate the proportion of the total area occupied by the red shapes, if I am right then repeated feedback (providing individuals with correct answers instantly after they make their estimations) will result in individuals’ skills increasing.  Subsequently, individuals will be better able to imagine the difference that 0.5, 1 or 5% of their land being used as skylark patches will really look like.

Other thoughts:

People don’t deal with percentages rationally and overestimate small percentages.  Individuals should be expected (on the basis of current research) to be more in favour of incorporating skylark patches when they are advertised as ‘leaving 98% of farm land area as arable' than as ‘taking only 2% of total farm land area').