Output Markets
The idea that technological progress increases supplies, which lowers output
prices and sometimes even reduces farmer incomes, is often called the tread-
mill effect. Because the demand for food is generally inelastic, small increases
in supply can lead to significant price declines, so net consumers win but net
producers lose.
The magnitude of this price effect is an empirical question and is the prod-
uct of two factors: overall market demand elasticity and the relative increase in
supply. If a yield-increasing agroforestry practice introduced in frontier agri-
culture is very locale specific and adopted by only a small fraction of produc-
ers, the price effect will be small. Similarly, if the crops in question are
exported and each country has only a small share of the global market, price
declines will not dampen the expansion. Commodity booms involving export
crops therefore can lead to a rapid increase in cropped area and corresponding
deforestation. One example is the rapid increase in cocoa production by small-
holders in West Africa in the twentieth century, although this was more by
monoculture cocoa plantation than cocoa agroforestry (see Chapter 6, this
volume).
However, frontier agriculture often is characterized by high transaction
costs, poor infrastructure, and limited market access. Some of the cash crops
reach only local markets, which easily become saturated if supply increases. If
the main outputs from agroforestry are for the local markets, any expansion
will quickly choke off because of depressed prices, and little or no additional
deforestation will occur. The issue of price responses to supply increases pre-
sents us with a puzzle or trade-off. From a rural development (farm income)
view one ought to go for crops sold in markets that can absorb an increase in
supply, that is, large domestic (urban) or export markets. But these are exactly
the type of markets that can lay the foundation for new technologies, includ-
ing agroforestry practices, to remove large tracts of forests.
Labor Markets and Migration
In isolated forest-rich economies, one can expect labor-intensive agroforestry
practices to have a positive or minimal impact on forests. Labor shortages and
high wages quickly constrain any expansion. On the other hand, if regional or
national labor markets function reasonably well and there is high labor mobil-
ity (migration), labor shortages are less likely to limit expansion. The extent of
interregional flows of labor and capital therefore play a crucial role in determin-
ing how much the agricultural sector expands, particularly over the long term.
When labor-intensive technological change occurs outside the frontier
areas, active labor markets can help curb deforestation. Employment opportu-
100 II. The Ecological Economics of Agroforestry