Agricultural inputs such as water, pesticide, and even time may have the unintended effect of stimulating some pest populations, leading to crop losses. A conceptual model is developed to contrast optimal use of pesticide and nonpesticide inputs with myopic use patterns which ignore pest externalities. Under most conditions, optimal management is found to entail reduced input levels. These issues are illustrated for Imperial Valley cotton using biological simulation. Correct calculation of the relative profitability of conventional and integrated pest management techniques, such as a shortened growing season, are found to depend crucially on whether pest externalities are taken into account.

The use of chemical pesticides frequently causes minor pests to become serious problems by disturbing the natural controls that keep them in check. As a result, it is possible to suffer heavier crop losses after pesticides are introduced than before their introduction. Efficient use of pesticides requires complete biological modeling that takes the appropriate predator-prey relationships into account. A bioeconomic model is introduced involving three key species: a primary target pest, a secondary pest, and a natural enemy of the secondary pest. Optimal decision rules are derived and contrasted with myopic decision making, which treats the predator-prey system as an externality. The issue of resistance in the secondary pest is examined briefly.

A key problem in pesticide regulation is uncertainty about health risks. Trade-offs between economic benefits and worker health safety are examined using an empirical illustration. Alternative decision rules for regulation under uncertainty are considered: a safety fixed rule, which protects individuals from excessive health risks, and uncertainty-adjusted cost-benefit analysis, which evaluates aggregate trade-offs between health and economic welfare. These criteria may lead to opposite policy conclusions, suggesting that the most appropriate public policy is a safe minimum standard (SMS), which allows weighing of costs and benefits only after some minimum acceptable level of health safety has been assured.

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Two issues lurk in the background of the papers by Lichtenberg, Taylor, and Cropper et al. The first is a specific question about the goal of regulatory policy. The second is a more global consideration regarding politics, technological change, and the future.