The economics of soil nutrient stocks and cattle ranching in the tropics: optimal pasture degradation in humid Costa Rica

We present a model that can be used to analyse economically optimal nutrient (nitrogen) stocks in agricultural lands. The model is applied to study cattle ranching in humid Costa Rica. The numerical results indicate that, for current meat prices and discount rate, it is privately optimal to 'mine' soil nitrogen. In the long run, efficiency is consistent with degraded and abandoned pastures, as observed in the study region. Sustainable pasture management is economically efficient only for a discount rate close to zero or for meat prices at about twice the highest recorded value in 1985-1997. The results highlight the potential conflict between sustainability and economic efficiency. Caveats and externalities that are not included in our model are discussed.