An Economic/Analytical Primer
Sustainable AG Application

• Complementarity :
– The positive “spillover” (marginal) impacts of one context on another.
• Substitution :
– The negative “spillover” (marginal) impacts of one context on another.
• Synergy:
– Uses complementarity/substitution among parts to add value and/or reduce costs.
– The whole is greater than the sum of it’s parts!!!

• Production and/or Distance Function:
– Functional relationship between inputs and outputs.
• Q
1
= f (Q
2
, Q
3
, x
1
, x
2
, x
3
).
– Substitute versus Complement Relations w.r.t.:
• Inputs
• Outputs
• Netputs!!!
– Inputs versus outputs is arbitrary from a whole farm/systems perspective!!!

• Cost, Revenue, Profit Functions.
– Functional relationship between netputs and values.
• P 3 = f (Q
1
, Q
3
, x
1
, x
2
, x
3
).
– Substitute versus Complement Relations w.r.t. Netputs!!!
– Generally: Value = Price

nd
• Marginal Product :
– Amount of netput (or value) for one more unit of another netput.
– 1 st derivative :
• MP x1
= ∂Q
1
/∂x
1
, MP x2
• ∂Q
1
/∂Q
2
, ∂Q
1
/∂Q
3
.
= ∂Q
1
/∂x
2
, MP x3
= ∂Q
1
/∂x
3
.
• Substitute versus Complement :
– 2 nd derivative describe how MP of one netput is affected by second netput ( a spillover effect ).
• ∂MP x1
/∂x
2
= ∂ 2 Q
1
/∂x
1
∂x
2
.

• How is marginal productivity of one netput affected by a second netput ???
– IF ∂MP x1
/∂x
2
= ∂ 2 Q
1
/∂x
1
∂x
2
> 0
– THEN , the second netput, x
2
, enhances the marginal productivity of the first netput, x
1
.
– This is netput complementarity
• AND , the foundation of “design for”
UpCycle synergy .

• How is marginal productivity of one netput affected by a second netput ???
– IF ∂MP x1
/∂x
2
= ∂ 2 Q
1
/∂x
1
∂x
2
< 0
– THEN , the second netput, x
2
, reduces the marginal productivity of the first netput, x
1
.
– This is netput substitution
• AND , the foundation of “design against”
Green Chemistry synergy .

• Netput “spillovers”:
– UpCycle design to reduce entropy
• Entropy: a negative marginal product due to lower level (energy) use
– Tillage/rotation/cover crops
• Increase (design for): soil structure, infiltration, biotic health/diversity, carbon sequestration and (slow release) nutrient cycling, etc.
• Decrease (design against): soil/water/nutrient/GHG loss.
• Look for Spillover s in Space/Time/Form !!!
– THINK: “whole farm”/ P 3 systems context…..

• THINK SYSTEMS/NETPUTS:
– Environment & Societal versus “Economic”
• Hierarchical  emergent properties ….
– Stocks versus Flows
• Longer versus shorter run….
• Duality to “time value of $$$” dilemma???
– Technical versus Biological Nutrients (UpCycle)
• Design to MIN(entropy)/MAX(solar capture/store)
– Weak(er) versus Strong Metrics:
• Still need “measure to manage”….

• THINK P 3 (place, people, profit) VALUE
“mappings” as Functions….
– Full generality ( advanced analytics/metrics)
• functions = “correspondences”
• benefit (versus profit/etc.) functions
– Traditional: Production/Cost/Revenue/Profit
– Triple Bottom Line Expansions???
• “ enlightened ” (green/spiritual) duality mappings ???
• P 3 Benefit Function mappings….
• Duality  need to invert (stand on head) …..

3
• Value Function: P 3 (place, people, profit) = f( )
•

• THINK P 3 (place, people, profit) VALUE
“mappings” as Functions….
• Sustainable AG:
– Value Function: P 3 (place, people, profit)
P 3 = f(Community Vitality, Cover Crops,
Conservation Tillage, Nutrient Management,
Crop/Lvstk/Landscape Diversity, On-Farm Energy
(Conserve/Produce), Water/Wetland Mgmt,
Marketing, Whole Farm/Systems Approach, Grazing,
Ecological Pest/Weed Mgmt (IPM))

• THINK P 3 Empirical/Discrete Derivatives!!!
– Simulate (cross-shock) P 3 Benefit
Correspondences
• Footprint Metrics: carbon, water, N|P|K|S, land
• Think: 2 nd (applied, discrete) derivatives!!!
– Innovate!!!
• Develop, expand, refine, calibrate, validate “new and improved” P 3 metrics!!!
• Social/interpersonal metrics!!!
– Measure to Manage!!!
• UpCycle design/manage for synergy…

• Identify potential +/- netput synergies:
– Note substitute/complement dynamics can change with the levels (hierarchy) of the component contexts.
• ALSO: Δ Space/Time/Form
• Via Dialogue With Major Players/Stakeholders
Across Whole System
– Supply Chain  Circle  Spiral (UpCycle)
• Identify potential design/management values/objectives/strategies/tactics/metrics (in this order) to exploit these synergies (bio-
mimicry!!!)