The Economics of Space in Land Use: and our Unrealised Potential in New Zealand

New Zealand industrial agribusiness uses a fallacious financial spatial analysis framework that works against the integration of trees, wetlands and other diversification elements into our farmed landscapes.  It conceptualises complex and multifunctional landscapes as simplified factories; a mechanical analogy that cannot perceive, let alone realise, the Scope of Potential – the Economies of Scope – within those landscapes. 

This lack of conceptual understanding is partly why there is a lock-in-trap that resists a redesign shift to integrated land use systems and continues to encourage an Economies of Scale industrialisation and energy-intensification of those farmed landscapes.  This is to the continued detriment of our local economies, local environment and local communities.  Further, it demonstrates a lack of vision and philosophical thought evident within land use education.   We need a paradigm shift in how we look at land.

I provide some background to the philosophical fallacies that dominate the industrial paradigm, and use a case study (the Stephens of South Otago) to demonstrate the potential within New Zealand hill country farmed landscapes.

South Otago landscapes

The hills and valleys of South Otago, New Zealand

Explain this.  Some of New Zealand’s farmers plant low pastoral production and high costs areas (they almost always go together) of their farm in a woodland, or put other areas in wetlands, and …. by so doing …. save costs, increase revenues, reduce risks, retain water, increase water quality and retention, increase stock health and performance, increase biodiversity and soil … essentially realise a potential Scope of many patterned things in association, which the mechanical agronomist dealing in averages will not even guess are there.  

They do better – their farm enterprises and they themselves – by their seeing, thinking and acting in this way ….. but they are at odds with the conventions of Modern industrial agri‘business’ (the husbandry ‘culture’ part of agriculture is grimly holding on).

Case Study: The Stephens, South Otago

The Stephens run a hill country sheep & beef farm in South Otago – Kakapuaka.  Much of South Otago is rounded tops separated by steeper U-shaped or V-shaped dissected gullies.  The gully bits love to return to gorse, the pioneer species precursor of an ecological transition to woodland.  In other areas of New Zealand the land morphology is different.  You can have wide flats and inverse V steep hills – or a descending landscape of face, plateau, face, plateau, etc. – or land as lumpy and irregular as a pot of thick porridge dumped onto the earth (Busby Hill coming in to Tokomaru Bay is like that – and that gluggy mudstone patch is *still* settling!!)

In other areas the species of pastoral succession is kanuka, but the principles of ecological forest succession are the same.  The stock grazing pressure (and preference) just isn’t there to keep it down.  When farmers  do clear the gorse, they’re lucky to get a few s.u./ha of poor grazing …. until they have to spend the $1000s per hectare to repeat the process every 15 years or so (in eternal pursuit of the ‘grass is king’, maximise ‘effective farm area’ paradigm).

Perley sketch Gully, face & wetland

South Otago sheep & beef hill country runs an average 14 stock units (su)/ha.  It’s a ‘head in the oven, feet in the freezer, but on average I feel fine’ kind of average.  Invermay pastoral agronomist and pattern thinker Gordon Cossens found production variation between paddocks within a farm at 100% +/- the mean.  He said the pattern variation within paddocks was the same.  So some areas produce near enough to twice the average, and some areas produce almost nothing.  Farm foresters will tell you exactly the same story.  They’ve walked this land.  Those that have looked up from the models will all tell you of non-uniformity and contingency – of this exposure, that wet, yonder piece of heaven.  Land is like that, with shifting patterns in time and place.

I’m convinced those farmers that plant trees are the best at observing those patterns.  You learn by being in their place, and listening.  I’ve been on hill tops discussing their observations.  They’ll talk of the pattern of grazing from dawn to dusk, from stock camps on northeast faces (out of the southwest and the frost, and where the early morning sun touches them).  Then grazing along the ridges and spurs until the sun warms the valley.  Then down the face they go, returning at dusk.  We put some GPS collars on a few sheep years later … and there it was.  Faces were secondary.  Shady cold narrow gut back faces were like offering tripe to a 10 year old.

Fitzgerald - the test of a first-rate intelligence

In these ‘bad’ pastoral areas within a farm you’re lucky to get 3 s.u. ha utilised.  Well, they’re not so much ‘bad’ areas as woodland areas.  Just as a bad pastoral boggy stock-loss-magnets are actually good wetlands.  But to think like that, you need to be able to hold more than one thought – even supposedly opposing thoughts – in your mind at the same time.  F Scott Fitzgerald said it the best.

Ken Stephens and his father Vic were heretics.  They planted trees on land that stock didn’t like so much, typically steeper than a particular contour line.  That is often cited as that contour where the tractor rolls over moving around the face.  Below that line, there be dragons.  Not just low production and very low pasture utilisation.  Also higher costs: woody weed control, fences and tracks blowing out, stock losses, wasted fertiliser, problem mustering areas.  But also soil erosion, water run-off, and a reduction in the quality and ecology streams.  Land without trees is both more flood prone, and more drought prone.  Clear a narrow dissected gully, and you are asking for environmental problems ….. and you’ll be throwing money down the drain.  Don’t listen to the maximise pastoral production agronomist (maximising production sub-optimises profits every time), or the maximise ‘Effective farm area’ advisor (that obsession ends up with a *loss* of effectiveness of the whole farm system.

Perley sketch - Dissected GullyThink and do something different, and the result will not be just a better profit/loss/risk & resilience profile; the benefits are multiple.  Better environment, better economy, better time management, better, better, ….  Run the easy contours on low costs, high return pasture, and give the stock shelter from that storm that hits every now and then right on lamb drop.

But back to the case study.  One memorable day, amongst a group of farm foresters (who are – I think – a special breed because they tend to be in my experience, maverick and very vocal and spirited thinkers …. so, yes, really annoying) Ken Stephens told us this story…..

So the fertiliser man turns up, and Ken tells him his stocking rates for the 80% or so of the farm in pasture – all of it the good stuff.  The guy goes back to the office to do his sums, and rings Ken.  “Ken, you’ve got it all wrong.  You’ve given me Southland finishing farm figures – up well over 20 su/ha.  You’re a South Otago hill country farmer.  That can’t be right.

Ken says no, we farm the good stuff, put the pastoral loss-making stuff into trees – save overhead costs, create shelter to the tops for that storm where I lose a hundred and the unsheltered neighbour who listens to Lincoln lost 1000.  Ken bought two extra farms for his sons from thinking about land this way.   He made money and had a less risky farm with a better environmental profile, and one that sustained his family and community.  That’s Economies of Scope.

Let all the costs and returns fall to the particular patch

The awareness of the costs associated with these poorer pastoral areas is an interesting point.   Many of those costs that occur *within* those areas, are not ‘directed’ there within the farm accounts.  You cannot find a money map of many, if any, farms with different shadings for high, moderate and low costs (and returns).  We’re not in the habit of money mapping like that (frankly, such mapping would be extremely useful as one step along the encouragement of land use integration).

Traquair Station Outram Google 2007ish? copyThis map of Traquair Station outside Outram (Town at centre bottom) gives you an appreciation of the money map.  The trees are in areas that are rubbish for grazing.  Charles Reid once told me flippantly that “We could have filled up these gullies with Tordon drums by now.  They’re forest areas.”

Rather than money-map, we just grab all the general stuff that isn’t related to a crop or stock unit, and smack it into overheads (aka indirect costs).  That’s fine from an accounting convenience point of view.  There is no need – from a farm accounts point of view – to spatially allocate such costs as stock losses, woody weed costs, labour, repairs and maintenance, let alone the even more nebulous fertiliser effectiveness, soil losses, water quality, biodiversity, stream function or drought function.  The tax man doesn’t need those specifics.  They want the bottom line and the bare logic of how you got there.  

The problem comes when your mind starts to believe that what is done for accounting convenience sake is an actual *fact* out in the field.  Because that’s when you lose the ability to synthesis and analyse land use potential within a farm landscape.  That’s when you stop thinking and seeing, and then you act in dumb ways.

When that appalling conceptual mistake of not considering the whole suite of costs and returns associated with a patch is made (and believe me, Gross Margin [GM] analysis when ‘analysing’ a forest area on a farm is the *norm* – conventional ‘wisdom’ even), then mistake builds upon mistake.  Seriously, this is what’s normal.

What happens is that – *instead* of the high costs associated with this low pastoral return country being very much part of the puzzle and of realising the potential of the whole farm system – the high 80:20 principle high cost pockets are …. well, they’re not so much ignored as completely invisible … what high cost pockets?  They’re not even in the suite of mechanical factory concepts.  Overheads are spread remember.  Evenly.  Like butter.  Add to the list of bollocks.

Fallacy.

Understanding land system functionality 

But looking wisely at land pattern goes beyond more accurate money maps of costs and returns.  Analysts (well, I’d prefer they were called Synthesists) should also understand the multiple beneficial functions of any new land cover – and particularly how they impact on the whole farm operation – finance, health, resilience, social, etc.

It’s through the introduction of beneficial multiple functions from, say, a wetland or woodland, or individual trees, or polyculture within patches, that synergies are created – shelter, shade, health, water, new revenue options, drought tolerance etc.  It helps if you’re a natural born ecologist – looking at patterns and connections in the landscape.

But what you *don’t* do if you want to realise the potential of polycultures among and within farmscape patches, is assume that – like high cost pockets, and like low return pockets – these functions, being contingent and annoyingly shifting, expanding and contracting like some starling murmuration, are best ignored.   Assumed to be zero.  Not even given an arbitrary value.  Simply presumed out of existence.

On Measurement - the McNamara Fallacy

And this – of course – is precisely what the agricultural ‘analysts’ do.  Assuming they don’t exist.  This is called the McNamara Fallacy (or the Quantitative Fallacy).  It is also a classic example of Alfred North Whitehead’s Fallacy of Misplaced Concreteness.  You think that you can deal in averages and only the relatively regular, universal and quantifiable, when you cannot.  Note, metaphysically we’re talking about a complex system – like a child – not a regular factory, a machine.  Fallacy.

The idea that there is no functional change in the farm environment associated with functions such as shelter, shade, water regulation, soil function, flood, drought, stock health, soil loss etc., is analytical blindness.  Blindness is what we do.

The Opportunity Cost Con

Add to the that the idea that taking any particular land ‘out of pastoral production’ is best represented by the precise and completely incorrect figure you know – the *average* of the whole farm (14 su/ha say) though it bears bears no relation to this patch – rather than the correct actual pastoral production and utilisation figure …. which you may not know precisely, but farm foresters will give you a far more accurate measure than the irrelevant farm average.  Many farm foresters have a real feel for those production patterns.  I don’t know how many times I’ve heard them say that they took this particular face out – from the edge of the ridge at the top to the start of the colluvium line – the line from where soil deposits downslope –  and lost effectively no stock.  A farmer who knows his land might *judge* 2 su/ha.  The professional will use the average, to great precision and a sense of faux objectivity.  The farmer will be far more accurate.

So they use the false number because they have some measured data, irrespective of context, quietly ignoring that it applies to the whole farm, and not to the ‘feet in the freezer’ particulars.  This is doubly fallacious – and really philosophically annoying – because it doesn’t *just* hide behind ignorance wielding a sword named ‘Accuracy and precision’; it actually assumes a presumed objective professional smugness that is beyond foolish.

Fallacy.  Fallacy.  Modern, mechanical, reductive, uniform, Newtonian Physics Envy delusion.  Worse, the logically indefensible approach is repeated even after the fallacies are explained.  I heard of an example only a few years ago.  Same gross margin analysis.  Same ignoring of the low return: high cost reality.  Same blindness to multiple and beneficial farm system effects.  Their message?  If you plant trees or wetlands, there’ll be an inevitable cost to the farm enterprise.   That is precisely the opposite of most realities when people with a feel for the land choose within the farm the composition, location and management of woodlands and wetlands, etc.   The Fitzgerald quote above keeps coming to mind; just how many thoughts can those analysts keep in their head beyond one.

Summary of the financial fallacies of integrated land use analysis

MAF and Lincoln produced multiple studies from the 1970s that showed from within a false logic of land as a uniform factory rather than a living system, that examples such as the Stephens was impossible.  I once collected them, searching back through time for some trees on farms analysis that was actually in accord with all the real world experience of our farm foresters.  I found not one.  They were all in opposition to their example.  Their exemplar to be frank.

I wanted to know why, and discovered layer upon layer of false assumptions (it is unfortunately very common in most professions I’ve found – unfounded belief in some dogma or other).  But reality, speality.  Apparently, when given a choice between a reality and false and much worshipped theoretical framing, it is the reality that is wrong.  

Their simplistic approach….. ????  If you put 20% of your farm in wetlands or trees, then “obviously” you lose 20% of all the good stuff – production, gross revenue, profit, etc.  And because we conveniently assume that farms are are all perfect average flat paddocks of course – factories – then gross margin (never mind the unaffected indirect costs) tells you the truth about where the costs lie because all the overheads are magically spread over the whole area.

But wait, there’s more.  The mismeasurement of the hyper-inflated revenue loss from that cattle-beast drowning, weed-control nightmare gorse wilderness, is compounded by the assumption that there will be no change in the ‘overheads’.  Weed control etc., having nothing to do with this particular site.  So a lower ‘effective farm area’ (meaning pastoral and nothing else) will have to carry the undiminished indirect cost structure.  Add that to the negatives against anything that dares *not* to be pure pasture or crop.

But wait, there’s more.  On top of the incorrect loss of revenue, and the incorrect non-loss of costs, and the incorrect blindness to multiple and beneficial functions – from shade to drought resilience – any establishment of wetland or woodland is loaded up with a fallacious ‘opportunity cost’ within its own internalised finance.  So another negative cost – the agronomists presumed loss to the farm system (the opposite of the reality) – is added to the forestry cashflow – so it will look like a poorer investment (and I haven’t even mentioned how land value is assumed in that financial analysis for pastoral land that makes a negative return!).

So a suite of fallacious negatives and absolutely none of the real positives (measurable and not) to the farm system are loaded on to the non-pastoral patch.

One might almost suspect that Lincoln and MPI agronomists et al. have a bit of a downer on land use systems that aren’t uniform commodity-producing agri-business factories focused on the logic of Economies of Scale.

Or it could simply be that the industrial factory paradigm that has so obsessed New Zealand agriculture for decades – the “maximise production at all costs through homogeneity, scale, and high energy inputs no matter the costs to economy, community or environment” – is entrenched and unbendable.

To point out the obvious lack of apparent capacity to conceptualise ourselves out our rural economic, social and environmental declines goes without saying.

But this cannot last.   The poets say it best.  The current New Zealand obsession with land and all that is in it and of it as industry are the poet Keat’s unweaving a rainbow (a potential one) made flesh.

But perhaps WH Auden ought to have the last word.  It is this culture of Modernity, industry and narrowness – which takes complex life and makes it a simple grinding metal beast – whose worth is reflected in the landscapes it makes.  This unbending culture that industrialises life and is going to smash, and is no better than the woods it makes, or massacres.

A well-kempt forest begs Our Lady’s grace;
Someone is not disgusted, or at least
Is laying bets upon the human race
Retaining enough decency to last;
The trees encountered on a country stroll
Reveal a lot about a country’s soul.

A small grove massacred to the last ash,
An oak with heart-rot, give away the show:
This great society is going to smash;
They cannot fool us with how fast they go,
How much they cost each other and the gods.
A culture is no better than its woods.

WH Auden, “Bucolics” part II, “Woods”

Hillend - rounded tops and dissected gullies

Typical South Otago – Rolling tops and dissected gullies

Chris Perley
Thoughtscapes

Chris Perley is an affiliated researcher at Otago University’s Centre for Sustainability with a governance, research, management and policy background in provincial economies, rural sociology and land use strategy. 

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