Environmental economics: an application of optimisation models at farm level

A linear programming optimisation model is presented. We used the model to analyse the environmental, economic, technical and organisational farm results of a dairy farm. We prepared two versions of the model, one for the present situation of the farm (organic version) and another for the situation prior to conversion from conventional to organic agriculture (conventional version). The objective function of the model optimises farm gross income. We present the general structure of the model and specify environmental aspects. In this paper attention has been paid also to the software instruments used for the optimisation of the model and to their facilities. The optimisation of the model is made through the software What’s best!, which is able to solve linear programming problems exchanging information (data, results) with Excel files. The results of the simulation show how the organic method achieves an economic efficiency level equal to the conventional one, due to the favourable price the farm could obtain for organic milk. Moreover the organic method generates some relevant environmental effects. We calculated the marginal and average production costs of environmental externalises through parametric linear programming.