Consumption of milk, meat and eggs is strongly reduced, while the consumption of grain and potatoes
is kept at a relatively high level. In addition, the crisis menu makes allowance for the fact that
consumption of fish, of which Norway has a huge export surplus, can be considerably increased.
The crisis menu indicates the minimum annual quantities of agricultural products that must be
available for consumption in times of crisis. However, according to the Gulbrandsen-Lindbeck-
principle, production in normal times does not have to be equal to the necessary production during a
crisis. Some switching of production when the crisis has occurred will be possible. This requires that
essential factor of production are available, especially acreage, skills and animal material, as indicated
by the function (7) and (8).
In line with the Gulbrandsen-Lindbeck principle, we first employ the agricultural model to
calculate how much acreage (L0) and labor (S0) that is needed to produce the quantities of food
required by the crisis menu. These levels, calculated to be 56% (L0) and 29% (S0) of the base levels,
must be kept continuously available in order to be prepared to produce the crisis menu if the needs
arise. In addition to keeping land and skilled labor available, an animal stock has to be available for
meat and milk production. This limits the extent to which the current production of animal products
can be reduced relative to the crisis menu. This is taken care of by assuming that the production of
meat (M0), cow milk (C0) and egg (E0) must not fall below the levels of the crisis menu.
The quantities derived above are employed to calibrate the distribution parameters of the
function. However, to find cost shares we also need to know the unit cost of each component. For this
aim, we implement a minimum restriction on each component equal to the quantity level. The unit cost
follow from the shadow price.
Preferably, the substitution elasticities (which are free parameters) should be based on
empirical estimates. However, in absence of such estimates we have to rely on judgment. At the first
level we assume that the elasticity is quite low (σ = 0.5). Thus, acreage, labor and animal material can
only to a minor degree substitute for each other without depreciating food security. On the second
level, it is likely that the possibilities to substitute are higher, since it is of minor importance from what
source the proteins and the animal fat come from (meat or milk). Here, we apply an elasticity of μ = 2.
Note, that between different meat products (beef, sheep, pig and poultry) we implicitly assume perfect
substitutability.
4. Quantifying complementarities - model results
The model is calibrated to reproduce the actual situation in the base year 1998 as closely as possible,
by including the actual support and tariff regime. Column 1 of table 2 presents the base solution. In spite
of climatic disadvantage, production is high (and import low). Norway is self-sufficient in most products,
and for dairy products there is even a surplus which is dumped on the world market. The exception is
grain. The arctic climate does not permit sufficient quantities of high quality grain for bread-making. To
sustain these high activity levels, substantial support is necessary (15.2 billion NOK or 1.83 billion €).
Since agriculture employs about 59,700 man-years, the support per man-year is about 255,000 NOK
(30,700 €).
Column 2 gives results of a simulation where landscape preservation is the only policy objective.
Landscape preservation is implemented in the model as described in section 3.2. Compared to the base
solution, the activity in the agricultural sector is substantially reduced, especially production and
employment (16% of level in the base solution). Naturally, since land use enters into the WTP function it
declines less than the other indicators. Nevertheless, the computed level of land use is only 43% of the
present level. Land intensive grazing, i.e. extensive sheep farming, keeps up better than grain production
on tilled land. Necessary support is 3.3 billion NOK, or about one fifth of the support in the base solution.
Note that food security as well as private goods (food), follow as by-products of landscape
preservation. More specifically, the index for food security is 37% of the crisis menu level. This
emphasizes the joint-product nature of agricultural activity. The agricultural land that enters into
production of landscape amenity values, contributes also to food security,