Historically, agricultural policy in Denmark has been based on individual activity-based support schemes. However, there is not always a 1:1 correlation between activity and effect, which is why there is a growing interest in so-called result-based schemes, where you, to a greater extent, measure what you want more of.
This article delves into the definitions and differences between result-based and activity-based schemes, as well as individual vs. collective schemes, and provides examples from existing and possibly future schemes from Denmark and abroad.
It is not in itself an advantage that schemes are either collective or individual. Similarly, a result-based scheme is not guaranteed to produce greater or lesser impact than an activity-based scheme. There may be perverse incentives in both an activity-based scheme and a result-based scheme, and thus no one type of scheme is generally better than another. The choice depends on the purpose of the scheme and some scheme-specific characteristics, including the availability and nature of private information of the farmer.
Good activity-based schemes, as well as good result-based schemes, require careful planning and design that can incorporate the spatial and temporal variation in both the effects and costs of the schemes. However, given the uncertainty and asymmetry of information on these aspects, it is also important to balance considerations of immediate impact and cost-effectiveness with those of avoiding outright counterproductive effects.