•     Identify indicators that reflect or give an idea about the evolution of these external costs and benefits over time;
•     Identify the scale at which these external costs and ben­efits can be studied: farm level (identification of the in­dividual farmer's contribution to a specific externality), landscape level;
•     Design policies that take into account the external costs and benefits associated with agriculture. Policies ad­opted to promote some public goods could worsen, or at least fail to alleviate some external costs (Sutherland et al., 2006). Specifically, the national (or larger scale) performance of the agricultural sector can be evaluated and the consequences analyzed at the local and farm level so that local policies do not contradict national ones; and
•     Develop and promote innovative entrepreneurship ini­tiatives, such as safe water production, eco- and nature tourism, recreation, hunting, including forest, upland and wetland systems.

Estimation of the contribution of agriculture  and rural services to economic welfare is inefficient and can be im­proved. This requires redefinition of economic efficiency beyond conventional measures of tradeable inputs and out­puts, which is "internalizing the externalities" of agriculture to obtain a comprehensive measure of the social and envi­ronmental "footprint" of the sector and its contribution to long term welfare (Barnes, 2002; UN SEEA, 2003; EFTEC, 2005).

(3) Design economic instruments to help achieve sustain-ability. Design economic instruments such as fiscal mea­sures, compensatory and incentive regimes, market support and trading systems that can help achieve sustainable devel­opment, promoting the appropriate balance of private and public goods. Examples include capital and maintenance grants for organic farming, agroforestry projects, extensive livestock systems in less favored areas, farm diversification schemes, voluntary schemes to pay farmers for environmen­tal services, grants and subsidies for cleaner, welfare ori­ented technologies and tradable permits for water licenses (OECD, 2000; DEFRA, 2002ab). For example, further re­search can examine how the supply of land to agriculture might respond to the fall in output prices as a result of the elimination of farm price and income support policies in many countries. Also, research could better examine how the supply of public goods associated with agricultural land responds to payments based on land area. Specific topics include:
•     Cause and effects of price instabilities, including conse­quences for production and investments;
•     Effects of the different public instruments in terms of market distortions, price stabilization (e.g., intervention prices, quotas, decoupled payments);
•     Role of market mechanisms such as stock markets and commodity futures markets to face price risks; and
•     Importance and role of contracts and conventions be­tween the players of a sector (farmers, agribusiness, retailers).

6.2.10.3 Sustainable rural livelihoods
There is continuing concern about persistent poverty and the vulnerability of individuals and families in some rural populations in NAE, whether due to increased pressure on land and water resources or economic factors associated with structural change. The concept of sustainable liveli­hoods is used to analyze the social and economic viability of agricultural and rural systems (Chambers and Conway, 1992; Carswell, 1997; Hussein and Nelson, 1998; Scoones, 1998; Ellis 2000; Turner et al., 2001). Whereas the term "livelihood" focuses on productivity, income and poverty reduction, the term "sustainability" refers to the resilience of livelihoods and the maintenance of natural resources on which they depend. This analytical framework can help to understand how households and communities cope with shocks and stresses, such as those associated with policy or climate change.
     The sustainable livelihood framework concept has con­siderable relevance for understanding the social and eco­nomic aspects of farming systems in the NAE region (Pretty, 1998) (Figure 6-1). It emphasizes the critical relationships between high level drivers and contextual factors, resources and assets, institutional processes, farmer motivation and coping  strategies  and resultant welfare  (Scoones,  1998; DFID, 1999).
     It is important to better understand the diversity of live­lihoods within rural households and communities as a whole and the critical synergy between rural and urban dimensions of livelihoods, especially as these affect the transfer of assets, knowledge, goods and services between the rural and urban sectors, with consequences for welfare. The critical influence of local and distant institutions (e.g., local customs regard­ing access to common property resources, local and national land tenure rules), social relations (e.g., based on gender, kinships, tenure) and economic, value-adding opportunities are also recognized.
     In the context of meeting development and sustainabil­ity goals in the NAE region, there is considerable merit in applying the livelihoods framework to guide future develop­ment of AKST, particularly to address the needs of the most vulnerable farming and rural communities. AKST clearly interacts with and is shaped by, the factors that describe the context for rural livelihoods, such as the policy and market drivers. As these change, so will the requirement for addi­tional AKST as it is clearly embedded within the assets of households and communities. These include the products, tools, equipment and processes (physical assets), the knowl­edge and skills available (human capital) and the systems of governance (social capital) available to a farming com­munity. Changing circumstances, whether induced by global or local factors, have implications for AKST in its widest sense.
     AKST is closely linked with the availability, use and pro­ductivity of natural capital such as land and water resources and financial capital as this determines access to farming and other inputs. The livelihoods framework confirms the importance of governance systems as these influence pat­terns of resource use and rural development, in turn shaping the development and dissemination of AKST. Hence, AKST is central to the livelihood strategies evident in farming sys-