Reality and modelling: Operational validation of an environmental- economic model of a dairy farm

Operational validation of a linear programming model of a dairy farm is done on the basis of representative results from reality. The model will be used to determine the effects of institutional, technical and price changes on the results of dairy farms. Average results of specialized dairy farms on sandy soil from 1992/93 are presented and representativeness of the year has been checked. Validation of the model was done in a number of steps. In the simulation step many available information from reality has been used in the model. Comparison of the simulated economic and environmental results with those from reality shows that the model is quite capable of simulating reality. In the optimization step a number of behavioral restrictions, which were included in the model in the simulation step, were lifted to give the model back its necessary flexibility. The differences between optimization and simulation results show, among other things, the effects of risk aversion and of lack of information and knowledge. In the optimal situation labour income is 15% higher while N losses and P2O5 losses are 9% and 41% lower than in the simulated situation.