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Environmental degradation is a major global problem. Its impacts are not justenvironmental, but also economic, with degradation recognised as a key cause ofreduced agricultural productivity and rural poverty in the developing world.The degradation literature typically emphasises common property or open accessnatural resources, and how perverse incentives or missing institutions leadoptimising private actors to degrade them. By contrast, the present paperconsiders degradation occurring on private farms in peasant communities. Thisis a critical yet delicate issue, given the poverty of such areas and questionsabout the role of farmers in either degrading or regenerating rural lands. Thepaper examines natural resource management by peasant farmers in Tanzania. Itskey concern is how the local knowledge informing their management decisionsadapts to challenges associated with environmental degradation and marketliberalisation. Given their poverty, this question could have directimplications for the capacity of households to meet their livelihood needs.Based on fresh empirical data, the paper finds that differential farmerknowledge helps explain the large differences in how households respond to thedegradation challenge. The implication is that some farmers adapt moreeffectively to emerging challenges than others, despite all being rational,optimising agents who follow the strategies they deem best. The paper thusprovides a critique of local knowledge, implying that some farmers experienceadaptation slippages while others race ahead with effective adaptations. Thepaper speaks to the chronic poverty that plagues many rural communities in thedeveloping world. It helps explain the failure of proven sustainableagriculture technologies to disseminate readily beyond early innovators. Itskey policy implication is to inform improved capacity building for suchcommunities.

Local Knowledge and Natural Resource Management in a Peasant Farming Community Facing Rapid Change: A Critical Examination