Use of chemical inputs such as pesticides have increased agricultural production and productivity. However, negative externalities, too, have increased. The externalities include damage to the environment, agricultural land, fisheries, fauna and flora. Another major externality has been the unintentional destruction of beneficial predators of insects which has led to a virulence of many species of agricultural pests. Mortality and morbidity among agricultural workers, especially in developing countries from exposure to pesticides, are also common. The costs from these externalities are large and affect farmers’ returns. However, despite these high costs, farmers continue to use pesticides and in increasing quantities. In this paper, we examine this paradox and show why farmers continue to use pesticides despite the increasing costs. We also emphasize ‘lock-in’ aspects of pesticide use.