The external cost associated with the spread of pasture weeds such as serrated tussock (Nassella trichotoma) is an important economic problem. This problem is complicated in many parts of south-eastern Australia where low rainfall and low soil fertility prevent the economic viability of control of this weed through pasture improvement. A consequence of serrated tussock spread in this region has been calls for increased public intervention in its control. However, because there have been no attempts to measure the external costs of serrated tussock spread, one of the major economic grounds on which this activity might be justified has not been quantified. The purpose of this paper is to provide this information. A stochastic simulation model is developed to determine the size of the external cost associated with the spread of serrated tussock and to evaluate the economic benefits of a range of control scenarios. It is concluded that on low rainfall-low soil fertility country the socially optimal control option for sen·ated tussock is to retire land from agriculture and re-vegetate it with trees. ©2000 Elsevier Science B.V. All rights reserved.