7
Organization and Placement

The appropriate administration of services, taken up in the previous chapter, will be effective in delivering research and information to policy makers, in particular the secretary, only if it is embedded in an organization that supports it. Both the internal organization of the Economic Research Service (ERS) and the organization of the U.S. Department of Agriculture (USDA) with respect to ERS need to be considered. This chapter draws from the administrative model developed in Chapter 6 and the lessons of experience recounted in Chapters 3 and 4, to propose effective organization for research and information in support of public economic policy in USDA.

Managing the Form, Scope, and Size of ERS

ERS is an organization that draws together data, other information, and economic analysis to produce concise factual information that is immediately useful in informing policy makers, chiefly the secretary, of policy alternatives and their consequences. To do this effectively, it must embody an understanding of policy issues, while reaching out to a wide universe of potential sources for data, other information, and economic analysis. Maintaining both the internal resources for timely delivery of relevant concise information and the external scope of potential vendors needed to ensure the quality and credibility of information and analysis are the functions that drive the form, scope, and size of ERS.

Ingredients for Effective Policy Analysis

An effective research and information agency in support of public economic policy must acquire primary data, produce secondary data and other information



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7 Organization and Placement The appropriate administration of services, taken up in the previous chapter, will be effective in delivering research and information to policy makers, in particular the secretary, only if it is embedded in an organization that supports it. Both the internal organization of the Economic Research Service (ERS) and the organization of the U.S. Department of Agriculture (USDA) with respect to ERS need to be considered. This chapter draws from the administrative model developed in Chapter 6 and the lessons of experience recounted in Chapters 3 and 4, to propose effective organization for research and information in support of public economic policy in USDA. Managing the Form, Scope, and Size of ERS ERS is an organization that draws together data, other information, and economic analysis to produce concise factual information that is immediately useful in informing policy makers, chiefly the secretary, of policy alternatives and their consequences. To do this effectively, it must embody an understanding of policy issues, while reaching out to a wide universe of potential sources for data, other information, and economic analysis. Maintaining both the internal resources for timely delivery of relevant concise information and the external scope of potential vendors needed to ensure the quality and credibility of information and analysis are the functions that drive the form, scope, and size of ERS. Ingredients for Effective Policy Analysis An effective research and information agency in support of public economic policy must acquire primary data, produce secondary data and other information

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in a form that is useful for both quick analyses and longer-term research, and provide research that improve, current and future decision making. The acquisition and organization of information, on one hand, and the conduct of long-term research, on the other, are intimately bound together by policy problems. Effective management maintains, the relevance of both information organization and research. Effective research requires he right information, and information should be produced only if it is going to be used. Producing primary is a very small part of ERS activities. The only significant ERS responsibility for primary data is the Agricultural Resource Management Study survey, which is actually fielded by the National Agricultural Statistics Service (NASS). Most primary data used by ERS come from NASS, USDA program agencies, the Bureau of the Census, and the Bureau of Labor Statistics. Secondary data Preparation and analysis, including Situation and Outlook reports and indicator, are a very significant part of ERS activities, accounting for about 40 Percent of the time of ERS Professional staff. Executive and congressional decision makers and a large set of private-sector decision makers use ERS secondary data and analysis. Responses to routine queries typically amount to staff's obtaining the relevant tables, and summaries and explaining how they answer the question. This sort of activity accounts for up to 20 percent of the time of ERS professional staff. The staff engaged in producing secondary data frequently have very detailed knowledge of the institutions and markets to which the data pertain, although, given the reduction in the personnel and resources of ERS, the level of detail and redundancy available to ensure continuity in quality are not what they once were. Producing long-term research is all so a very significant pact of ERS activities. In some cases, ERS research entails economic analysis of important policy questions being addressed or likely to be addressed by USDA. The economic analysis involves isolating the economic essentials of the problem at hand, making appropriate and supportable assumptions about the economic behavior of the parties involved, reaching conclusions about the effects of alternative policies, and expressing the appropriate qualifications and uncertainty about the conclusions. In other cases, ERS research reports are descriptive presentations of secondary data. These reports are valued by a broad range of users as potentially useful inputs to policy analysis, and they can do much to facilitate effective economic analysis, but in themselves they do not provide analyses of the likely effects of alternative policies Form of Policy Analysis The need to produce secondary data and research in support of effective policy poses significant challenges to the organization of ERS. On one hand, knowledge of institutions, understanding the policy process, good primary and

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secondary data, and high-quality economic analysis are all essential to effective policy. Those responsible for policy in a particular are must therefore have access to data, institutional detail, and economic analysis. On the other hand, the professional skills required for good economic analysis are not the same as those necessary for construction of secondary data and a complete grasp of institutional detail. An environment in which data set construction is the main activity is unlikely to be a fruitful milieu for a analytical economics, and vice versa. The standards evaluation for these different kinds of work are quite different, as well: in particular, it makes little sense to evaluate those responsible for secondary data construction by the academic standards that are, rightly applied to analytical economic research. Most ERS projects, require interaction between secondary data construction institutional knowledge, and economic analysis. This requirement is appropriately reflected in the current structure of ERS. The characteristics and career paths of staff professionals involved in these three activities are distinctly different, however. It is quite rare for any one individual to be competitive in both secondary data development and economic analysis; it is generally unproductive to obtain more economic analysis, by encouraging career changes for those who have specialized in secondary data development or institutional and market information; and the characteristics and career paths of staff professionals involved in these three activities are distinctly different. Although not equally expert in all areas significant number of professionals participate in more than one category of ERS service. RECOMMENDATION 7-1. ERS management should consider flexible professional staffing arrangements, including the use of visiting scholars and postdoctoral appointments, to obtain the best internal staff. Scope and Structure The substantive economic policy mandate of USDA, combined with the process of evaluation applied to the administration of ERS services, determines the scope and structure of ERS. A thorough evaluation of ERS, along the lines anticipated in this report could greatly change the services supplied by ERS over the long run, and therefore the internal structure of the organization. We present two, possibly extreme, examples for purposes of illustration. Suppose that the program of price supports and similar subsidies currently being reduced is reconstituted in a very different way that requires derailed central management across many commodities. Then at current staff levels, ERS would likely be hardpressed to provide the information needed to administer this program, even if it abandoned most of its other activities, at current staff levels. It is likely that most of this work would be undertaken internally, and there would be few resources available, at current funding levels, for either, intramural or extramural research.

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At the other extreme, suppose that commodity-specific economic policy is abandoned entirely, and that USDA's economic policy mandate for social welfare, environmental, and consumer issues continues to expand in scope. The outcome of this change in mandate, and an evaluation indicating that there is little reason for public-sector secondary data preparation and analysis, might produce a structure in which ERS services would best be produced by a core staff analysis group and substantial commitments to support of external long-term research. In this case, too, evaluation might well indicate that research resources should be concentrated with greater intensity on a smaller number of research questions likely to be key in informing future policy decisions. The future course of the USDA mandate surely lies somewhere between these two extremes. These illustrations are raised here to underscore the fact that the organization of economic analysis in support of policy within USDA derives from the USDA policy mandate. As this mandate evolves, the organization must be reexamined. RECOMMENDATION 7-2. The appropriate scope for ERS activities should be determined by the economic issues within the policy mandate of USDA, by the system of program evaluations described in this report, and by implementation of the principle of competitive supply of research and information in support of public economic policy. Taking into account the greatly increased complexity of the policy issues in USDA, the very substantial reductions in ERS staff, and the growth in alternative sources for policy analysis, the outcome might well be that ERS should concentrate on a smaller range of issues but with no decrease in real resources. Proportionate changes in scope and resources, regardless of direction, are unlikely to be productive. There is a gross inconsistency between the declining real resource base of ERS, the growing diversity and scope of USDA policy information needs, and the conflicting priorities and expectations of ERS clientele, including the secretary. and Congress. This problem, which ERS cannot itself solve, must be faced by these parties jointly. ERS within USDA Throughout the history of ERS and its predecessor the Bureau of Agricultural Economics (BAE), the position of the agency within USDA has changed several times. The current position of ERS within USDA is not conducive to its mission to provide research and information support for the economic policy mandate of USDA, relative to either past or potential arrangements. To provide improved policy support and to implement the recommendations for changes in

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the administration of ERS services made in this report, reorganization of ERS and the Office of the Chief Economist in USDA is necessary. Current Lines of Responsibility The current organization of USDA, with respect to economic policy and the research and information support of economic policy, is presented in Figure 4.1. The Office of the Chief Economist is situated in the Office of the Secretary of Agriculture. The chief economist has direct contact with the secretary in policy meetings and has a small staff of about eight professionals. Several other specialized units report to the chief economist (see Figure 4.2). In contrast, the administrator of ERS reports to the under secretary for research, education, and economics, along with the administrators of the Agricultural Research Service, the National Agricultural Statistical Service, and the Cooperative State Research, Education, and Extension Service. The under secretary has no responsibility for economic policy, and the disciplinary backgrounds of the individual in this position have been biology, food and nutrition, or education. Many requests to ERS for staff analysis come from the chief economist. These lines of authority do not well serve research and information in support of economic policy within USDA. The administrator of ERS, with responsibilities for administering over 300 professional employees, is several steps removed from the policy process to which the work of ERS must be relevant. The chief economist, charged with representing economic information in the decision making process, has no direct line of authority to the greatest concentration of talent in USDA for marshaling this information. There is bound to be competition between the administrator of ERS and the chief economist in providing both the secretary and other decision makers—including pertinent congressional committees—with economic analysis and prospectively assessing the impact of proposed changes in policy. These lines of authority would not serve well research and information in support of economic policy under the model of competitive procurement of services by ERS advanced in this report, either. In the current organization, there is no position suited to deciding whether particular information and research services in support of economic policy should be procured from outside vendors, or, in the event that both ERS and outside vendors might supply services, whether or not ERS should be chosen. The administrator of ERS, as a potential bidder in most cases, cannot have the final authority for developing solicitations and choosing from among vendors. The Office of the Under Secretary for research, education, and economics, is not designed to do so. For the chief economist to do so would involve interagency fund transfers each time a decision is made. Reorganization of the economic policy support function within USDA should therefore be considered simultaneously with the question of how these research and information services we procured.

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Organization of Economic Policy Support in USDA The principles for procuring information and research, the lessons learned from the history of the BAE and ERS, and the experience of other cabinet-level agencies suggest a reorganization that copes with all of these problems. First, both economic policy decision making and research and information in support of economic policy should be brought into a single line of authority. This was the case for most of the history of the BAE and ERS, and it is true in many cabinet-level agencies today, including the Assistant Secretary for Policy and Evaluation in the Department of Health and Human Services, the Assistant Secretary for Policy in the Department of Labor, and the Office of Program Analysis and Evaluation in the Department of Defense. Second, consistent with the lessons learned from the history of the BAE and ERS and with the model for procurement of information and research services developed in this report, the functional separation between policy decisions, on one hand, and credible research of high quality in support of these decisions, in the other, should be clear and transparent. These considerations lead to the following recommendations, presented in order of increasing specificity. RECOMMENDATION 7-3. ERS should never be involved in recommending or deciding on specific policy actions, which are the prerogative of the secretary. RECOMMENDATION 7-4. A small, highly capable policy analysis and advisory group should be led by an appointee, such as a chief economist or assistant secretary for economics, who manages day-to-day economic policy staff support for the Office of the Secretary. Such a unit would be appointed to serve the secretary and would provide any advice on political and policy action, keeping prescriptive advice on political matters from being directed to ERS. RECOMMENDATION 7-5. The administrators of the Economic Research Service and the National Agricultural Statistical Service should report to the chief economist or the assistant secretary for the economics. Process of Economic Policy Support in USDA The Office of the Chief Economist or the Assistant Secretary of Economics, in this recommended organization, requires individuals with a thorough understanding of current and emerging policy issues and strong abilities in framing research questions. The set of skills required for this staff people is quite similar to those needed on the staff of the president's Council of Economic Advisers and in the economic policy support agencies for cabinet departments previously

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mentioned. Anticipating emerging policy questions and ensuring that outside research is brought to bear on these questions are critical. Staff must have a keen sense of the policy environment and an ability to identify the best researchers for each issue. The Office of the Chief Economist or the Assistant Secretary for Economics must be able to pose well-framed research request that address their policy needs, while balancing timeliness, qualifications to do the work, and a sense of what is possible. The professional staff in the Office of the Chief Economist or the Assistant Secretary for Economics, and not ERS, would be responsible for bringing the research and information services of ERS to bear in policy councils. They must therefore have a thorough command of the economics of policy questions, whether provided internally by ERS, through sponsored extramural research, or through syntheses of existing research and information. The same staff of the Office of the Chief Economist or the Assistant Secretary for Economics would be responsible for evaluating the program of research and information conducted externally and exercising oversight to ensure that research and information programs are oriented to clients, and not co-opted by vendors. The administrator of ERS, in this proposed organization, would be responsible for the administration of internal research and information projects and would have a direct interest in maintaining programs that are competitive with alternatives in the public, private, and academic sectors. The administrator of ERS should be a professional, career economist, not subject to political appointment He or she would be available to explain the research and information findings of ERS, as would external contractors, but should never be called on to represent the policy position of the secretary, the assistant secretary for economics, or the chief economist. Achieving an organizational structure that insulates the production of economic information and research from political considerations, while ensuring that this work will be relevant to the economic policy mandate of USDA, is a difficult but essential task. To the extent that this is done well, ERS will be more attractive to motivated and capable professionals as a place to work. This is especially important as ERS reaches out to a wider group of professionals than it has in the past. To the extent that this is done well, the entire culture of ERS will change. Expectations will be raised. It will be more difficult for new administrators and division directors, to compromise standards for timeliness, quality, relevance, and credibility or to intervene, in research programs for political purposes. The economic policy mandate of USDA continues to grow in scope and complexity. The secretary's is a political position, and he or she cannot be expected to act otherwise. At the same time, precisely because of the analytical complexity of the issues the secretary confronts , it is essential to have research and information support that meets the highest standards for quality, timeliness, and relevance. In a politically charged environment, clear steps must be taken to ensure that considerations of fact and analysis in policy decisions are credibly

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conveyed as such. This report has outlined steps that can be taken in pursuit of these goals. Their attainment is essential to maintaining the world leadership of the more broadly defined U.S. food and agricultural sector and to addressing key economic problems facing the United States and the world. Conclusion This report began by considering the nature of public economic policy and by indicating the enormous benefits that derive from informed public economic policy. It has presented several alternative arrangements for the production of information, research, and analysis to inform public economic policy. Both history and analysis indicate that, in the case of ERS, some of these arrangements work well and others do not, and this report provides some reasons why this is so. The report's recommendations, based on this history and analysis, provide a process for finding effective arrangements. Adoption of the recommendations in this report will be effective only if there is agreement among senior policy makers on the principal points underlying them. These points include the nature of public economic policy and the desirability of informed rather than uninformed public economic policy. In the production of information, research, and analysis to inform public economic policy, they include the principle of competition and the desirable attributes of quality, relevance, timeliness, and credibility. The operation, even the concept, of an agency that informs policy decisions with credible and relevant information but that is not connected to or informed by decision makers is vulnerable, indeed, it is fragile, as amply demonstrated by the history of ERS. Yet the same history indicates that this role is essential to success in informing policy decisions. The concept of such an agency is too fragile to sustain disparate expectations by the executive and legislative branches. It requires cooperation and agreement between the secretary and the relevant congressional leadership on a common set of expectations and rules for shared access to ERS services and its role and expected behavior in dealing with both branches of government. Only in such an environment will informed public economic policy survive.