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subsidiary issues, including quality standards, evaluation, resource allocation, and employing research performed by others. ERS requested that the panel recommend changes in the management and structure of the research program in order to improve research quality. This report presents the panel's findings, conclusions, and recommendations.
The report begins by laying out the issues that underlie public economic policy. Chapter 2 raises several questions: What are the principal reasons that governments should or do intervene in market economies in representative democracies? Why not simply apply laissez-faire principles universally? The economic characteristics of markets that lead to bad outcomes under laissez-faire principles are well understood, and this understanding successfully predicts the outcomes of different government interventions. Attempting to intervene without understanding these characteristics is likely to lead to bad outcomes. Understanding the relevant economic characteristics in any particular market requires research planners to develop a useful analytical framework. In addition, good data and other information are needed to design and implement specific policies. The demand to understand the policy implications of changes in markets that are driven by innovations in science and technology presents a need for the continued development of new information and research in support of economic policy.
Producing data, information, and research in support of policy is itself an economic problem. The same economic principles that predict the outcomes of government interventions in markets also indicate when private markets will produce these needed data, information, and research. In most cases they will not, or they will produce too little, or they will produce data, information, and research that are not useful in public policy. Public sponsorship is therefore needed. Economic analysis can be used to trace the implications of different kinds of public sponsorship, through the incentives created for the individuals and organizations involved in producing information and research.
The development of agriculture in the United States provides an enlightening case study of government intervention in changing markets. It is rich with examples that inform our understanding of this process. Changes in agricultural technology, founded in both the physical and life sciences, have increased both production per worker and production per acre more than tenfold in the past century. Technological changes have differed in form and degree over the hundreds of agricultural commodities, each with its own market. Since a significant portion of agricultural biological technology is specific to location, changes have differed by substate regions of the United States as well. There has been a long-standing commitment to public-sector research and information production in U.S. agriculture, not only in the physical and life sciences, but also in economics, to support the understanding of public policy appropriate to agriculture as markets have changed with technology. In economics and statistics, this commitment can be traced at the federal level to 1840. Growing research and information production in economics led to the creation of the Bureau of Agricultural