Economic policy making is an inescapable activity of government. In a world of constantly evolving technology and information, many social institutions, including markets and property rights, are also changing. Many markets function well, but only government can provide the legal framework in which these markets exist, and changing technology leads to new markets, for which changes in this framework are required. Some markets do not function well because of the inherent characteristics of the goods and services traded; for these markets, too much or too little of the commodity will be produced or consumed unless government intervenes. In this environment, new research and information must constantly be brought to bear if economic policy is to be made wisely. The quality of economic policy decisions affects the nation's well-being and is an important factor in its competitive position with respect to other nations.
New research and information are produced at many points in the public and private sectors, and public occurs policy is now made at international, national, state, and local levels. Many markets and firms are global. The interaction of research and policy occurs in diverse ways. One of the most important is the intramural programs of economic research and information in government agencies charged with responsibilities for support of economic policy. Within the U.S. Department of Agriculture (USDA), the Economic Research Service (ERS), and before 1953 its predecessor, the Bureau of Agricultural Economics (BAE), has conducted such a program.
At the request of ERS, the Committee on National Statistics of the National Research Council convened a panel to study general principles for improving the quality and effectiveness of research in an intramural social science program that must serve agency program needs. The panel was asked to examine a variety of
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
Economics in the U.S. Department of Agriculture in 1922. It was the predecessor agency of the ERS.
The collective history of the BAE and ERS, described in Chapter 3, is rich with different structures for managing the production of economic information and research in support of private decisions and public policy in the agricultural sector. Some of these experiences were successful, others less so, and some of the same arrangements have been tried more than once in the past 75 years. From these experiences, a number of lessons can be drawn. The chapter concludes with these, and Chapter 4 goes on to lay out some of the problems currently facing ERS and USDA,
Research and information agencies in support of public economic policy, of which the ERS is one, supply a variety of services to the departments in which they are located, as well as to other agencies, the Congress, and the public. They provide analytical support for decision making, tracing through the likely implications of potential changes in policy. They often collect primary data, or transform primary data and combine it with information in a way that strengthens their decision making support function. They often conduct or sponsor intermediate and long-term research that will provide the foundation for improved analysis and data collection at the time it is needed to support policy decision making. For these various services, the agencies involved have different clients in government and the private sector, and they have numerous options for procuring the data, information, and research. Some agencies produce information and research internally, others rely on grants and contracts, and yet others develop long-term relations with organizations outside government that do much of the actual work.
To be effective, a research and information agency in support of public economic policy must understand the nature of the services it is charged to provide, the clients to whom it provides the services, and the way that its clients will evaluate the services provided. Recent changes in management policy within the federal government, including the Government Performance and Results Act of 1996, require that these understandings be made more explicit than they have been in the past. To the extent that the management of an agency clearly perceives its services, its clients, and the attributes on which its delivery of services will be evaluated by its clients, it can prospectively consider different arrangements for delivering services and for managing the delivery of its services.
This report provides specific details on how ERS—and by extension, any research and information agency in support of public economic policy—can implement this process. It is fundamental that the choice among different vendors for services—for example, permanent branches in the agency, independent institutes under long-term contract to the agency, and individual grantees or contractors—be made on the basis of the attributes of the services that will ultimately be evaluated. Chapter 5 explains this prospective use of the evaluation process and extends it to evaluating the performance of staff within the agency.
In applying these principles to ERS, the report draws on the rich history of the agency and its predecessor, the BAE, on the mix of services currently provided by ERS and the way these services are changing, and on the various ways that research and information in support of public economic policy are produced and organized elsewhere in the federal government, the United States, and the world. Chapter 6 identifies four attributes of leading importance to most of the clients for most ERS services: timeliness, relevance, quality, and credibility. The report then poses the question, how should the production of information and research be administered by ERS management, so that it compares favorably with alternative arrangements, in all four attributes? Among a great number of possibilities, the potential answers include: do more of the same, do it differently or don't do it all. The outcomes are far from the same for different ERS services; for example, the implications for day-to-day staff analysis of current policy questions and for intermediate and long-term research, are quite different. In each case, however, the principle that potential vendors for all services must be competitive is maintained: no organization is ever given a permanent retainer for the provision of a service—whether it is a branch within an agency or an institution outside an agency.
The organizational framework within which a research and information agency in support of public economic policy is placed vitally affects its ability to marshal and administer its services effectively. This framework must cope with a tension that is evident in all government agencies charged with economic policy responsibilities and throughout the history of ERS. On one hand, the research and information produced or procured by such an agency must be relevant to the policy questions of the department in question. To this end, close contact with policy makers is important. On the other hand, politics involvement of researchers, and those administering research, is invariably damaging to the quality and credibility of the work in the long run (and often in the short run). The final chapter of the report applies the principles of evaluation and administration developed earlier to this question, making recommendations about the organization within USDA and for determining the size and scope of the responsibilities of ERS.
Throughout the report we address arrangements for producing research and information that will best serve public economic policy in general and federal economic policy for food, agriculture, and natural resources in particular. Pursuing the recommendations made here will require effort, perseverance, and time. The report provides a goal of achieving the best information and research support possible for economic policy within resource constraints. It provides a broad framework for achieving that goal. How that goal is pursued, and how long it will take to achieve, will depend in no small part on current political and economic considerations. Along the way, some of the goal, described here will not be met. It is the hope of the panel that identifying the goal will facilitate movement in its direction.