Sowing Seeds of Change Informing Public Policy in the Economic Research Service of USDA (1999) / Chapter Skim
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2 Informed Public Economic Policy
2 Informed Public Economic Policy
Pages 17-31
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From page 17... ...
In the last 50 years, the increased involvement of government in economic policy has been accompanied by more detailed collection of data, expanded production of information of many kinds, and intensified economic analysis of the effects of alternative policies. In fiscal 1996, some 29 agencies of the federal government carried out significant economic information collection or research in support of their mission, at a cost of $182 million.)
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From page 18... ...
To understand and evaluate the function of any such federal agency, it is necessary to first appreciate the reasons for public economic policy in a representative democracy with a market economy. These reasons drive the policy-making agenda.
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From page 19... ...
Since an informed public is essential to the performance of democratic institutions, and since many forms of information are pure public goods, the potential for underproduction of information in a market-oriented democracy is a public policy issue of the highest magnitude. Barriers to Information Markets can lead to inefficient production levels if individuals and firms do not have common information.
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From page 20... ...
New knowledge about pesticides is a public good. With more than 10,000 fruit producers, more than 1 million food retailers and eating establishments, and more than 100 million consuming households, new knowledge is nonexcludable as well and therefore a pure public good.
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From page 21... ...
In an earlier era, programs for this purpose included rural free delivery and rural electrification in the United States. Today, these programs include measures to increase the flow of information to rural areas, for example through Internet access, and federal partnerships with nonprofit organizations providing assistance to rural areas.
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From page 22... ...
Given the large number of corn producers in the United States, basic development of hybrid corn earlier in this century was a pure public good, and it was not until the 1930s that replication of inbred lines and distribution became excludable and thus primarily a function of private-sector firms. A vertically integrated producer of poultry with sales in the billions of dollars will have incentives to undertake both basic development and subsequent marketing of a patented, excludable commodity.
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From page 23... ...
The invention of the steam engine had its effect on living standards through the development of new industrial processes and rail and sea transportation, all of which required much more than technological advances. The economic success of rail transportation, for example, also required innovations in property rights, the development of a large supporting economic infrastructure, and eventually substantial modifications of the market economy itself.
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From page 24... ...
It offers the opportunity to suggest the changes that are most likely to succeed, and thereby to reduce the costs of institutional innovation. Changes in institutions include modifications of government policy that address market failures and inequities in income distribution, as well as property rights and other aspects of the political infrastructure in which a market economy functions.
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From page 25... ...
Any contemplated important change in public economic policy is likely to bring forth a host of studies originating in the private sector. On one hand, it is vital for private-sector interests to be able to identify impacts of contemplated policy change that may have gone unnoticed.
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From page 26... ...
First and most important, it provides the only alternative to carrying out the field experiment of actually making the policy change. For example: research on auction design is a very attractive alternative to uninformed experimentation with the rules for government auctions, for example in the sale of the electromagnetic spectrum and the leasing of productive cropland for conservation purposes.
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From page 27... ...
Thus it is not surprising that advances in the theory of auction design (Engelbrecht-Wiggans et al., 1983; Hirshleifer and Riley, 1992) have taken place almost entirely in the public sector.
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From page 28... ...
In applying the econometric framework and sampling design, issues specific to each state arose, since industry mix and seasonal demand for electricity vary widely by state (signer, 1981~. This work was sponsored by individual state utility commissions, typically by contract to individuals or private-sector research organizations.
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From page 29... ...
In the private sector, novel decisions are faced by firms in new industries, and markets provide substantial rewards for making such decisions effectively. In the public sector, decisions in novel circumstances must be taken by governments confronting the institutional aspects of technical progress for the first time.
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From page 30... ...
In the short run, the forces that would bend the factual outcome of policy analysis to political purposes are strong, but, in the long run, yielding to these forces renders policy analysis useless and policy decisions less well informed. In the long-term, open and credible policy analysis supports good decision making, can be a potent political and positive force, and can generate the political support necessary to protect and sustain credible research and analysis in government.
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From page 31... ...
For example, liberalization of agricultural trade in the Uruguay round of trade negotiations under the GATT agreement is estimated to have net benefits of up to $8 billion annually for the United States and $30 billion annually worldwide (Economic Research Service, 1989:Table 10~. ERS had a small but vital role to play in the negotiations, and its annual budget is a very small fraction of the net benefits realized from the new agreement.
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