West, Quentin M.

English

Research Papers in Economics

SOUTHERN JOURNAL OF AGRICULTURAL  ECONOMICS  JULY  1973
ECONOMIC  RESEARCH TRADE-OFFS  BETWEEN
EFFICIENCY AND EQUITY
Quentin M. West
U.S.  agricultural  economic  research  has  revolution.'  As statistics indicate and as visits
traditionally  focused  on  farm  production  and  to the countryside make  clear, rural America
marketing  efficiency.  In the future it  must give more  is  crumbling.  Not  just  the  family farm,  but
attention to equity.  every aspect of rural America is crumbling -
Americans  will  certainly  maintain  their  interest  schools,  communities,  churches,  business,
in  producing  things  more  efficiently.  But,  it  is  a  and way of life."'
healthy  sign  that  they  are  also  becoming  more  While  we  may quarrel  with some  conclusions  of
interested  in  making  sure  that  changes  are  made  Hard Tomatoes,  these  writers  present  some  points
fairly, justly, and impartially.  like this one that should arrest our attention.  In total,
While  there  has  been  an  increasing  amount  of  the report indicates  that our research policy has been
agricultural  economic  research  directed  toward  the  wrong - it gave too much to the wrong people. Yet,  it
problems of equity, there has not been enough. While  is not  a black and white  question.  The evidence does
I  could  present  a  paper documenting  this research,  I  not  warrant  the  conclusion  that  the  publicly
think it more useful at this point to consider seriously  supported  research  objective was wrong. It does show
our  overall  research  policy  and  try  to  reach  some  our  research  to  be  too  narrow  -- because  it  largely
conclusion  about whether  it has  adequately  come to  ignored a  very large  set of consequences - the human
grips  with  the  economic  and  social  issues  pressing  cost  and  returns.  I  submit  that  we  should  not
upon us today.  abandon what has  been good and productive  research
In  the  long-run,  society  will  generally  cease  to  but  we should broaden our area of concern to include
support  investments which  they believe  do  not serve  all the consequences of change.
the  broad  interests  of  the  public.  They  will  be  For  example,  development  of  cotton  varieties
concerned  more and  more  with those issues which go  adapted  to  the  Southwest,  along  with  the
beyond  "efficiency."  Some  say  our  development  of irrigation there,  led to lower  cost  of
production-oriented  research,  supported  by  public  producing  better  cotton.  This  also  led  to  the
monies,  has  been  way  off base.  The  author  of the  wholesale  displacement  of people  in the Southeast as
report, HardTomatoes, Hard  Times says:  cotton  production  moved  westward.  Whole
"...this  focus  on  scientific  and  business  communities  in  the  Southeast  were  left  with
efficiency  has  led  to  production  (and  unemployed  and  underemployed  farmers  and  farm
overproduction)  of  a  bounty  of food  and  workers.  Many of the displaced migrated to the cities
fiber  products,  and,  not  incidentally,  it  in  search of jobs that were  nonexistent  or  for which
certainly  has contributed to the  enrichment  they  were  not  prepared . Yet  we  did not  study  this
of an agri-business few.  impact as soon as we should have.
On  the  other  hand,  there  have  been  There  are  many examples  where  our attempts to
far-reaching  side  effects  of  the  land  grant  increase  the  output of food and fiber  have generated
colleges'  preoccupation  with  the  'green  environmental  problems  and  socio-economic
Dr.  West  is  administrator  of  the  U.S.  Department  of  Agriculture's  Economic  Research  Service.  The  author appreciates  the
assistance  of ERS' Lon Cesal and James  R. Sayre.
Jim  Hightower,  Hard Tomatoes,  Hard Times  -- The  Failure of the  Land  Grant College  Complex,  Agribusiness
Accountability  Project, Washington,  D.C.,  1972,  p.  3.
9inequities.  The  point  is  that  we  must  focus  more  to  measure  the  impact  of  public  decisions  on
attention on who gains and who  loses, by when, how,  commercial  agriculture.  This  includes  a wide range of
and by how much. We must be able to anticipate  and  issues  including those  on the use of pesticides  relating
possibly  forestall  the  "inconveniences"  associated  to  the  preservation  of  our  environment.  These
with change.  decisions  impact  substantially  on  the  ability  of our
We  have  largely  avoided  these  problems because  food and fiber system to produce efficiently.
they  are  controversial  and therefore dangerous to our  But, we must  also be concerned  about the impact
programs.  Too,  we  have  not  sufficiently  developed  of  agricultural  decisions  on  the  general  public.  For
our  economic  theory,  conceptual  bases,  analytical  instance,  if  we  were  appraising  the  prospects  of
techniques,  and our data base to accommodate  these  adopting  the  mechanical  cotton  harvester  today,  or
problems.  But  conflicts  can  be  resolved  only  if  any  other  of  the  many  important  technological
adequate  information  about  alternatives  exists  and is  developments  of  the  past  30  years,  we  would
available  equally to  all those concerned. Research has  certainly  be  forced  to  examine  its  impact  on
the  important  responsibility  in  making  these  employment,  community  services,  and other  factors.
alternatives known.  Whether the questions involve mechanization  or other
We  can  expect  the  interdependencies  of  our  commercial  agriculture  developments,  we  need  to
economy  to  grow  in  step  with  economic  progress.  trace through the impacts  of alternative  development
This  will  increase  the  likelihood  that  the  gains  and  programs  and  be  able  to  identify  clearly  just  who
losses  of new  technological  developments  will not be  gains and who loses.
shared  equally  by  all  members of our society.  If we
do  not  shift  with  the  times,  and  begin  addressing  HOW TO MEET TODAYS  RESEARCH NEEDS
more  fully  this  problem  of  equity,  we  will  face  atual  and  institutional  capital  for
mounting backlog  of problems which  can overwhelm  dealing  with  many  of  the  problems  I have  cited  is
our  best  efforts  to build  a  strong  rural  economy  in  seriously  lacking.  We  lack  adequate  theoretical
America.  constructs,  methodologies,  and  organizational
It  is,  of  course,  unfair  to  single  out  our  know-how to deal with many of the problems  we will
agricultural  economics  research  system  as  being  face  in  the  next  decade.  The  theoretical foundation
inadequate  in  its  attention  to  modern  issues  of  for  dealing  with equity issues  is  especially  weak.  We
equity.  A  recent  ERS  study  showed  that  federal  have  modern welfare  economics,  but this  is not  very
spending  on  human  resource  development  satisfactory  for  many  of  the  dynamic  problems
disproportionately  favors  metropolitan  areas  over  associated with who gains and who loses.
non-metro  areas.  For  example,  non-metro  counties  We  also  have  serious organizational  deficiencies.
account  for  66  percent  of  all  substandard  housing  We  have  organized in terms of professions rather than
units  but  receive  only  16  percent  of  all  federal  in  terms  of  problems.  We  have  created  artificial
housing  assistance.  A  similar  situation  exists  in  the  research boxes which look neat on organization tables
areas  of  education,  health,  manpower  training,  and  but which fail to come to grips with real problems.
others.2 For  example,  the  traditional  research  boxes  in
TODAY  REEARCH  PRIORITI  ERS  in  the  form  of divisions  of  Farm  Production
Economics  and  Marketing  Economics  often  created
The  formation  of  public  policy  is  highly  stumbling blocks  to dealing effectively with problems
dependent on the  quantity  and  quality of knowledge  cutting  across  the  entire  beef  industry,  feed  grain
available.  It  is  our  research  institutions  that  add  to  industry, and soybean industry.
this  stock  of knowledge.  So,  if we  are  to  have  the  Likewise,  people  with  a  need  for  public
knowledge  required  to  make  appropriate  public  assistance  are  normally  faced  by  a  complex  of
policy, our research institutions must better meet this  problems rather  than a single problem. Yet, we find a
challenge.  multitude  of  public  programs,  each  dealing  with  a
Returns  to the  commercial  agriculture  sector are  single  problem.  As  we  move  toward  a  consideration
as  important  today  as  ever.  But, we  must now look  of people and their problems, we must also move to a
beyond  farm  gate  questions  and do  a  better  job  in  multi-problem  approach  in  our  research.  Such team
representing the entire society.  research  is  very  difficult  to  organize  within  the
On  one  hand,  we  need to  accelerate  our efforts  constraints of our current research organizations.
2Freddy  K.  Hines  and  Lynn  M. Daft,  The  Economic and Social Condition of Rural America  in the  1970's:  the
Distribution of Federal Outlays Among  U.S.  Counties,  prepared  by  ERS  for  the  U.S.  Senate  Committee  on  Government
Operations,  Government  Printing Office, Washington,  D.C., Dec. 1971.
10The  Economic  Research  Service  is aware of the  and  analyze  the  access  these  resources  are
problem  and  we  are  taking  what  I  believe  are  likely  to  have  to  nonfarm  employment
significant  steps.  Last  month we altered  our research  opportunities in the region.
program  away  from  the  discipline-oriented  research  3.  Evaluate  programs  and  policies  designed  to
organization to one which is issue-oriented.  assist  the  displaced  human  resources  to
We  have  grouped  three  divisions  -- National  obtain  employment  outside  of  agriculture,
Economic  Analysis,  Commodity  Economics,  and  either  within  or  outside  the  flue-cured
Foreign  Demand  and Competition  - under  a  deputy  tobacco area.
administrator  for  food  and  fiber  economics.  This We now  have ten researchers  addressing this issue research area  will focus on society-wide  demands  for
and we expect  this to increase  to about  15  soon. We sufficient  supplies  of  agricultural  commodities  at
are  using  a  matrix organization  or coordinated  team
reasonable  prices. approach  where  various  types  of  expertise  are
Further,  we have grouped three other divisions -
FaurtheRweshave  groupe  three othe  dniv  an  brought  to bear  on a  common  problem. All research
Natural  Resource  Economics,  Community  and Nul sr  E i  C  t  an  resources  are  under  the  direction  of  a  project
Human  Resources,  and Foreign Development  - under  manager.  Within  2  years,  we  expect  to  have  the
a  deputy  administrator  for resource and development  necessary  understanding  of this  overal  problem to
economics.  This  area  will  focus  on  society-wide  advise  policy  makers  on items ranging from on-farm
demand  for  equitable  development  of human  and  mechanization  to  incentives  for  rural
natural resources.  industrialization industrialization.
Too,  we  have  eliminated  the  highly  structured  The  expected  mechanization  of  flue-cured
organizational  lines  in  ERS;  more  specifically,  the  tobacco  harvesting  and  processing  will  almost
branches  dealing  with separate  research areas. We will  certainly  result  in  a  series  of  interdependent
move  toward  a  matrix  type  of  organization.  This  adjustment  problems  in  the  flue-cured  tobacco
means  that  we  will bring  several  disciplines together  region.  Moreover,  reduced  domestic  or  foreign
on  special  issues.  This  helps  streamline many of the  demand  for  tobacco  could  further  compound  the
administrative  functions  of  the  agency.  But,  more  seriousnessoftheseproblems
importantly,  we  hope  this  type  of organization  will  The  likely  adjustment  problems  are  both  an
equip  us  with  the  means  to  trace  through  all  the  in  y  a  regonal  prob  Mechanization  of industry  and  a  regional  problem.  Mechanization  of
consequences of a given development  factor.  tobacco  harvesting  will  result  in  substantial  on-farm
We  will  concern  ourselves with the efficiency  of We  will concern  ourselves with te efficiency  of  adjustments,  and the adoption of new technologies  in
our  production  and  marketing  system;  but, we  will  processing  will  bring  about  substantial tobacco  processing  will  bring  about  substantial
also  be  concerned  with what  happens to people  and adjustments  in the  tobacco  processing  plants.  These
their  communities.  Perhaps  I  can best  illustrate  our adjustments will primarily substitute capital for labor.
new  approach  by  discussing  our  current  research  Accompanying  these  problems  will  be  regional
program in the flue-cured tobacco region. adjustments  associated  with  human  resources.  The
THE ERS RESEARCH PROGRAM  ON  initial  adjustment  involves  a  decrease  in employment
FLUE-CURED TOBACCO  opportunities,  and  a  need  to  expand  employment
opportunities  in  other  industries  in  the  region  or
Our  flue-cured  tobacco  research  strategy  is  a  prepare  and assist the displaced  workers to migrate to
team  approach  designed  to  understand  the  obtain employment in other regions.
interactions  between  the  commercial  and  human  The  task  of  expanding  nonfarm  employment
development  aspects  of  the  problem.  The  general  opportunities  for  the  displaced  workers  is  complex.
study  objectives  relating  to  human  resource  Consideration  must be given to the  characteristics  of
development  are to:  the  displaced  workers  and the  characteristics  of the
1.  Determine  the  existing  quantities  and  manpower  needs  of industries  which  can  profitably
characteristics  of  human  and  capital  expand in the flue-cured  region.
resources  employment  in  the  production,  Many  industries  have  specialized  needs  which
marketing,  and  processing  of  flue-cured  must  be  met before  they  can  profitably  locate  in a
tobacco,  and  how  these  quantities  and  given  region.  What  are  these  special  needs and what
characteristics  are  likely  to  change  during  capabilities  does  the  flue-cured  tobacco  region  have
the next decade.  for  meeting  these  needs?  If it  is  possible  to  expand
nonfarm  employment  in  a region,  the industrial and
2.  Develop  a  detailed  profile  of  the  human  occupational  mix  of  the  region  will  normally  be
resources  which  are  likely  to  be  displaced,  altered.  New  public  and  private  services  must  be
11added  and  in  some  cases  old  services  substantially  impetus to pull together the research already done on
modified.  rural  industrialization  and  to  propose  new  areas  of
What  do  the  displaced  human  resources  do  if  needed  research  focusing  on  employment,  income,
there  are  no  employment  opportunities  for  them in  population,  housing,  and community service goals for
the  region?  One  alternative  is  to migrate  to another  rural development.3
region.  This  raises  a  number  of  equity  related
questions.  Should  relocation  assistance  be provided?
If so, to whom? Only displaced workers,  or anyone in  SUMMARY
the  region  who wants to  leave?  Who  are the gainers,
and consequently who should be taxed to finance the  The  essence  of our discussion can be summed up
relocation  of the displaced?  in  terms  of  efficiency  versus  equity.  In  light  of
What  type  of  intelligence  on  employment  modern  day  America's  concern  over  poverty,
opportunities  in  other  regions  should  be  provided?  environment,  and  the  general  quality  of  life,  it
Should  this  be  restricted  to  only  the  displaced  appears  that  equity  is  as  important as  efficiency,  or
workers (the losers)?  possibly  even  more important.  Frankly,  our research
If the  displaced  labor  resources  are  young  and  program  has  emphasized  efficiency  -- efficiency  of
retrainable,  the  opportunity  cost of retraining  would  commercial  agricultural  production  and  marketing.
probably  be very  low.  On the other  hand, if they are  This  concern  must  be  continued  but  it  must  be
old  or  nonretrainable,  it  may be best to retire  them  tempered  with  an  equal or  greater  concern  over  the
on welfare.  In either  case,  the services  offered by the  side effects of efforts to achieve this efficiency.
public  sector  would  have  to  be  expanded  and  There  are  trade-offs  between  efficiency  and
probably modified substantially.  equity.  But, unfortunately,  in the past we have made
Alternative  means of livelihood, employment,  or  these  trade-offs  in  light  of  raw  power  - economic
welfare  for  the  displaced  workers  must  be analyzed  power,  political  power, the  power naturally  accruing
before programs  and policies  can be designed  to deal  to those privileged  enough to have an effective  voice.
effectively with the regional adjustment  problems.  The  poor and disadvantaged  do  not have this kind of
Perhaps  the  most  important  provision  in  the  power.  Yet,  we  are  publicly  supported  research
Rural  Development Act  of 1972  is the authority for  organizations.  We  have  the  public  responsibility  to
government guaranteed loans, with no upper limit set,  represent  all  segments  of the  society  as we measure
for  rural  industrialization.  This  gives  us  added  the trade-offs between efficiency and equity.
3 Further discussion  of the Act  is  contained  in  an ERS  paper by  Lynn  M.  Daft: The Rural Development Act of 1972:
What  Is It?  presented  at  the  Conference  on  Manpower  Planning  for  Jobs  in  Rural America,  Sponsored  by  Michigan  State
University  and the U.S.  Department of Labor, Austin, Texas,  Dec.  1972.
12

ECONOMIC RESEARCH TRADE-OFFS BETWEEN EFFICIENCY AND EQUITY

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