NC1003: Impact Analysis and Decision Strategies for Agricultural Research
(Multistate Research Project)
Status: Inactive/Terminating
NC1003: Impact Analysis and Decision Strategies for Agricultural Research
Duration: 10/01/2001 to 09/30/2006
Administrative Advisor(s):
NIFA Reps:
Non-Technical Summary
Statement of Issues and Justification
Continued improvement in social welfare of Americans, competitiveness internationally of American agriculture, and resolution of production and environmental problems facing American farmers depend on public and private investments in R&D. Public sector research and development have, in the past, contributed substantially to advances in farm productivity and efficiency in marketing agricultural products. Research and development have also generated technologies and provided information that have enhanced environmental quality, improved food product quality and safety, reduced adjustment costs in rural areas, helped maintain the economic viability of rural communities, and upgraded the performance of public policies at state, regional, national, and international levels as they relate to the agricultural sector. A continuing flow of research results is needed to maintain and enhance productivity, efficiency, environmental, and other gains.
Significant changes in sources of R&D funding, opportunities in science, intellectual property rights, and new technologies have been occurring during the 1990s. Some of these changes have had large social impacts and others have encountered unusual resistance by consumers. Advances in knowledge from R&D, new technologies, and new social-economic issues associated with the organization of R&D and impacts of new technologies are expected to continue into the 21st Century. Careful examination and analyses of these issues can produce a national public good yielding valuable information and facilitating better public and private R&D polices in the future. In order to most effectively plan and implement an agenda for public research in agricultural and related areas, substantive information and analyses are needed on (1) expected net benefits and costs of alternative research programs, both basic and applied, (2) distribution of the costs and benefits (including environmental and other selected externalities) among producers, consumers, and (agri-) business/industry, (3) key inter-relationships between investments in research and other public sector programs affecting agriculture, (4) alternative mechanisms for planning, managing, and evaluating agricultural research portfolios, (5) new linkages and relationships between public and private R&D, and (6) evaluation of alternative institutional configurations for funding and conducting research.
During the 1990s, real national total R&D expenditures grew at 3.2 percent per year, while agricultural R&D grew at about 1 percent per year. The federal government funded about 29 percent of all U.S. R&D expenditures in 1998 but only 19 percent for agricultural R&D (AAAS 2000a). State governments funded a very small share of all U.S. R&D (<1%), but a much larger share of agricultural R&D (16%). During the 1990s, federal funds for all research decreased at an average rate of 1.5 percent per year, and for agricultural research at 1 percent per year. State government funding of all research grew at 2.2 percent per year during this period and for agricultural research at 1 percent per year. For all R&D and agricultural R&D, the private sector is the major source of funds, and its share has been growing. During the 1990s, U.S. total real private R&D expenditures grew at 5.7 percent per year (AAAS 2000a), but for private agricultural R&D at about 2.2 percent (Klotz, Fuglie, and Pray 1995, updated 2000). Given the relatively slow growth of public, especially federal, funding of agricultural research, public agricultural research administrators of all types are searching for new sources and institutional arrangements for acquiring resources for research.
Major developments have occurred in science, which enable unusual manipulation of genetic materials- (genetic engineering through biotechnology)-and new information technologies and systems. The speed of DNA analysis has greatly accelerated, genomes for major farm animals and plants are about to be completed, new techniques for successful interspecies gene transfers have advanced rapidly; and the pace of development of new agricultural technologies has increased. Genetic engineering of cotton, soybeans, corn, canola, and some vegetable crops have been commercially successful. In the field crops, the early commercial applications of biotech have been associated with input use, Bt-cotton, RR-soybeans, Bt-corn. In the future, enhanced output traits hold possibilities-(enhanced oil soybeans, enhanced protein corn, vitamin enriched rice, etc.). These technical advances were made possible by prior advances in basic science, but follow-on discoveries were embodied in materials or processes, frequently patented, and sold commercially by the private sector (McMillan et al 2000).
Bt-cotton, commercially available only since 1996, has provided large U.S (and global) net social benefits, reduced the application of environmentally risky pesticides, and given U.S. cotton farmers a significant share of the benefits (Falck-Zepeda, Traxler, and Nelson 2000). Round-up Ready soybeans have been a big success for U.S. farmers and Monsanto, but consumers have received modest consumer surplus benefits from lower prices. However, European consumers have shown great resistance to RR-soybeans and Bt-tomatoes and corn (McHughen 2000). Also, the recent Star-link Bt problem has shown how difficult segregation and identity preservation can become when extreme care is not taken in marketing of new technologies and handling the product.
Rapid advances in information and communication systems have been occurring using complementary technologies of computers and telephone--satellites, fiber optics, and wireless communications (World Bank 1999; Shapiro and Varian 1999). The real cost of storing one unit of information or sending one unit of information is approximately one-ten thousands of the cost of 20 years age. Although the pace of change in Web and Internet information systems has been very rapid during the past decade, it seems likely to continue well into the next century (Shapiro and Varian 1999). In the future, the potential use of these technologies by farmers and consumers has major implications for the way business is conducted in the future. In particular, these technologies have major implications for the way that farmers obtain and use information on technologies, the way that they purchase inputs, and sell outputs, and the way that they manage their businesses.
Recent changes in institutions associated with discoveries have had profound impacts on the way that agri-business firms interact among themselves, the structure of chemical, seed, and life science industries, and potential distribution of benefits from R&D. Starting in the 1970s intellectual property rights were expanded and strengthened for biological discoveries and other types of discoveries. Patents were extended to transgenetics in the mid-1980s, but the 1990s has brought commercial sale of these new technologies. Because patenting of biological materials is new, much fine-tuning of intellectual property protection is needed over the next decade. Major problems are arising with overlapping patents, excessive breadth, and lock outs, leading to major concerns about an absence of freedom to operate by major technology producing companies (Santanello, Evenson, Zilberman, and Carlson 2000). This is creating a major problem for many companies as they attempt to obtain the permission needed to use many related and complementary, but protected, discoveries in their R&D programs and creates problems for them being able to market new products once developed.
The Bayh-Dole Act of 1980 altered the incentives for IPR protection and distribution of income from discoveries financed completely or partially by the federal government. This act gave the income generating rights of the discovery to the non-federal partner, e.g., private company, university, or research institute. It is generally believed that the Bayh-Dole Act has been a major force behind the rapid growth of university technology transfer offices and associated increases in university patenting, licensing, and start-up companies, and increase in licensing income of public universities (Henderson et al 1997, Narin et al 1997, Massing 1999). Hence, the new act has provided the opportunity for public universities to undertake discoveries with the objective of profiting from licensing or selling discoveries or from supporting start-up companies. Traditionally, administrators of public, e.g., land-grant, universities have argued successfully that they were undertaking public-good discoveries, that private provision of the public goods led to major under provision, and that universities'research budgets should be financed from public tax collections. Much, however, is unknown about the long-term effects of rapid growth in R&D for profit in public universities, e.g., implications for the public/private-good composition of discoveries, the incentives faced by university scientists, the social rate of return to public research, and the reaction of taxpayers.
This project is designed to develop information to be used by public sector research administrators and other groups interested in the acquisition of resources for research, in planning and evaluating research, and in managing public research for the maximum benefits to society. Information developed in the project will be useful for budget and program development at state, regional, national, and transnational levels. This information will assist individual research administrators, regional associations of experiment station directors, legislative aids, OMB, directors of the CGIAR system and administrators of the individual international agricultural research centers, and other organizations in the financing, planning, managing, and evaluating public sector agricultural research. Information generated by the project will be useful to private firms concerned with supplying farm inputs, transportation, storage, and processing of food and agricultural products; and to Congressional committees who appropriate funds and exercise oversight for federally funded research. It will also be useful to consumer groups who are interested in the amount and share of benefits from R&D going to them and more generally how agricultural R&D is likely to affect the cost of a healthy diet, and food and environmental safety.
Because of the need for further development of methods, principles, and strategies for planning, managing, and evaluating agricultural research and for major empirical studies of impacts of R&D and of R&D funding mechanisms, the proposed project requires the effort of a sizeable group of scientists and the coordination of their individual and collective efforts. This effort and coordination can best be accomplished within the framework of a Multistate Research Project. Moreover, several of the key SAES scientists who have experience and commitment to the proposed program of research under NC-208 are located in the North Central Region. In many cases, the NC-208 project will provide a platform from which subgroups within NC-208 can pursue outside funding, e.g., the USDA's IFASF competitive grant program.
Related, Current and Previous Work
This renewal of NC208 will build on the past five-year phase in which five symposia were held, ten books and over 125 journal articles were published, and many popular pieces were published (See Appendix B). Groups in NC-208 received over $1.5 million in IFAFS grants in 2000. Results of work on NC-208 have been used in testimony before U.S. Congressional committees, in support of State budget requests to State legislatures, in U.S. farm bill discussions in Washington, discussions and seminars with ministries of agriculture in Europe and Asia and directors of the CGIAR system, and in other ways by research administrators. Over time the expertise that has been accumulated in the project members has led to new cooperative efforts among members and to transfers to other research groups.
Previous NC 208 Research. The groups' activities were jointly determined at the outset and then divided amongst institutions to gain productivity through comparative advantage for work on four objectives. A brief summing of key accomplishments and findings are presented:
Objectives
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To estimate the expected and actual flow of benefits and costs of research for agriculture, and related areas including the incidence of their distribution.
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To determine and quantify the relationships between research and other public sector policies and programs for agriculture.
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To analyze decision strategies for agricultural research funding by different public institutions and private organizations.
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To continue the development of procedures for facilitating the priority setting process for agricultural research and to implement them in individual states and nationally as requested.
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Methods
The project work will be divided among institutions to maximize comparative advantage and be coordinated to reduce unproductive duplication and to enhance the collective product of the group. Stakeholder input will be solicited regularly, and specialists in communication skills have been added to aid in delivering results to stakeholders.Under Objective 1, the project will undertake parametric and non-parametric analyses of the impacts of research and the technologies that it generates on:
a. resource productivity
b. improvement in environmental quality and easing of regulatory requirements
c. the performance of U.S. farm commodity programs
d. international technology transfer
e. the competitive position of American agriculture in world markets
f. the economic welfare of producer, consumer, and agribusiness groups.
Emphasis will be given to examining the impacts of agricultural biotechnology and information technologies used in agriculture on efficiency, environmental quality, food safety, and benefit distribution.
Methods to achieve objective 1:
1(a) Research on Resource Productivity
Social costs and benefits from public and private agricultural research will be estimated at the global, national, regional, state, and sector level using newly constructed R&D data sets and new livestock and crop technologies applying advanced econometric and sectoral simulation techniques for production and profit function specifications. Where appropriate and interesting, rates-of-return on investments, net present values, benefit-cost ratios, and other selective indicators will be derived. Representatives from Alabama (Auburn), California-Davis, Georgia, Idaho, Iowa, IFPRI, Michigan, Nebraska, New York, North Dakota, Texas, Utah, and Virginia will coordinate efforts and share results to obtain maximum synergy and minimize unproductive duplication.
Although much has been learned about the contributions of public research and extension to aggregate agricultural productivity, aggregate supply, and input demand, new data sets and advancing econometric techniques suggest that new and important discoveries and refinements in these estimates can be made. Given limited aggregate private agricultural R&D data, new data sets will be created and incorporated into the productivity analyses. New and extensive analyses of public research geographical and intersector R&D spillover effects will be undertaken. Advances in our understanding of the sources of growth is essential to understanding how to reproduce growth in the U.S. and elsewhere in the future and how public policies might affect future growth rates. This effort will use state-of-the-art econometric estimation techniques and refined series. Representatives from California, IPRI, Florida, Indiana, Iowa, Missouri, and ERS will coordinate efforts to quantify and explain sources of output, input, and productivity growth.
1(b) Improvement in Environmental Quality and Food Safety and Easing of Regulatory Requirements
Traditional and new agricultural technologies, e.g., biotechnology, integrated pest management, impact the quality of the environment (e.g., through changes in pesticide usage, carbon fixing, greenhouse gas emissions), potential for bacterial contamination, and food spoilage/decay. Issues of regulation of biotech inputs and products will be considered. Representatives from Arizona, California-Davis, Idaho, Illinois, Ohio, Nebraska, Texas, and Virginia will coordinate efforts to maximize collective discoveries.
1(c) The Performance of U.S. Commodity Programs
New technologies impact aggregate U.S. agricultural supply conditions, which affects the potential costs of U.S. farm commodity programs, and the programs provide incentives affecting the allocation of land among alternative uses and adoption of technologies. Representatives from Arizona, Texas, and North Dakota will coordinate new efforts.
1(d) International Technology Transfer
The speed at which technologies developed in one country are diffused to other countries has increased. Important transfers occur from the U.S. and other developed countries to developing countries, and some technologies move among developing countries, especially with the assistance of the international centers. New research will examine the international transfers of crop biotechnology, e.g., in cotton, soybeans, canola, and vegetables. This work also includes an economic analysis of genebanks. Representatives from Auburn, California-Davis/IRPRI, California-Berkeley, New Jersey/Rutgers, and Ohio will coordinate new efforts.
1(e) The Competitive Position of American Agriculture in World Markets
Nation-specific R&D and international borrowing of discoveries are two routes for changing the relative cost of producing agricultural outputs of any country and affecting international competitiveness. Competition among developed countries is keen, for example among OECD countries, but growing concern arise from LDCs acquiring new technologies cheaply (without compensating innovators) and exporting to developed countries. Representatives from University of California-Berkeley/IFPRI, Idaho, Indiana, Texas, and ERS will coordinate efforts to identify impacts of R&D on international competitiveness among countries.
1 (f) The Economic Welfare of Producer, Consumer, and Agri-business Groups
The magnitude of social benefits and costs and their distribution resulting from new technologies, especially biotechnology, will be examined. Consumer resistance to ag biotech inputs and outputs will be examined and methods tested for softening the problem, e.g., labeling, the potential for a new information verification system. Farmers acceptance and adoption of rBST and GMO crops will be examined using the latest econometric and sectoral simulation techniques. Representatives from Auburn, California-Davis, Illinois, Indiana, Iowa, New York, Ohio, Texas, Wisconsin, and ERS will coordinate efforts to maximize collective discoveries.
Under Objective 2, the project will undertake development, analysis, and examination of decision strategies:
a. for optimal incentives in research institutions
b. to provide new funding mechanisms for agricultural research
c. to aid and improve research priority setting
Methods to meet objective 2 are:
2 (a). Optimal Incentives in Research Institutions
R&D is an unusual activity where uncertainty of output and inability to monitor inputs (scientists) occurs. Little research has examined incentive making in research (single task) or multi-task jobs (e.g., research, instruction, and outreach). However, administrators set incentives and scientists react to them, but little is known about setting incentives optimally, given the complex decision making environment. The environment differs between public and private institutions and incentives for both types of institutions will be examined and biotechnology will be part of the focus. Representatives from Alabama (Auburn), Iowa, Maryland, New Jersey (Rutgers), Ohio, and ERS will coordinate efforts on new discoveries.
2(b) New Funding Mechanisms for Agricultural Research
Given that administrators and scientists are searching for new resources for research, an examination of the potential advantages and disadvantages of new sources will be undertaken. This includes examining the effects of the sale of discoveries, e.g., biotechnology, by universities through technology transfer offices, formation of new clubs having a specific research interest, new public-private sector partnerships, formation of start-up companies. Representatives from California-Davis/IFPRI, Idaho, Iowa, Maryland, and Michigan will cooperate.
2(c). Aid and Improve Priority Setting
Formalizing public research planning in sound principals of priority setting may increase the social benefits from public funds allocated to research. Principles of priority setting will be advanced, information management systems developed to support the system, and a document to assistant experiment stations and other institutions set priorities will be written. Representatives from Idaho, Virginia, and California-Davis/IFPRI will coordinate efforts.
Under Objective 3, the project will examination analytically and empirically potential costs and benefits (advantages and disadvantages) of alternative institutional, transfer, and operating arrangements:
a. for land-grant universities and USDA agencies
b. for the CGIAR system and the national agricultural research systems of the LDCs
c. for private sector companies
Methods to meet objective 3 are:
3(a) Land-Grant Universities and the USDA
The SAES and USDA research agencies were endowed with public federal and state funds to undertake research for the public interest. New funding mechanism challenge the traditional rationale for public sector financing of agricultural research, may crowd-out or complement traditional funding sources, and hence may result in more or less real resources for agricultural research in the long run. The research will produce new results and shed new light on these important land-grant research policy issues through new conceptual models and empirical analyses. Representatives from Iowa, Maryland, New York, and Wisconsin are working together to maximize discoveries.
3(b) The CGIAR System and National Agricultural Research Systems of the LDCs
The push to privatize plant genetic materials is contrary to the philosophy of the CGIAR system, which pushed farmers use over strong IPRs and licensing income. An analysis of the optimal strategy for the CGIAR system in the new IPR environment will be undertaken and implications developed for the developing NARs. Representatives from Alabama (Auburn), California-Berkeley, IFPRI, and ERS will coordinate efforts.
3(c) Private Sector Companies
Changes in public research impact private R&D just as changes in private R&D impact public research. Both static and dynamic models of these relationships will be developed and tested. New research will quantify the impacts of public research on aggregate private R&D, and examine the potential complementary/substitute relationships between these major sources of R&D. New research policy recommendations will be developed. Representatives from Michigan, New Jersey (Rutgers) and Iowa will coordinate efforts and share discoveries to reduce duplication of effort.
Measurement of Progress and Results
Outputs
- The project will produce new R&D data sets, new models of R&D impacts and decision strategies, new protocols for public-private relations, and new information for agricultural science policy makers.
Outcomes or Projected Impacts
- Outputs of this project can be expected to enhance public and private decision making on the development and use of agricultural technologies, public decisions at the institutional and national level for organizing and managing agricultural research, and generally to increased social welfare through a more efficient system of discovery and distribution of knowledge and information for agriculture.
Milestones
(2002): A symposium with three-fourth day disseminating project information to agricultural science policy makers (see Appendix C)(2005): A symposium to report major project discoveries followed by publication and distribution of a book to research administrators and policy makers.
(2006): A symposium to disseminate information to science policy makers.
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Projected Participation
View Appendix E: ParticipationOutreach Plan
The nature of the research undertaken on this project places a premium on communicating and disseminating research results to experiment station directors, national level research administrators, and national policy makers and research directors responsible for justifying and allocating research resources. Consequently, a symposium will be organized annually to present, discuss, and disseminate research results and three special symposia will be organized (see Milestones). All symposia will be open to research directors, administrators, and policy makers. In addition, information bulletins in non-technical language as well as two-page summaries of research results will be prepared and disseminated. Project annual reports, symposia programs, and related materials will be posted at the NC-208 website and summaries of research results made available to a broad audience.
Organization/Governance
The project will be organized as a Multistate Research Project consistent with the specifications for membership and organization given in the "Guidelines for Multistate Research Activities." The project technical committee shall consist of one vote from each cooperating agency as appointed or otherwise designated by each respective organization, an administrative advisor appointed by the Association of North Central Experiment Station Directors and a representative of the Cooperative State Research, Education, and Extension Service (CSREES). The executive committee for NC-208 shall consist of a chairman and secretary, elected by the technical committee. Members of the executive committee will be elected annually and may succeed themselves. This committee will have the major responsibility for coordinating research efforts contributing to the Multistate Research Project. The chairman of the project technical committee will prepare the annual report, summarized from material supplies to him by the project committee member from each participating agency. The chairman will send two copies of the final draft of the annual report with original signature of recommendation and an approval block for signature to the Administrative Advisor. The Administrative Advisor will make the appropriate distribution. Meetings will be held at least once a year at time and place mutually agreed upon by the technical committee with the approval of the administrative advisor. The secretary will have responsibility to record the minutes of the annual meeting. The secretary will be responsible for distribution of approved minutes to members of the technical committee. The Administrative Advisor will send approved copies to CSREES and Directors of participating SAES and other agencies. A research symposium, drawing on the work of individuals inside and outside the project, will normally be held in conjunction with the annual meeting.
Literature Cited
American Association for the Advancement of Science (AAAS). AAAS Report XXV: Research and Development FY2001. Washington, DC: American Association for the Advancement of Science, 2000a.
Falck-Zepeda, J.B., G. Traxler and R.N. Nelson. "Surplus Distribution from the Introduction of a Biotechnology Innovation." American Journal of Agricultural Economics 82(May 2000):360-369.
Henderson, R., AB. Jaffe, and M. Trajtenberg, "Universities as a Source of Commercial Technology: A Detailed Analysis of University Patenting, 1965-1988." Review of Economics and Statistics. 80(1998): 119-127.
Klotz, C., K. Fuglie, and C. Pray. "Private-Sector Agricultural Research Expenditures in the United States, 1960-92," USDA, ERS Staff Paper No. 9525, Oct. 1995 (updated 2000).
Massing, D.E. (Ed.). AUTM Licensing Survey: Fiscal Year 1998. Chicago, IL: The Association of University Technology Managers, Inc., 1999.
McHughen, A. Pandora=s Picnic Basket: The Potential and Hazards of Genetically Modified Foods. Oxford, U.K.: Oxford University Press, 2000.
McMillan, G.S., F. Narin, and D.L. Deeds. "An Analysis of the Critical Role of Public Science in Innovation: The Case of Biotechnology," Research Policy 29(2000):1-8.
Narin, F., K.S. Hamilton, and D. Olivastro. "The Increasing Linkages Between U.S. Technology and Public Science," Research Policy 26(1997): 317-330.
Santanello, V., R.E. Evenson, D. Zilberman, and G.A. Carlson. Agriculture and Intellectual Property Rights: Economic, Institutional and Implementation Issues in Biotechnology. Wallingford, U.K.: CARI Publishing, 2000.
Shapiro, C. and H.R. Varian. Information Rules: A Strategic Guide to the Network Economy. Boston, MA: Harvard Business School Press, 1999.
World Bank. World Development Report: Knowledge for Development. New York, NY: Oxford University Press, 1999.