Organizational Economics in Agricultural Policy Analysis

Abstract

The ongoing industrialization of US agriculture features striking changes in the organization of markets and firms, including a noticeable movement toward larger firms and greater product differentiation among both farms and processors, as well as shifts away from the use of spot markets to govern transactions between the two, and toward greater reliance on formal contracts and alliances. These organizational shifts raise important issues concerning the proper role of government in industrialized agriculture, especially with regard to the design of policy regarding environmental, food safety, competition, R&D, and farm support issues. Furthermore, they raise important issues for designing research and data programs to support policy analysis. Our paper discusses how organizational shifts affect the demand for contemporary agricultural policy analysis. In response to the industrialization process, public policy analysts have drawn heavily on the theory of organizational economics and recognized the importance of developing rich empirical databases on the wide variety of market transactions and organizational responses in agriculture. In particular, we highlight our primary vehicle for understanding organizational change in agriculture, the annual Agricultural Resource Management Survey (ARMS), a comprehensive survey instrument applied to thousands of US farms. The paper describes relevant ARMS-based research and the challenges of updating the survey and our research programs to capture the relevant issues.