Is the USDA Relocation Just Good Old-Fashioned Rent Seeking?

July 3, 2019 | 3:51 pm
Rebecca Boehm
Former Contributor

One of things I cherish about economists is their ability to call BS when they see it. In research settings economists tend to have a reputation for asking hard-hitting questions during seminars. They are known for having the most unpopular opinion and for being unabashedly proud of it. I’ve personally seen non-economists bristle at the thought of giving a talk to an economics-oriented audience. As someone who straddles the worlds of public health and economics I get it, trust me. I’ve been there.

Without doubt, this attitude is partially a function of the male-dominated nature of the profession, which has serious drawbacks and has been the center of much negative attention lately. That aside, there is still great value in having the ability to be constructively and compassionately critical, and to voice an evidence or theory-based opinion even when it is unpopular, and to be mighty proud of it. The world needs a great deal of this right now.

Personally, I’ve taken the economists’ contrarian culture to heart over the last several years, which is part of my rationale for coming to Washington to work for evidence-based food and agriculture policy.

In the very short time I’ve been in DC one issue I’ve worked closely on is the relocation of USDA’s Economic Research Service (ERS) and its National Institute of Food and Agriculture (NIFA). And throughout this work so far I’ve been proud—and unsurprised—that many economists have loudly and publicly opposed the controversial plan to relocate these two agencies.

For example, Dr. Brian Stacy, who was a former ERS researcher now working at the World Bank, explained why he thinks the relocation is so harmful to the agency and agricultural research. Former ERS Administrator Dr. Susan Offutt said in an op-ed that USDA is throwing away a world-class research institute. Dr. Dawn Thilmany, president-elect of the Agricultural and Applied Economics Association (AAEA) and associate department head at Colorado State University’s College of Agricultural Sciences, recently penned a column in Colorado’s Daily Sentinel about the harms the relocation will have on the state’s farmers and food system. Former AAEA president Dr. Scott Swinton wrote a hard-hitting op-ed claiming that, done properly, a relocation of ERS and NIFA could have made sense for farmers and food consumers, and I happen to agree with this view. AAEA itself, which represents thousands of economists, has come out strongly against the relocation. AAEA recently dealt a serious blow to the Administration’s so-called “cost benefit” analysis that was intended to justify the move as a “cost saving” measure.

These economists know the relocation will dilute, diminish, and at worst, cause long-term damage to government research that serves the interests of our nation’s farmers and food supply. In addition, as any good student of economics would tell you, these economists know this relocation may come with a heavy dose of rent-seeking.

Rent seeking 101

For my non-economist readers, rent-seeking is when individuals or groups ask the government to change policies to benefit themselves without a concomitant benefit to the rest of us. “Rent” in this phrase doesn’t refer to the money spent to pay for a house or apartment. Rather rent in this context is a cost paid by the producer of some good or service to generate a sort of “unearned” income. Unearned? Yes, unearned because the income wasn’t generated from producing or selling a good or service. The income was generated directly from changing policies or currying favor or privilege (typically) from government officials or those in power.

Crucially, part of the theory of rent-seeking explains that those seeking policy change to benefit themselves spend resources to capture these “rents” for themselves (e.g., lobbying activities), and these expenditures will not create new wealth for society at large. The story can be further complicated when the benefits to those engaging in lobbying activities are concentrated and the costs of their actions are borne by many people. And in many instances, the people who are harmed by the change may have less incentive or ability to launch their own attempt to block the changes being asked for by the rent-seekers.

With respect to the relocation of ERS and NIFA, economists and experts (including several former high-level USDA officials) have repeatedly exclaimed how the move will be a huge loss to our nation’s farmers and consumers since the agencies are losing talented, seasoned food and agriculture experts who will now be far away from where policy is made. Some claim that this relocation even jeopardizes the scientific integrity of USDA. Moreover, Secretary Perdue has never articulated specific, credible reasons for how this relocation will benefit farmers and the public at large. But on the other hand, the Kansas City region stands to gain new jobs and federal funding from the relocation. Thus, the rent-seekers gain, and the rest of us lose.

Keep in mind with this rent-seeking hypothesis I am posing, I’m being optimistic. I’m taking Secretary Perdue at his word that he will rehire all the vacancies that have been created since the relocation proposal was announced. However, if I’m being pessimistic (which I’ve already been), this relocation is an attempt to dismantle important USDA research. Current estimates indicate that 80% of the current ERS roster will quit before the relocation is complete AND the Administration’s FY 2020 budget proposal has a 30% budget cut and 52% cut to staff years at ERS. Who knows if this administration will actually rehire the hundreds of employees who have already quit and who plan to do so in the coming months.

But, let’s hold on to what little shred of optimism we have for the moment. Is it possible then that the relocation of ERS and NIFA was motivated by rent-seeking by some group or individual? Is there any evidence to suggest that rent-seeking might be what’s really going on here? That’s a great question!

Who’s who among the rent seekers

In addition to the Missouri and Kansas Congressional delegation—who have been vocally in favor of this no matter the harms it will cause (because they will gain many jobs and federal funding, of course)—one lobbyist has also been particularly outspoken and actively in favor of the relocation. His name is Randy Russell, and he runs the Russell Group, one of DC’s most powerful food and agriculture lobby shops. An Agripulse “Signal to Noise” podcast has Russell in February 2019 boasting the virtues of the relocation. Our own research into Congressional lobbying records (here is one for example) indicate that Russell Group was lobbying on behalf of BioSTL, a St. Louis, Missouri bioscience firm that was one of the applicants on the USDA short list of potential relocation sites. Clearly these groups are seeking rents—either for the states of Missouri or Kansas, or for some other groups such as real estate firms or other businesses who see an economic opportunity in the relocation.

Of course, we found records of many other interest groups lobbying on the relocation, so Russell Group is not the only one who is seeking rents for its clients. For example, Broad Square Partners, a Kansas City non-residential building operator, hired lobby firm Kit Bond Strategies to lobby on the relocation of ERS and NIFA. The University of Kansas also did its own lobbying, presumably in the hopes that it could help sway Secretary Perdue to move the agencies closer to its campus.

Meanwhile, Secretary Perdue said to the Senate Appropriations agriculture committee in April 2019 that to make his final decision on the relocation site he was going back to the finalist (or short list) sites to ask them for “their last and best offers”.  In other words, Secretary Perdue was asking the rent-seekers for more.

But regardless of who exactly was lobbying and no matter which place Secretary Perdue decided to move these agencies—Kansas City, Purdue University, St. Louis, North Carolina’s Research Triangle were all finalists—this is, bottom line, a big win for one small locality (and perhaps a certain set of food system industries or interest groups) and a giant loss for farmers and our nation’s food supply. In other words, the relocation can be viewed as classic rent-seeking. That is, if this whole thing isn’t just an attempt to dismantle both agencies.

And knowing my economist colleagues who have yet to voice their contrarian views in their typical outspoken fashion, they ought to be furious that this rent-seeking behavior has already caused substantial damage to one of our nation’s most treasured economic research institutions.