Reply about Graduate Agribusiness Management Programs: Supply Meets Demand

S. Andrew Starbird raises some interesting questions and valid points regarding agribusiness management graduate programs. However, there are several additional issues that should be considered in this debate. In particular, we offer two counterpoints to those raised by Starbird. First, Starbird focuses primarily on supply issues and ignores demand for graduate agribusiness management programs. Second, we question the argument that private school adoption of graduate agribusiness management programs is a measure of program success or quality. Lastly, we believe the more important issue is how should graduate agribusiness management programs “fit” into traditional agricultural economics departments and the agricultural economics profession?

Demand for Graduate Agribusiness Management Programs

Starbird's arguments suggest that there is little if any demand for graduate degrees in agribusiness management and such programs are only a “second choice” for students who are really interested in business management. That is, Starbird argues that the degree of specialization in agribusiness programs is detrimental because it creates a differentiated product with no demand.

Starbird attributes the increase in graduate agribusiness management programs to “rent seeking” on the part of agricultural economics faculty and the food industry. However, we believe the increase in graduate agribusiness management programs, at least partly, reflects student demand for such education. To buy Starbird's argument, we would have to believe that the only students in graduate agribusiness management programs are those that cannot get into a general MBA program. However, even the casual observer will note that there is clearly a subset of highly qualified graduate agribusiness management students who could have chosen any major on campus. Yet, for whatever reason (we do not claim to be able to characterize these students' utility functions), some students actually want a graduate degree in agribusiness management.

Even for those students for whom an agribusiness management degree is a “second choice,” agricultural economics departments are still selling a product demanded by their clientele. As an analogy, consider individuals' automobile choices. We would all probably like to drive a Mercedes, but most of us go with a “second choice” such as a Ford or Chevy. These cars are lower-priced, lower-quality than Mercedes, but Ford and General Motors supply those products because there is significant demand from utility-maximizing consumers subject to budget constraints.

Starbird also suggests that specialization in degree programs is somehow counterproductive. This argument is inconsistent with the lessons we teach our students in marketing and management classes. A key strategy for almost any company is market segmentation. Many companies are highly successful at targeting small market segments with niche products. In fact, many of the extension and research activities being conducted by economists at land grant universities are aimed at developing “value-added” or niche products in an attempt to segment traditional commodity markets. If such a strategy is good advice for our clientele, should it not be good advice for us as well? In fact, most traditional MBA programs are quite specialized. Many MBA programs are noted for their expertise in certain “specialties,” such as restaurant and hotel management or international business programs. In addition, most students must choose specializations within MBA programs, such as marketing, management, or finance.

Agricultural economics departments, employing good marketing strategies, have been successful at selling a differentiated product to a niche market. Starbird states that this approach creates agribusiness management students that are (p. 275), “faced with lower salaries, less mobility, and less credibility than their general management peers.” We are not aware of any data actually supporting such an argument. One would surely expect a significant difference in student income between prestigious universities offering MBA's (e.g., Harvard, Stanford) and any common MBA program. However, it is less clear that average income is different between graduate agribusiness management and “common” MBA programs. In this regard, it is also important to compare the income of a given agribusiness student with his or her next-best available and desirable alternative, which may not be an MBA program. If a student is interested in working in agriculture, then are they better off, in financial terms, farming or working as a manager in a stable food company? This is essentially an opportunity cost argument. We cannot simply compare average salaries of MBA program graduates to those of agribusiness management program graduates or all graduates to determine whether agribusiness management students are better or worse off. Indeed, Dale and Krueger recently found that students who attended more selective colleges earned about the same amount as students with comparable ability that attended less selective colleges. So, even if it were true that agribusiness management graduates earned less than MBA graduates, this result would likely be due to the fact that agribusiness management students have lower opportunity costs.

Starbird's assertion that our students strictly prefer general MBA degrees to agribusiness management degrees assumes we know the utility functions of those students and implies that they are somehow unable to make utility-maximizing choices. To the best of our knowledge, no student is forced to enroll in graduate agribusiness management programs; they knowingly enroll in programs where salaries are potentially lower and career opportunities are potentially less mobile. Unless we assume irrationality, enrollment in graduate agribusiness management programs is due to decisions of student-consumers maximizing their lifetime utility, which is a function of a myriad of factors, income being only one component.

Public versus Private Supply of Graduate Agribusiness Management Programs

Starbird also asserts that private universities simply do not engage in agribusiness programs because “there is no money in it.” This raises two issues. First, the statement presumes that there is something inherently wrong with the lack of private universities serving this clientele group; that there is something superior about private education. Normative judgments aside, it is certainly true that private universities have likely chosen to stay out of this market due to student numbers, and, thus, money. As with many industries, initial entrants target high-volume, high-profit markets. But, as markets mature, later entrants tend to specialize and focus on lower-volume, lower-profit market segments not previously served. Starbird suggests that somehow there is something wrong with the fact that the public universities are low-cost, subsidized providers of degree programs. Clearly there is a demand on the part of both students and businesses for this low-cost service. The fact that universities are providing it (where, as Starbird notes, public universities have a comparative advantage) sounds suspiciously like market forces at work.

Second, this argument is inconsistent with the mission of the Land Grant system, and to some extent, public universities in general. Namely, the mission is to provide access to education to the “masses” (i.e., those who cannot attend Harvard due to financial or intellectual constraints). Thus, the profit motive of the private universities fails to provide adequate supply of education, and public universities are called upon to provide the positive externality of broadly accessible education.

Thus, if we accept the assertion that there is demand for agribusiness degree programs and we also accept the premise that public universities are low-cost providers of those degree programs, then we are forced to conclude that the market has successfully identified a demand for a product and is supplying it at the lowest possible cost. If we believe our own competitive models, then social welfare has been maximized. Now, one may argue that some supply control will increase rents to the students. One may also argue that education is a signal of student quality and that a large variance in program quality degrades the quality of that signal. While these are different issues than raised by Starbird, they need to enter the debate.

Role of Agribusiness Management in the Agricultural Economics Profession

Although the issues Starbird raised are important, we believe the more important contribution is that it brings the debate about agribusiness programs, in general, to the forefront. In some sense, agribusiness programs are “stepchildren” of traditional agricultural economics programs and of the profession. As such, these programs are not likely exploiting their full potential. But, reaching that potential will require that the profession grapple with the true purpose of agribusiness research and education within the overall objectives of our profession.

Agribusiness creates tensions in agricultural economics programs because the typical business research is not “grounded” in familiar mathematical economic models. Additionally, the culture of the business school is different from agricultural economics departments. These factors lead to skepticism about the “quality” of agribusiness research and education. Unfortunately, much of this skepticism is grounded in reality. On the research side, our profession's agribusiness journals do indeed publish lower quality research as measured by analytical rigor and innovation or contribution to the broader body of literature than the American Journal of Agricultural Economics (AJAE) or Journal of Agricultural and Resource Economics (JARE), for example. Agribusiness journals are often the “option of last resort” for many manuscripts. As a result, the agricultural economics profession appears to have received a signal that agribusiness and low-quality research are synonymous. However, much of the research in the general business fields is very rigorous and grounded in theories of management and marketing.

A casual perusal of the top business journals, such as the Journal of Marketing, Journal of Marketing Research, Management Science, or the Academy of Management Journal reveals that high-quality, quantitative research takes place in these fields. Acceptance rates at these journals are no greater, and are in many cases, lesser than the best economics journals. We submit that it is not agribusiness research per se that is being shunned by our discipline, but that much of the research considered to be “agribusiness” does not meet the necessary quality standards to be published in top agricultural economics or business management journals.¹

So, what should be done? Perhaps there is room for the creation of an agribusiness journal aimed at promoting high-quality research. Or, perhaps greater methodological inclusiveness within traditional agricultural economics journals could serve this purpose. Importantly, we argue that the discipline might be enriched with the inclusion of alternative methods and theories, but only if agribusiness research is held to the same high standard as our “economic” research.

Another natural solution is for agribusiness researchers to publish their work in general business journals. The most qualified agricultural economists routinely publish in general economics journals. However, in our assessment, it is quite uncommon to see agribusiness research published in general business journals. If agribusiness research is “up to snuff” it should be publishable in general business journals. For this strategy to be effective, agricultural economics departments would have to value publication in general business journals to the same degree that they value publication in general or agricultural economics journals.

One approach that would improve the quality of agribusiness management research and education is greater interaction with general business programs. A better understanding of what constitutes a good MBA program or good business research would improve our own programs. Traditional agricultural economics departments combine rigorous analytical skills with applied, problem-solving skills. Combining traditional and business school skill sets could actually provide a superior product to what exists in the market today. But for this to occur, agricultural economics departments must be willing to seek out expertise in general business departments. When an agricultural economics department is seeking to fill an agribusiness management or marketing position, searching within the general management or marketing fields would likely increase the pool of high-quality candidates.

To conclude, we see no reason why Starbird's comments are necessarily a condemnation of agribusiness management degree programs, either from a supply—demand perspective or a philosophical perspective. However, Starbird's perspective on the problem is valuable because it casts light on a skeleton that our profession has attempted to keep in the closet. If we do not seize the opportunity to resolve the discontinuity between research and teaching traditional agricultural economics and agribusiness, we may very well suffer the fate to which Starbird alludes: a colossal waste of resources on an area that bears no fruit.