Rausser’s first attempt to evaluate and advance a framework for improving the evaluation of alternative policy options with Richard Just (Rausser and Just 1982). This paper appeared in two different book publications and outlined fundamental principles that must be followed by analysts in evaluating the consequences and impacts of various policies. In the Rausser and Just paper, there are ten core principles along with 15 subprinciples that should guide policy analyst in providing recommendations to various governments for the agricultural sector. This paper was published way back in 1982 and was followed by the seminal publication in the Economic Report of the President in 1987.
The report included the important chapter “Toward Agricultural Policy Reform.” This chapter noted that the benefits arising from U.S. agricultural policy programs did not reach those most in need. Moreover, the distortion that existed on world markets and the food commodity dumping activities across the globe concentrated in developing countries, resulting from subsidy-
induced excess supply from the United States and European Union, resulted in strong disincentives for agricultural productivity. The market distortions and damages imposed by U.S. agricultural policies are the direct result of political economic forces that ignore the resulting poverty, hunger, and malnutrition of low-income households around the world.
This focus on policy reform during Rausser’s time as Senior Economist at the Council of Economic Advisers (CEA) became the basis for his subsequent work as Chief Economist at the Agency for International Development (AID). Much of this is summarized in a summary analytical model that was jointly published with P. Zusman as the lead article in the AJAE entitled, “Public Policy and Constitutional Prescription” (Rausser and Zusman 1992). This scholarly contribution resulted from his focus while at the Chief Economist at AID on governance structures. It also became the basis for Rausser’s critique and undermining the so-called, Washington Consensus.
With his 1990 article “A New Paradigm for Policy Reform and Economic Development,” and with dozens of further publications on the same theme, Dr. Rausser argued that international agencies (e.g., the IMF and the World Bank) and donor agencies (e.g., AID) should not make assistance conditional on outcomes or establishment of particular government policies. Instead, his work made clear that decision-making about which countries are given priority for economic assistance should emphasize underlying constitutions and the design of institutions. Rausser wrote in 1992:
These arrangements are usually overlooked in ideological debate and in scholarly research, and their importance is not generally appreciated in either the mature market economies or in the societies in transition. . . .[But] privatized enterprises will work well only after a society has established the institutions that are needed for an efficient private sector.
For example, he argued, democratic governmental and judicial institutions are critical to the enforcement of contracts, the security of private property and the assignment of liability for wrongful conduct. Without sound constitutional structures, there is likely to be a maldistribution of political power[1], in which political agents are unencumbered in pursuing self-interest rather than the public interest. In essence, he argued that the underlying constitution must be designed to establish the credible guidelines and mechanisms for “rules by which rules are made.” In a 1993 publication in World Development, he proposed that for the former communist regimes throughout Eastern Europe and the former Soviet Union, “The public sector must play a dominant role during the transition process and will be effective if and only if a well-designed constitution and an associated legal and regulatory infrastructure is first established.”
Before Gordon Rausser’s entry into this arena, policymakers largely held to the so-called Washington Consensus of the 1970s and 1980s, which emphasized allowing the free market to “get prices right.” Yet his research and efforts as president of the Institute for Policy Reform demonstrated successfully that such an approach was misguided. Ultimately, in the mid-1990s, the IMF and the World Bank embraced his arguments and turned to supporting public-sector policies that reflect his insights into the essential importance of good governance in all of its aspects. At the time, IMF Managing Director Michael Camdessus remarked, “Every country that hopes to maintain market confidence must come to terms with good governance.”
This cumulative experience and scholarly work were then widely applied with the major event of the fall of the Soviet Union. He was not only actively involved, formulating models for transition economies, but he simultaneously founded the Institution for Policy Reform. Here, Rausser went well below agricultural economics into the general fields of micro and macroeconomics. A book was published formally Communist Eastern European countries. Along with the book, three major publications appeared in the world development: Clague and Rausser (1992), Rausser and Johnson (1993), and Ball and Rausser (1995).