Virtual Think Tank
I founded the National Center for Policy Analysis (NCPA) and served as its leader for 31 years. During that time, I pioneered the concept of a “think tank without walls.” By that I mean our most important scholars were not our employees, even though our relationship was very close. Some of our most important activities were joint ventures with organizations that retained their separate identities, even though at times we acted as a single entity to achieve a common purpose. I have now taken this way of thinking to the next level and created a think tank without overhead. The structure of the think tank, the Goodman Public Policy Institute, is described below.
After Pete du Pont and I left the NCPA, I took the opportunity to think about where think tanks spend their money and why it is spent it that way. Here is what I concluded. More than 80 percent of the time, effort and money is spent on activities that are not directly related to the organization’s stated purpose – which is impact on public policy. And that’s not only true of think tanks. I think it’s true of most non-profit organizations.
By impact on public policy, I mean changes in real legislation. Remember what was accomplished under my 31 years of leadership at the NCPA: Health Savings Accounts, Roth IRAs, abolition of the Social Security earnings test, reform of the 401(k) system, etc. The new organization I have created is doing these kinds of things and much more.
Think Tank without Walls: Partnering with Scholars
There are basically two kinds of think tanks. When I started the NCPA, all the older, larger think tanks were based on a model of bringing academics together and letting them interact under one roof. In those days there was no Internet. If you were a conservative/libertarian professor on a college campus, odds are you were very lonely. The opportunity to interact – if only for a year or so – with like-minded scholars was of great benefit. I know. I was one of them. Right out of Columbia University graduate school, I went to the Hoover Institution, where I met George Stigler, Gary Becker and others. It was a memorable experience.
The other model is the one followed by almost all state think tanks. Because these organizations have limited budgets, they cannot afford to have on staff a scholarly expert in every field (health, taxes, environment, etc.). So they find a scholar at a college or university and contract with him or her to write a study in one of these areas – with special attention to the problems in their own state. But after the study is finished, the scholar and the think tank go their separate ways.
At the NCPA, we pioneered a third approach: an active ongoing arrangement with a scholar who functioned as our expert even though he or she was not our employee. Under this arrangement, the university (or other organization) paid all the overhead and we paid only the marginal cost of the studies and activities we wanted. It is because we followed this model that Phil Gramm was able to say that “the NCPA does more with fewer resources than any other think tank in the country.”
[Of course, other organizations do the same thing to a certain extent. But they don’t base their whole business model on the approach.]
Here are just a few examples:
Starting a privatization revolution at the local level.Our first partnership was with Madsen Pirie (Adam Smith Institute in London) and together we introduced Margaret Thatcher’s techniques of privatization into the United States. Our activities included: publishing Madsen’s book on 21 techniques of privatization (Dismantling the State), hosting a privatization conference in Washington, DC for all the U.S. think tanks, publishing the proceeds of that conference (Privatization), arranging for speaking opportunities for Dr. Pirie as well as media interviews, facilitating op ed pieces, etc. At the local level, this was the beginning of a privatization revolution in the United States.
Another partnership was with Richard Rahn, when he was chief economist for the U.S. Chamber of Commerce. In 1984, Richard and I wrote the first editorial on Health Savings Accounts – for The Wall Street Journal. In the early 1990s, we partnered with Dr. Rahn (and the Chamber) to propose a series of tax cuts to lift the economy out of the recession, underway at the time. The proposals were quickly incorporated in the Delay/Wallop bill, the Gramm/Gingrich bill, the Kasten bill and eventually they became the tax component of the 1994 Contract with America.
For many years Aldona and Gary Robbins were the NCPA experts on tax policy. They did the technical work on our tax proposal with the Chamber. They did a series of studies on the Medicare Catastrophic Coverage Act of 1989, and Milton Friedman and others credited our work with causing the repeal of this law – the first repeal of a federal welfare program in 100 years. The Robbinses also provided me with the fundamentals for my debate on the capital gains tax with Michael Kinsley – which remains a classic in the field of tax policy.
Our partnership with Lynn Scarlett (Reason Foundation) led to a series of studies on environmental issues and an article in Reader’s Digest that the executives at Coca Cola claimed turned the debate around on solid waste issues.
For 15 years we had a contractual relationship with Dr. Saving and his colleagues at Texas A & M. For much of that time, Dr. Saving was a Trustee of Social Security and Medicare. This, in addition to his academic credentials, gave him instant credibility everywhere. Our relationship with Dr. Saving had a major influence on George W. Bush’s approach to Social Security privatization. And we were the only organization that explored how to privatize Medicare with individual accounts.
Also over a period of about 15 years, we had a relationship with Laurence Kotlikoff (Boston University). This led to pioneering work on lifetime marginal tax rates; studies of the flat tax, a national sales tax and a value added tax; a Kotlikoff/Goodman proposal to completely revamp the way we regulate banking (in The New Republic); and a one-of-its kind study of the corporate income tax that was summarized in The New York Times.
Think Tank without Walls: Partnering with Other Organizations
Here again, the most attractive feature of the arrangement is economic; it’s based on the principle of specialization and comparative advantage. An organization can reap the advantages of skills some other organization has without merging. Here are a few examples:
In the 1990s we partnered with Warren Steibel and Bill Buckley to produce about 20 thirty-minute Firing Line shows and about a half dozen two hour debates.The result: our messages on such topics as school choice, Health Savings Accounts, welfare reform and the flat tax got in front of millions of television viewers.
The Sumners Foundation had money and students, but they had no way to host a speaker’s series to give students the opportunity to interact with nationally known figures or to put on seminars for the students. So they turned to the NCPA. The Sumners lecture series featured three appearances by Supreme Court Justice Clarence Thomas, as well as presentations by George W. Bush, Jeb Bush, Rick Perry, Gerald Ford and others.
Salem Radio Network partnered with NCPA in 2008 to drive people to a website where they could sign a petition in opposition to Obamacare. The result: the largest online petition ever delivered to Congress.
Four Star Leadership with Gen. Tommy Franks brought students from around the country to a one week summer camp. It was a partnership among three organizations – the NCPA, the General Tommy Franks Leadership Institute and Museum and Oklahoma Christian University. Each contributed based on its comparative advantage and each managed its own overhead.
The Advantages of Contracting Over Employment
In some ways the advantages are obvious. With contracting you can be entrepreneurial, opportunistic, versatile and cost effective. With contractors, you can expand or contract your involvement – usually with ease. If an issue becomes hot, you can engage more. If an issue becomes cold, you can engage less. Employment contracts tend to be rigid. They are hard to adjust and hard to end. With employment relationships you tend to be locked in. The typical agreement with a contractor has a one-month notice clause.
If your relationship with academics is contractual, you can produce the best products because you can take advantage of the very best people to study a problem:
When Singapore introduced its system of medisave accounts in 1984, I was flexible enough to be able to go there, to meet scholars in Singapore who could study and report on their system and to communicate the results of their studies to the outside world.
When South Africa introduced its system of Medical Savings Accounts in the early 1990s, I was able to go there, discover the best scholars and (again) communicate the experience to the outside world.
If your relationship with people and institutions is contractual, you can minimize costs:
Contractors manage their own overhead. Or if they don’t, someone else does.
This means the think tank is free to specialize in what it does best – and that is rarely ever managing overhead.
Contracting doesn’t always work. Through the years we have learned that there is an art to managing contracts. And when things didn’t work out the way we had hoped, we tried to learn from the experience.
I liken this to privatization at the local level. If cities try to do everything themselves, they will find they are in hundreds of different businesses (garbage collection, street cleaning, etc.). Privatization is potentially very cost-effective. But only if the city develops skills at doing one thing very well: monitoring contracts.
One more thought. Organizations with employees have an esprit de corps. They have a corporate culture. They have a personality. And partly because of all that, they develop loyalty and commitment. Aren’t these things important? And if your main relationships are contractual, don’t you lose all that? I find that the opposite is true, at least among academics. They feel more comfortable dealing with a colleague than with a supervisor. (There is a reason why they chose to be in the academic world.) In any event, I have developed long lasting friendships with people who were contractors, not employees.
A Think Tank Without Overhead
Here is a radical thought. If this model works well, why are we limiting it to scholars and other organizations? Why can’t everything a think tank does be contractual? Put differently, if there are significant advantages of avoiding some overhead costs, why not avoid all overhead costs?
How would that work? We don’t have to be too imaginative. We have been functioning that way for the past year and a half. Jeanette Goodman has handled development and certain high level administrative functions from Miami. Charlie Sauer has been representing us on Capitol Hill. Forbes is hosting my blog. The Independent Institute is the publisher of a new book I have written and maintains a web page with all my publications and TV and radio appearances. An ad agency is handling all media relations. We are contracting for accounting services with a firm in Dallas, for legal services with a firm in DC and for technical services whenever we need them.
We haven’t solved every problem, but we are well on our way. At the moment, we have no office, no receptionist and no employees. Every person involved handles his or her own overhead costs. Our virtual organization is free to focus on its mission.
Here is a sample of what we have been doing from our Media page:
Republicans Have a Health Plan – Finally!
Nearly 150 House Republicans have signed on a health plan that matches very closely the Goodman Institute plan developed for Donald Trump. It includes personal and portable health insurance, 24/7 access to a personal doctor, telemedical care in the patient’s own home, flexible Health Savings Accounts and a real market for the chronically ill.
Kotlikoff in the WSJ: Myths of Warrenomics
Elizabeth Warren economic advisors say the rich pay the lowest tax rates of all. Laurence Kotlikoff says they are wrong. Using the most sophisticated tools available to economists, Kotlikoff finds that among 40-year-olds, the top 1% face a lifetime average net tax rate of 34.5 percent. Yet when positive and negative taxes (benefits) are included, the poorest fifth are facing a rate of – 46.6 percent. For every dollar people in the bottom fifth earn, they get 46.6 cents back from the government.
Social Security’s Mistakes Cost Couple Thousands of Dollars
Over the past 13 years, Mrs. Jimmy Rogers and her husband have, been deprived of tens of thousands of dollars in Social Security disability and spousal benefits, thanks to Social Security’s acknowledged mistakes. Jimmy has been forced to pay extra Social Security payroll taxes and extra federal income taxes she didn’t owe. Writing in Forbes, Laurence Kotlikoff says the government is still, to this day, sending them a bill for over $120,000 for disability and spousal benefits that they rightfully received.
Why Not Try Free Market Health Care?
Find a health care sector where there is no Medicare, no Blue Cross and no employer and it is probably a market that works very well. Lasik surgery is one example. Patients get a package price and they know what they are going to pay in advance. Competition works. Over the past decade, the real price of Lasik surgery fell 25%. A similar story can be told about cosmetic surgery.
What’s Wrong with Private Health Insurance?
All too often, private health plans have perverse incentives to under provide to people who get sick — incentives that are created by unwise government regulation. However, government insurance often faces the same incentives and the results can be even worse.