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Reality 101 By: Arnold Kling
TechCentralStation | Tuesday, January 24, 2006


"Of far more serious import was the isolation of writing-school students (and teachers) from real-world America. The campus, for all its attractions, is a poor place to get any feel for life as most Americans live it, yet the campus had become not merely the training ground for ostensibly literary American writers but the only place they knew anything about."
--
Jonathan Yardley

Washington Post book critic Jonathan Yardley believes that the quality of American fiction has declined. The most often-quoted line from his essay is, "it has been a half century since an American writer published a novel that indisputably deserves to be called great." He argues that the academic isolation of American writers has led to novels with an inward focus on the author's psyche, because campus-bound authors lack the perspective to tell stories that illuminate the world in which we live.

 

I believe that it is not just writers who would benefit from experience gained outside the ivy walls. I think that it would be healthier for academics of all stripes to spend some time in business and government.

 

Correlation with Political Leaning

 

Below are some economists who obtained degrees in a common academic environment. We are listed in the order of the number of years spent outside academia since we earned our Ph.D's.

 

Economist

Institution and Year

Years Outside Academia

Arnold Kling

MIT, 1980

20

Larry Summers

Harvard, 1982

10

Jeff Frankel

MIT, 1978

4+

Brad DeLong

Harvard, 1980

2

Paul Krugman

MIT, 1977

1

 

One thing that struck me in constructing this table is that if you were to align us politically from right to left, we would be in the same order. This probably would not have been true at the time that we received our degrees. My guess is that we were close to one another on the political spectrum at that time. I think all of us were pretty much on the less-than-extreme left back in the day, with Krugman not necessarily any more liberal than Kling.

 

Statistically, this is a small sample from an observational study, which makes it a poor data set from which to draw inferences. However, I am struck by the strength of the correlation between time spent outside academia and political leaning. I feel that it is worth speculating on some possible reasons people who began with approximately the same training, background, and outlook might have diverged in their politics on the basis of life experiences.

 

Risk, Autonomy and Academia

 

Academic life offers an almost unique mixture of high autonomy with low risk. The position of tenured professor carries perhaps the lowest risk of job loss of any occupation in America. Meanwhile, as my college economics professor Bernard Saffran was fond of pointing out, being a professor means not having a boss. Your day-to-day teaching and research are free from bureaucratic oversight or management supervision.

 

For the rest of us, autonomy and security tend to be mutually exclusive. In fact, the trade-off between risk and autonomy is perhaps the most emotionally wrenching issue that we face in our careers. Among people who have worked for large organizations, is there anyone who has not at some point had the urge to quit and become an entrepreneur or a consultant, in order to escape the dysfunction of office politics and the prison of bureaucratic inertia? At the same time, is there anyone who has not felt the restraining hand of the stability of a paycheck and the security of health care coverage, leaning on you to go back and put up with your boss a while longer?

 

The writer Bill Whittle argues provocatively that the issue of responsibility constitutes an important political divide. Whittle and I are on the side that emphasizes personal responsibility, while those on the left would tend to downplay personal responsibility in favor of group responsibility or other "root causes." I found it interesting that while the economic analysis of outsourcing posted by economist Brad DeLong was similar to mine, DeLong drew an implication for government to spend more on infrastructure and education, while I drew an implication for individuals to be more adaptable.

 

Those of us who have spent considerable time outside of academia can relate to Whittle's statement that "Freedom is the Platinum Visa card. We alllll want one. Responsibility is the credit rating. Not so much enthusiasm for the kind of discipline needed to earn one of those." To most of us, it is common sense that freedom and responsibility go hand in hand. On the other hand, college professors, who enjoy so much autonomy with so little insecurity, can lose sight of the significance of responsibility.

 

Organizational Behavior

 

Another way that working outside the campus has shaped my views has been through observing organizational behavior. I have experienced first-hand the difficulty that corporations have in getting disparate constituents to pull together.

 

At some level, economists are aware that corporations are not single-objective monoliths. We have coined the term agency problem to describe the conflicts within a corporation -- primarily the conflict between shareholders and managers. However, the pervasiveness and significance of these sorts of problems is largely under-estimated. Academic economists fall easily into the habit of treating the corporation as an individual, when in fact -- as shelves of management books can attest -- a large business organization is like a dysfunctional family.

 

People on the political left, and academics in particular, have an inordinate fear of large corporations. They see no hope for smaller economic units, which they believe will be crushed by the giant corporate steamrollers. Instead, my experience has taught me that large corporations have very limited competence. One of the few academic works that captures the comparative advantages of smaller firms is Amar Bhide's The Origin and Evolution of New Businesses, which I cited extensively in my own book on bootstrapping.

 

By the same token, the academic left has an inordinate faith in government efficacy. They assume that if government policy means well, then it will be executed well. Those of us who have spent time in government are more keenly aware of the obstacles to effective performance that exist within the bureaucracy.

 

The Adolescent Fantasy

 

Many academics share the adolescent fantasy that government would be terrific if only the right leaders were in charge. They think that all of our problems would go away if only "the people" could get their way over the "special interests." Their model of politics is the old Jimmy Stewart movie "Mr. Smith goes to Washington."

 

A good way to cure the adolescent fantasy is to spend time in government. Up close, it is hard to tell the people from the special interests. The crusaders for more low-income housing turn out to be construction companies. The campaign for energy independence and clean-burning fuel turns out to be a plea for a subsidy to benefit a large ethanol producer. Conversely, those of us arguing against drug price controls do so not because we are industry stooges but because we believe that markets incentives lead to better treatments and cures.

 

The Democratic Party is opposed to tax cuts. Is this a matter of principled concern for the fiscal health of the United States, or is it because "the people" that dominate the party platform -- the teachers' unions; the American Federation of State, County, and Municipal Employees; and opponents of Social Security reform -- all feed from the government trough?

 

Economists Alberto Alesina and Francesco Giavazzi point out that the prescription drug benefit for seniors "may cost US taxpayers more than President Bush's massive (sic) tax cut of 2001... But while many observers have pointed out the risks associated with Bush's tax cuts, and the gaping deficits that have followed, few seem worried about the added deficits that will arise from this gift to the old."

 

Alesina and Giavazzi point out that the elderly are becoming a formidable interest group. Their numbers are increasing, they vote consistently, and they have more money to contribute to political campaigns, because they are richer than the young people who are paying the taxes to support Social Security systems. "The stronger the political power of pensioners and of older workers, the greater the pressure on government to shorten working lives and increase pension benefits. This in turn raises the share of voters who are dependent on pensions, and thus the political power of retirees. In a recent article, Vincenzo Galasso and Paola Profeta from Bocconi University in Milan show that, in Italy, this nexus is now the major obstacle to pension reform. As time passes, the political support for reform dwindles, at least until the system blows up."

 

My friends who suffer from the adolescent fantasy are fond of campaign finance reform, which they say means doing away with private campaign contributions and instead using public funding. My response is that the taxpayers already outspend the private sector on political funding by a factor of more than ten to one. After all, what do the hundreds of billions of dollars spent on agricultural subsidies and pork-barrel projects represent other than public funding of re-election efforts?

 

Diversify Experience

 

This essay is not meant to be an attack on higher education. I do not wish to devalue traditional scholarship or academic excellence. However, I do want to suggest that college professors could benefit from diversity of experience. A few years spent working in a corporate or government setting would benefit professors by giving them first-hand knowledge of organizational behavior and politics in practice. I think that both our society and our universities would be improved if professors were required to spend a few years taking Real World 101.

 

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Arnold Kling, a former economist with Freddie Mac and the Federal Reserve, has written on economic issues and maintains a blog.


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