Madmen, Intellectuals, and Academic Scribblers

The Economic Engine of Political Change

Edward J. López, Wayne A. Leighton

• Publisher: Stanford Economics and Finance
• Year: 2012
• ISBN:
  9780804783965
• Edition: 1
• Topic: Politics & International Relations
• Subtopic: Political Process
• Index: Politics & International Relations

Madmen, Intellectuals, and Academic Scribblers presents a simple, economic framework for understanding the systematic causes of political change.

Wayne A. Leighton and Edward J. López take up three interrelated questions: Why do democracies generate policies that impose net costs on society? Why do such policies persist over long periods of time, even if they are known to be socially wasteful and better alternatives exist? And, why do certain wasteful policies eventually get repealed, while others endure? The authors examine these questions through familiar policies in contemporary American politics, but also draw on examples from around the world and throughout history.

Assuming that incentives drive people's decisions, the book matches up three key ingredients—ideas, rules, and incentives—with the characters who make political waves: madmen in authority (such as Franklin Delano Roosevelt and Margaret Thatcher), intellectuals (like Jon Stewart and George Will), and academic scribblers (in the vein of Friedrich Hayek and John Maynard Keynes). Political change happens when these characters notice holes in the structure of ideas, institutions, and incentives, and then act as entrepreneurs to shake up the status quo.

1

Ideas and the Rules of Politics

Coaches abused basketball again today.

—The Washington Post, March 8, 1982

It was March 7, 1982, and the cold drizzle falling on Greensboro, North Carolina, was no match for college basketball fever. The hottest ticket in the country was the Atlantic Coast Conference (ACC) men’s basketball championship, with nationally ranked number-one North Carolina taking on number-three Virginia, in a rematch of their two-game split of the regular season. This game had it all. Both teams had come in with only two losses all year. A total of five future National Basketball Association (NBA) players, three of them future all-stars, would take the court, and the greatest basketball player of all time, Michael Jordan, was in his debut season for Carolina.¹ A rare national television audience was about to tune in. And inside the Greensboro Coliseum, 16,034 screaming fans felt lucky just to be there when the game tipped off. The anticipation was palpable. The excitement could not have been greater.

But, by the end of the game, the fans were booing, the players on both sides were disappointed, and both coaches were taking flack for thinking too much and playing too little. With seven minutes and thirty-three seconds left to play and his team ahead by one point, North Carolina’s coach, the legendary Dean Smith, told his team to play keep-away. With Virginia’s coach Terry Holland keeping his squad close to the basket in a zone defense, the North Carolina players were free to dribble and pass and stall and do everything but shoot. As the game clock ticked away, and a glorious game turned foul, the chorus of boos rose in crescendo beyond the rafters of the Greensboro Coliseum. One thoughtful sportswriter summed up the despair: “Imagine the final 12 minutes of Hamlet if the cast started reciting the Congressional Record. Or Hemingway writing the last chapters of his classics in pig Latin. Coaches abused basketball again today, ruined what could have been a game for the ages by thinking.”²

The ACC championship wasn’t the only “slowdown” game that year where fans booed; it was just the biggest. Average scoring nationwide had been declining for seven straight years and had reached its lowest point in more than three decades. The various conference leagues were becoming increasingly worried about the quality of play and a possibly shrinking fan base. The National Collegiate Athletic Association (NCAA) began looking into the rules of the game and how “stall-ball” was not only possible but in fact a winning strategy too tempting for coaches to pass up. Desperate for a good idea, they turned a figurative eye to Danny Biasone, an Italian immigrant who had settled in Syracuse, New York, and in 1954 invented the twenty-four-second shot clock.

Danny Biasone owned a bowling alley and had built up enough of a fortune to start a professional basketball team. In 1946, his Syracuse Nationals began to play in what would soon become the National Basketball Association. In 1950 the NBA had its own “stall-ball” fiasco, when the Fort Wayne Pistons beat the Minneapolis Lakers by the dubious score of 19–18. A shrewd businessman, Danny Biasone protected his investment by inventing the shot clock. Like many revolutionary ideas, his was simple. He divided the 2,880 seconds of a forty-eight-minute game by the average number of shots per game, which was 120. He arrived at an average of one shot taken every twenty-four seconds. By the new rule, if the team on offense failed to shoot the ball within twenty-four seconds of taking possession, the whistle would blow, and the other team would get the ball. When the NBA introduced Biasone’s rule in 1954, the number of shot attempts and average scoring increased by 15 percent—in one year!³ The idea rescued pro basketball and ushered in its modern era.

Chances are the NCAA brass didn’t actually consult Biasone in 1982. It didn’t have to. By that time the NBA was a very successful sports enterprise, and the shot clock for college basketball was on everyone’s mind. But the idea hadn’t gone anywhere yet (except for one minor college league, the Sun Belt Conference, which had recently begun using a forty-five-second shot clock). In fact, basketball coaches around the country hated the idea. Just twenty days after the Carolina–Virginia letdown, the NCAA rules committee held a survey, and coaches voted against a thirty-second shot clock by a whopping 343 to 53. Even so, the NCAA rules committee pressed on, saying the shot clock was necessary “as a result of a decrease in scoring, what many people thought was an excessive use of zone defenses and because some teams were holding the ball a little too long . . .”⁴ After a few years, as different leagues experimented with different rules, the NCAA eventually settled on a thirty-five-second shot clock. The days of stall-ball and angry fans were over. College basketball became immensely popular—and profitable. By 1989, CBS television paid $1 billion for the right to broadcast the postseason tournament, and by 1999 the network upped the ante to $6 billion, making college basketball one of the biggest revenue sports in U.S. history.⁵

The Rules of Politics

You may wonder why a book about politics begins with a story about basketball. But a close look reveals that there is more than basketball at play in the shot clock story. Sports are like controlled experiments in human behavior; they have much to tell us about the way people interact and why. The coaches and players are highly motivated, and how they play depends a lot on the rules of the game. When a new idea changes the rules of sports, players and coaches have new and different incentives. In basketball, a shot clock increases the costs of holding the ball for too long, while a three-point line increases the benefits of long-range shooting. When the rules of sports change, we get an unobstructed view into how incentives shape people’s strategies and tactics, which largely determine how the game turns out.

The rules of politics work the same way. Voters, politicians, corporations, and all other political actors are driven largely by their incentives in politics, which in turn are determined by the rules of the political game at a given time and place. Politicians vote for government spending in ways that will get them more votes. Interest groups prefer to work with policymakers on specialized issues that don’t attract negative publicity. And voter turnout is low on rainy days. As in basketball, the rules of politics determine how the game of social life is played. And, when the rules of politics change, this change gives political players new incentives. So the shot clock story is about more than basketball. It’s an allegory for our story of political change, a microcosm of our broader tale, starring madmen, intellectuals, and academic scribblers.

These characters come to us from the pens of two prominent twentieth-century economists, John Maynard Keynes and Friedrich August von Hayek. Both articulated theories by which new ideas, sooner or later, sway public opinion and overwhelm status quo interests. In Keynes’s landmark 1936 book, The General Theory of Employment, Interest, and Money, he said that “madmen in authority” unwittingly heed the counsel of “academic scribblers.” By “madmen in authority,” Keynes refered to policymakers—those people whose hands grip the policy levers and can change the rules of the game. In the shot clock story, they are the NCAA rules committee. In politics, they would be politicians, bureaucrats, and other decisionmakers in public policy. As for Keynes’s “academic scribblers,” they are philosophers, economists, and other thinkers whose main job is to produce ideas. In the book’s final sentence, Keynes said it is ideas, not vested interests, that are ultimately “dangerous for good or evil.”⁶ Keynes said the academic scribblers win. They, not the vested interests who currently benefit from the status quo, ultimately control the madmen in authority.

Keynes’s perspective is top down: The ideas of academic scribblers might originate in ivory towers, but they become concrete and influential as they work their way down to shape what broader circles of people believe. Madmen in authority might speak to the masses in everyday language, but, whether they know it or not, the depth of their message was penned by some bygone academic.

What about the intellectuals in our tale? For this we turn to Keynes’s great adversary, Hayek, whose approach to ideas was similarly top down. But Hayek added a middle layer between the madmen and scribblers. In a 1949 essay, “The Intellectuals and Socialism,” he argued that opinion makers who trade in ideas—whom he called “intellectuals”—select the academic ideas they like, edit and repackage them, then disperse these ideas into society. The problem, according to Hayek, is that intellectuals hold biased views. In Europe and the United States following World War II, where Hayek lived and worked, the intellectuals favored socialism, and the public discussion promoted by the press strongly favored this perspective. In other times and places, if intellectuals hold biased views toward some other set of ideas, we should expect the public discussion to tilt in that direction. Hayek argued that the intellectual class acts like a sieve between academic scribblers who generate ideas and the absorption of these ideas into the body of public attitudes, beliefs, and opinions, where madmen in authority make their appeal.

In short, Keynes and Hayek gave us a top-down process for thinking about the rules of the game and how they change. In basketball or public affairs, change usually is a tale of madmen, intellectuals, and academic scribblers, offering different ideas, changing the rules of the game, and giving people new incentives. If the NCAA rules committee plays the part of madmen in the shot clock story, with their hands on the levers of policy ready to change the rules of the game as needed, then the sports writers, with their allusions to Hamlet and Hemingway, are the intellectuals. And Danny Biasone, with his back-of-the-envelope arithmetic, plays the academic scribbler.

Coaches and players aren’t chessboard pawns, of course. Neither are voters. Rather, they are individuals with their own goals, aspirations, talents, and limitations. And they have their own ideas about how the world should work—ideas that are shaped by life experiences, culture, age, and other influences that seem rather bottom up compared to the scribbles of some bygone academic. College coaches resisted the top-down shot clock idea in part because it was foreign to their long-held beliefs. College hoops, they believed, had done fine without a shot clock for eighty years. There was no time limit on possessions in Dr. James Naismith’s original thirteen rules of the game. This shot clock idea—it just wasn’t right.

So, apparently, the status quo can be a formidable foe. It consists of established, vested interests that benefit from the status quo rules. And it also has people’s long-held beliefs on its side, which presents us with a challenge. We have Keynes and Hayek telling us that ideas eventually trump interests and change the world. Yet we look around and see that a lot of things do not seem to be changing, or seem to resist changing, even when we can imagine a better solution. So which is it? Do ideas really matter? Do they change the world? If so, how? And when?

Changing the Rules of Politics: How and When Ideas Overcome Vested Interests

What major rule change or reform by the U.S. government has been most beneficial during your lifetime? Maybe you’ll think of the Civil Rights Act, or the Endangered Species Act, or the Family Medical Leave Act. If you focus more on foreign policy, you might nominate the Shanghai Communiqué that came out of Nixon’s trip to China, or the Strategic Arms Reduction Treaty with Soviet Russia to phase out nuclear missiles. If economic growth is your priority, your top pick might be the deregulation of the airline and trucking industries in the 1970s or the auction of radio frequency spectrum in the 1990s that ushered in the age of mobile communications.

Now flip the question over. What is the most wasteful and unjust policy in memory that was carried out by the federal government? If you or a loved one has ever desperately needed an organ transplant, you might nominate the National Organ Transplant Act of 1984, which created the shortages, waiting, and dying that we now have. Or perhaps your house has been taken by eminent domain, in which case you might point out that urban renewal programs destroyed the neighborhoods of millions of people in the twentieth century, especially African Americans and the poor among us.⁷ Or perhaps you’re a frequent flyer, in which case you might nominate the Transportation Security Administration’s (TSA’s) enhanced pat-downs and full-body imaging. If a family member is one of the 4 million people in jail or on parole for drug possession, your thoughts might drift to the war on drugs, which turned forty years old in 2011. And so on.

Quite a mixed bag, this government business. The fate of the human condition depends on how ordinary people respond to the rules of the game. And the rules of the game, in turn, depend largely on how governments respond to ideas circulating in society. The process of political rules adapting to a changing world—what we call political change—creates the new incentives that generate outcomes that we hope will improve the human condition and yet sometimes make it worse. Yet, for all its importance, political change doesn’t easily surmount status quo forces.

Understanding political change is both simple and complex. It is simple because we need only focus on incentives to begin explaining the political world, yet complex because changing incentives is not like flipping a light switch. Incentives are embedded in institutions—the many rules of the game that make up politics, law, religion, art, and all other aspects of a society. Like athletes who get better through weight training, which tears muscle tissue so that it may grow back stronger, changing political rules requires tearing a people’s institutional fabric. It is only natural to expect resistance to that, even if the result is beneficial.

And, like all human creations, a society’s institutional fabric evolves. It is the product of a particular people in a given time and place in history. And it is in this context that new ideas are accepted or rejected. Consider, for example, the experiences of the English before and after the Industrial Revolution, of the Germans in the decades prior to World War II compared to the decades following it, of U.S. citizens before and after the terror attacks of 2001, or of the Chinese under Mao compared to the same people after decades of historic economic growth. In all these cases and more, the circumstances of time and place changed dramatically, creating a climate receptive to different ideas.

With this insight, we get a better view of how ideas matter and what conditions are needed for ideas to trump interests. Both Keynes and Hayek believed that top-down ideas are the driving force in political change, despite the opposition of vested interests or the current beliefs of the masses. An earlier giant in economic thought, John Stuart Mill (1806–1873), saw things differently. Ideas are of no consequence by themselves, Mill argued, unless “outward circumstances conspire with them.”⁸ According to Mill, ideas matter—in fact, they matter a lot—but they alone do not explain why change happens. It is not inevitable that ideas eventually sway public opinion and overwhelm vested interests. Something must happen to make the ideas relevant at a given time and in a given place.

In politics as in sports, change comes when conditions make it possible for new ideas to trump both vested interests and long-held beliefs. And crisis is the word that most easily evokes Mill’s “outward circumstances.” In college basketball, more (and more prominent) coaches gradually succumbed to the temptation to play stall-ball, and as this game-killing practice lost its stigma, a crisis emerged. After thirty years in the waiting, the time had come for Danny Biasone’s big idea.

If you listen to politicians and pundits enough, crises both real and imagined will become exceedingly common. That’s because madmen in authority are expected to act in response to a crisis, and the bigger the crisis the bigger the change expected—or allowed. During the Great Depression, unusually severe economic conditions created a political environment that was much more receptive to starting new government programs, including programs that likely would not have garnered equivalent support in earlier years. More recently, as President Barack Obama took office in the wake of the subprime and financial crises, his chief of staff offered the following advice: “Never let a serious crisis go to waste. What I mean by that is it’s an opportunity to do things you couldn’t do before.”⁹ Market advocates are tempted to draw the same connection between crisis and change. Milton Friedman, f...