talk

WORkInG GROUP On ECOnOMIC POLICY

of tHE
nOBEL DREAMS

a q u a r t e rly p u b l i c at i o n o f t h e h o o v e r in s t i t u t i o n , s ta n f o r d u ni v e r s i t y

tower
Winter 2011

How Hoover affects public policy

by Amy Hellman

Senior Fellow Thomas Sargent gets the coveted call

With new and uncertain challenges facing Americas economy, Hoovers Working Group on Economic Policy is actively researching explanations for the markets poor ecconomic performance and for policies to restore strong economic growth.
Composed of economic, financial, and legal experts, the groups strength lies in its production of fact-based research and policy ideas, and on its ability to communicate those findings. By conducting quantitative and analytic investigations that allow the evidence to lead the way, its objective findings of what works and what doesnt drive its conclusions. The members of the group are not content simply to do research. They also contribute numerous op-eds and articles to leading news media, including the Wall Street Journal, and appear on national television and radio programs to describe and explain their findings. Members have taken their message to the frontlines of policy making, testifying in seventeen hearings before Congress. With communication channels expanding to new media, several members have also created prominent blogs. (continued on page 6)
Senior Fellow Thomas Sargent won the 2011 Nobel Prize in Economic Sciences.

inside
from the directors desk Year in review Page 2 Hoover Legacy Society George Shultz reflects on values that endure Page 3 VIP visitors Hoover welcomes Representative Paul Ryan Page 4 In excellent company Photos from our summer board meeting Page 5 Recommended reading Our fellows book touts Page 7 Political posters Treasures from the Hoover Archives Page 8 new from Hoover authors Bedside table offerings Page 9 Uncommon commitment Three honored for service to Hoover Page 10

Hoover economist Thomas Sargent, a leader in the field of macroeconomics and the rational expectations revolution, has been awarded the 2011 Nobel Memorial Prize in Economic Sciences. A senior fellow at Hoover since 1987, Sargent joins Hoover fellows Gary Becker, Douglas North, and A. Michael Spence in attaining this most prestigious international distinction. He shares the $1.5 million prize with Princeton University professor Christopher Sims. In awarding the prize, the Nobel committee cited Sargents empirical research on cause and effect in the macroeconomy. (continued on page 6)

ideas defining a free society

FROM THE

directors desk
Year-end marks an auspicious time to review our
institutional progress. The task forces and working groups that anchor our scholarly research efforts and drive our public policy work have been an unsurpassed success. It is no accident that the quality of our fellowship and discourse, the range of outreach, and the level of interest in our work continue to grow. Despite the challenges of a sluggish economy, Im proud and pleased that our public policy dialogue is having a substantial impact on both the national and international policy arenas.

Institutionally, we have made a number of important enhancements to program and staff in recent years:
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Hoover appointed two full-time senior fellows this summer; the appointment of two part-time senior fellows is

currently in process. Our recruitment continues to focus on scholars of unique talent.

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Our pilot Leadership Forum has greatly increased our direct interaction with public officials. Under the

forums auspices, we also convened a highly successful workshop on the fiscal crisis facing many state and local governments, inviting scholars as well as local government officials to exchange ideas and experiences.
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We continue to surge forward with our communications efforts. Our proactive, media-focused approach has

netted superior results.

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The Hoover Press has expanded, and its distribution channels have improved.

Our FY11 fund-raising effort finished slightly ahead of target; because there is no shortage of good ideas at Hoover, our 2012 target is somewhat more ambitious to accommodate new and existing initiatives. We are grateful for new gift support. With a recent increase in development field staff, along with a steadfast and generous base of support, we are highly motivated to enhance our connections with our strategic partners who invest in the Hoover enterprise. With best wishes for a happy holiday season,

John Raisian, Tad and Dianne Taube Director

Hoover Institution

HOOvER LEGACY SOCIETY

Values that endure

The Honorable George P. Shultz is a charter member of the Hoover Legacy Society.

Legacy and vision. Roots and wings. To provide their heirs with all four, members of the Hoover Legacy Society have found that including Hoover in their estate plans is among the most meaningful ways to preserve and extend our countrys freedoms and opportunities. Among the Legacy Societys 110 charter members are the Honorable and Mrs. George P. Shultz. At ninety, Mr. Shultz, a former secretary of state, treasury, and labor, is actively engaged in the intellectual life of the Institution. On any given day, he can be found meeting with government, business, and academic leaders at Hoover. The basic ideas defining a free society is the central point, Mr. Shultz said. And there are a lot of terrific people around working on these issues. I read their work and comment. They read what I write and comment. Its an exciting intellectual atmosphere. A father of five, Mr. Shultz believes the legacy that he is leaving to his children extends beyond a financial inheritance to include the values that he holds dear. Our membership in the Hoover Legacy Society provides an ethical will, of sorts, for our children, grandchildren, and great-grandchildren, Mr. Shultz said. By including Hoover in our estate plans, Charlotte and I have made a statement that the principles guiding the Institutionlimited, representative government, private enterprise, and individual freedomare, in our view, essential to the well-being of our heirs and the thriving of our great nation. Chaired by Overseer Bill Edwards, the Hoover Legacy Society offers those who choose to include Hoover in their estate plans the opportunity to place a personal statement in the Library and Archives, thus becoming available to future generations as part of the Hoover Legacy Collection.
For more information about the Hoover Legacy Society, call 650 7256715 or e-mail hooverdevelopment @ stanford.edu.

In addition to his Legacy Society gift, Mr. Shultz has endowed senior fellowships held by the Honorable Abraham D. Sofaer, a former federal judge who served under Mr. Shultz in the State Department, and by renowned economist John Taylor. The Legacy Society honors those who have included Hoover in their estate plans, either with an outright bequest or through the creation of gift annuities, charitable remainder trusts, charitable lead trusts, retirement accounts, or supporting foundations. Hoover is pleased to offer planned giving consultations at no fee.
ideas defining a free society
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Michael Winokur

vIP vISITORS

Hoover welcomes Representative Paul Ryan

The Hoover community welcomed US member of Congress Paul Ryan to Stauffer Auditorium in September, where he delivered a major policy address on health care repeal and reform that was covered by major mainstream media.

I hope you dont hold it against me that I steal a lot of ideas from people here at Hoover, Ryan said. Its true. I steal monetary policy ideas from John Taylor, I steal rule-of-law stuff from Richard Epstein, and I even tried to steal some wit and humor from Peter Robinson this morning. Before his general address, Ryan joined Research Fellow Peter Robinson on the set of Uncommon Knowledge, Hoovers video program on public affairs, for a wide-ranging interview that can be seen online at www.hoover.org/multimedia/uncommonknowledge/94796. Ryan also met privately with some twenty fellows to discuss policy issues ranging from the debt crisis to jobs, economic growth, tax reform, and transparency in government.
Senior Fellow John Taylor and Congressman Paul Ryan meet over lunch in Hoovers Annenberg Conference Room.

Ryans visit follows on the heels of earlier visits by policymakers including House Speaker John Boehner, House majority leader Eric Cantor, and former governor Mitt Romney, a candidate for president.

Hoover Institution

In excellent company
Photos from our summer board meeting

Top row (left to right): Jill Smith; Overseer Bill Edwards, Fellow Henry Miller, Sherri Ferris; Senior Fellow Martin Anderson, Overseer Tad Taube, Senior Fellow Timothy Garton Ash. Center row (left to right): Overseer Peyton Lake, Visiting Fellow Anne Bayefsky, Senior Fellow Victor Davis Hanson; Senior Fellow John Taylor, Michelle Ajami, Senior Fellow Fouad Ajami; Overseer Bob Oster with Senior Fellow Peter Berkowitz. Bottom row (left to right): Joan and Overseer David Traitel with Senior Fellow Tom Henriksen; Overseer John Jordan with Julie Hauser; Steve Herrick, Overseer Alan Stanford, Deputy Director David Brady ideas defining a free society
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How Hoover affects public policy

(continued from page 1)

John Taylor, the George P. Shultz Senior Fellow in Economics, chairs Hoovers Working Group on Economic Policy.

played out as follows: the administration released its initial plan, Ryan followed with his alternative plan, and, in an unusual turn of events, the administration revised and rereleased a more modest plan after reviewing the data (see the accompanying graph titled A Tale of
Obama Budget I Feb 14

A Tale of Three Budgets

Spending as a share of GDP, 2000-2021
26% 25% 24% 23% 22% 21% 20% 19% 18%

Three Budgets). Taylor highlighted Hoovers research contributions both in congressional testimony and another op-ed, Obamas Permanent Spending Binge.

History

Obama Budget II April 13

The Working Group on Economic Policy has spent tireless

House Budget April 5

effort on the debt, the deficit, and the budget, with members taking every opportunity to contribute and push forward a fact-based debate. No doubt the debate will continue, aided by the insights of the Hoover working group nudging our nation back on a path to prosperity.

01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21

Sources: Congressional Budget Office, House Budget Committee, and authors estimates based on April 13 White House fact sheet

As working group chairman John B. Taylor states, There isnt always a direct line that connects academic research with its effect on policy, but with the quality of scholarship being produced, and the exceptional outreach efforts of Hoovers communications team, the Working Group on Economic Policys findings and ideas are being transmitted to Washington as well as state capitals and the broader public. For example, the groups efforts in early 2009 to conduct research and examine the impact of stimulus packages changed the conversation by producing evidence showing that the stimulus would not (and ultimately did not) work to help the economy. That view is now widely held. Another example of how Hoover scholars are reaching policy makers and helping redefine the nations conversation is the significant change in government spending growth in the federal budget:
u In March 2011, Congressman Paul Ryan, chairman of

Senior fellow thomas Sargent gets the coveted call

(continued from page 1) Sargents work demonstrates that it is hard for politicians to manipulate people into behaving in ways that dont make economic sense, the Wall Street Journal editorialized the day after the prize was announced. Temporary fiscal stimulus wont change consumer spending permanently because it doesnt change underlying wealth or income. The failure of the temporary, targeted Keynesian agenda to restore growth has become obvious. Both Chris Sims and Tom Sargent are of the school that you should evaluate policy proposals rigorously with estimated and theoretically well-founded models, rather than just speculate on how a policy would work or did work, and that is. an important model to follow, Hoovers John Taylor wrote in his blog, Economics One. Sargent has been a friend and Hoover colleague for nearly twenty-five years, said Director John Raisian. His work on rational expectations and business cycles is renowned, and to achieve this honor at a time when our economy is struggling is appropriate, as we can learn from Toms insight into todays maladies. In addition to his Hoover appointment, Sargent is a professor emeritus in Stanfords economics department and a professor at New York University.

the House Budget Committee, spoke at Hoovers Board of Overseers meeting in Washington, DC, where he credited Hoover economists with guiding his work on the GOP budget plan that later became known as The Path to Prosperity. Ryan made use of Hoover research and data both in a Wall Street Journal article and on various YouTube videos he made to explain the plan.
u By April 2011, Ryans proposed spending plan had

compelled the White House to revise downward the rapid spending growth in its original proposal. The scenario

Hoover Institution

RECOMMEnDED READInG

Fellows tout their book picks

Hoover fellows eclectic reading tastes extend far beyond their academic disciplines. In this issue of Talk of the Tower, Deputy Director David Brady and Research Fellow Kori Schake offer their literary picks and pans.

David Brady, Deputy Director

Davies family Senior fellow Cochair, Virtues of a free Society task force I recently read Javier Mariass A Heart So White, a novel that presents marriage as a theater of discovery and an exploration of memory and the terrible and beautiful ways a single moment can alter a life. The novel draws its name from Lady Macbeths famous line, My hands are of your colour; but I shame / To wear a heart so white (2.2.6162). I am interested in European writers because they address questions of memory, many deriving from the World War II period. Among other favorites Ive recently read are W. G. Sebalds The Rings of Saturn and Austerlitz, and The Shadow of the Wind, by Carlos Ruiz Zafn. South American and Indian writers capably explore culture and transformation. I recommend The Storyteller: A Novel, by Mario Vargas Llosa, which examines the evolution of an individual who leaves contemporary Latin American urban life to become a storyteller for the Machiguenga Indians. (continued on page 11)

Kori Schake, Research fellow

Ive just read Conversations of Socrates, Xenophons account of Socrates trial, which helped me understand why an Athenian jury found Socrates a danger. Stripping away Platos scintillating contributions, Socrates comes across as a stern moralist and a genuinely antidemocratic man, especially in a society that had just reclaimed its government from the tyrants (several of whom were Socrates students). One book I began to read but did not finish was Evan Thomass The War Lovers: Roosevelt, Lodge, Hearst, and the Rush to Empire, 1898. Posing as a biography, it is actually a revisionist history that paints Theodore Roosevelt and his coterie as dangerous ideologues instigating opportunities for war in order to advance their grand visions of empire. I admire writers who translate history into narratives for general readers; they do a great public service. But Evanss caricatures and repeated parallels with the Bush administration are unsound. To borrow from New Yorker critic Dorothy Parker, this is not a book to be set aside lightly; it should be thrown with great force. (continued on page 11)

ideas defining a free society

POLITICAL POSTERS

Archives
The Hoover Archives is home to more than 120,000 political posters from all over the globe, depicting some of the most memorable moments in world history, including the iconic World War II poster, Uncle Sam Wants You. The poster, its history, and the collection were showcased on PBS last year when Antiques Roadshow spent a day filming a program segment at Hoover. Encapsulated and stored in flat file drawers, the posters rarely leave the Hoover Archives. But in an unusual partnership forged with the Art Institute of Chicago earlier this year, twenty-six handpainted, original World War II propaganda posters depicting the Soviets role in fighting the Nazis were exhibited there through the end of October. Among them was Soviet political cartoonist Boris Efimovich Efimovs Maneater (above center), portraying Hitler as a cannibal gnawing on human bones labeled France, Greece, Yugoslavia, Rumania [sic], Poland, and Belgium. Another, Superbestiality (above left), shows several people dressed as cows while a guard stands by with a whip tipped with a Nazi swastika. All but one of the posters in the Chicago exhibition depicted the World War II period, with the exception being a woman, representing the United States, giving food to starving Russian children. This American Relief Administration poster highlights the efforts of Hoover Institution founder Herbert Hoover and the US government in
Reproductions of many of the posters are available for sale. to purchase, e-mail hoover_visuals@stanford.edu.

Treasures from the Hoover

providing food and aid to the Russians after the First World War. Hoover biographer George Nash makes a credible case that Mr. Hoover saved more lives than any person who ever lived. Scholarly interest in the impact of the visual image is increasing, and many scholars have made posters the subject of their researchnot just as colorful supplemental illustrations. The depth of the Hoover Archives poster collection provides students of the psychology and techniques of propaganda with a large sample of material on which to base their research. Because this is one of the Institutions most popular collections, it incurs significant wear and tear. Moreover, new acquisitions may have been damaged by pushpins or taped-up displays on a wall or kiosk. Hoovers conservation lab carefully identifies any preservation issues and prescribes the appropriate course of action. As archivists work to digitize the poster collection, more and more are becoming searchable via Hoovers online database. Some 33,000 posters from more than eighty countries are currently available for online viewing at http://hoohila.stanford.edu/poster/.

Hoover Institution

nEW FROM HOOvER AUTHORS

bedside table OffeRings

Eyes on Spies: Congress and the US Intelligence Community, by Amy B. Zegart In this volume Zegart examines the weaknesses of US intelligence oversight and why those deficiencies have persisted, despite the unprecedented importance of intelligence in todays environment. She argues that many of the biggest oversight problems lie with Congressthe institution, not the parties or personalitiesshowing how Congress has collectively and persistently tied its own hands. Deterrence: Its Past and Future, Papers Presented at the Hoover Institution, edited by George P. Shultz, Sidney D. Drell, and James E. Goodby Drawn from the third in a series of Hoover conferences on the nuclear legacy of the Cold War, this report examines the importance of deterrence, from its critical function in the Cold War to its current role. Recognizing that todays international environment is radically different than it was during the Cold War, the need is pressing to reassess the role of nuclear weapons in deterrence and to look ahead to the future. Freedom Betrayed: Herbert Hoovers Secret History of the Second World War, edited by George H. Nash Herbert Hoovers magnum opuspublished nearly fifty years after its completionoffers a revisionist reexamination of World War II and its Cold War aftermath and a sweeping indictment of the lost statesmanship of Franklin Roosevelt. Hoover offers his frank evaluation of Roosevelts foreign policies before Pearl Harbor and policies during the war, as well as an examination of the wars consequences, including the expansion of the Soviet empire at wars end and the eruption of the Cold War against the Communists. In Excellent Health: Setting the Record Straight on Americas Health Care, by Scott W. Atlas, MD In Excellent Health offers an alternative view of the much maligned state of health care in America, using facts and peer-reviewed data to challenge the statistics often cited as evidence that medical care in the United States is substandard and poor in value relative to that of other countries. The author proposes a complete plan for reform in three critical areas of the health care puzzletax structure, private insurance markets, and government health insurance programsdesigned to maintain choice and access to excellence and facilitate competition. No Higher Honor: A Memoir of My Years in Washington, by Condoleezza Rice From the former Secretary of State, this is the compelling story of eight years serving at the highest levels of government. A native of Birmingham, Alabama, who overcame the racism of the preCivil Rights era to become a brilliant academic and expert on foreign affairs, Condoleezza Rice found herself at the center of the Bush administrations intense efforts to keep America safe in the wake of the 9/11 attacks. Surprisingly candid in her appraisals of various administration colleagues and the foreign leaders with whom she dealt, she also offers keen insight into how history proceeds. No Higher Honor delivers a master class in statecraft that reveals the authors essential warmth and humility and her deep reverence for the ideals on which America was founded. The Thomas Sowell Reader, by Thomas Sowell Whether the subject is economics, race, war, politics, or late-talking children, Thomas Sowell has taken them on with the same fervor and thoroughness in his columns, essays, and books from which excerpts are reprinted in this volume. Also included are autobiographical sketches that may provide clues as to how he became the writer and insightful observer that he is. Sowells careful explication, personal wit, and intellectual rigor allow his thoughts to be clearly exhibited, understood, and welcomed.

ideas defining a free society

Three recognized for Uncommon Commitment

For the first time in a decade, Hoover presented its Uncommon Commitment Award to three members of the Board of Overseers at its summer meeting. The honor recognizes those who, by their contributions to American values and institutions, have promoted ideas defining a free society. First awarded in 2000 to Hoover benefactor Richard Scaife, the Uncommon Commitment Award was presented by Director John Raisian to Paul L. Davies Jr., William C. Edwards, and Tad Taube for their leadership and loyalty.

Paul L. Davies Jr.

Reflecting his

commitment and philanthropic leadership merit the rare distinction conferred by the Uncommon Commitment Award.

the Hoover Legacy Society, and Hoovers first formal fund-raising campaign, has contributed immeasurably to Hoovers strength. An intellectual partner, venture

commitment to Hoovers Library and Archivesthe growing repositories of rare historic materials on which our Institution was foundedPaul has bequeathed a rare gift to posterity that will expand and preserve the collections through which the scholars of the future can peer into the past. The archives represent the spectrum of history, illuminating the lessons of the ages to augment present understanding, supporting our prevailing viewand that of Herbert Hooverthat learning from history is essential to deep thinking on matters of contemporary public policy. Pauls service to Hoover includes three terms as board chair. His active engagement brings Hoovers visions to life. His sustained

William C. Edwards

Since

capitalist, and philanthropic leader, Bill embodies the uncommon man of whom Herbert Hoover spoke, saying the great human advances were brought about by distinctly uncommon people with vital sparks of leadership.

the inception of the William and Barbara Edwards Media Fellows Program, more than eight hundred of the nations leading journalists have visited Hoover, each gaining insight and access to advance the ideas generated by our fellows. This program, a direct result of Bills vision and generosity, is now a hallmark of our outreach efforts, leading to new levels of press coverage of the policy perspectives of the Hoover Institution. Bills leadership of our development efforts, including chairing the development committee,

Tad Taube

Together, Tad and

Director John Raisian developed the Koret Task Force on K12 Education, which led to the model of applied scholarship that has propelled the Institution forward for more than a decade. Today, there are eight academic teams in place, including

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Hoover Institution

fellows tout their book picks

(continued from page 7)

Uncommon Commitment Award winners (left to right): Paul Davies, Bill Edwards with Director John Raisian, and Tad Taube with John Raisian.

(David Brady, continued) Also excellent are the novels of Robert Bolano: 2666, Amulet, Savage Detectives, and By Night in Chile. The fiction of Indian writers Jhumpa Lahiri (The Namesake), R.K. Narayan, and Bharati Mukherjee depicts the phenomenon of migration, the status of new immigrants, and the feeling of alienation often experienced by expatriates. V.S. Naipauls Among the Believers: An Islamic Journey makes astute observations about countries transitioning to Sharia law. As for nonfiction, Ive just reread David Kennedys Freedom from Fear as a primer for the work that Im doing with Douglas Rivers and Morris Fiorina, which involves looking at what has happened to political party identification from the New Deal to the present, what drives it, and what changes it. In partnership with YouGov weve been tracking the same 15,000 respondents since 2004 to try to assess what motivates change in party affiliation. Not surprisingly, were finding that, in part, its the way you ask the question. Given the state of our economy, Ive also just reread The Big Three in Economics: Adam Smith, Karl Marx, and John Maynard Keynes, by Mark Skousen, which includes a lot of material on Milton Friedman. Its brilliant in its simplicity, capturing a broad cross section of the ideas and history behind modern economic thought. Thanks to Skousens entertaining writing style, you hardly notice till youre done how much youre learning. I highly recommend it.

the Koret-Taube Task Force on National Security and Law. Tad, who is president of the Koret Foundation board of directors, was also instrumental in creating a program whereby Israeli scholars could have a place and a platform to share their unique perspectives among Hoover fellows and, by extension, with Stanford colleagues, students, and community members. He has supported the directorship as well as a senior fellow position bearing his name. Garnering respect not only from Hoover board colleagues but from the most distinguished among our fellows, Tads sustained and unwavering commitment merits the highest distinction of the Hoover Institution. Im also working on a history of how the international order reacted when Americas growing power became a disruptive force in international politics, beginning in 1865. It explores how alarming our democracy was to the establishment powers and contrasts the choices made by Britain and Germany in managing a rising United States. (Kori Schake, continued) Ive just finished writing a book, titled War by Other Means, on how to improve the State Department. Ten years into the war on terror, State has largely failed to do its part in a war strategy that depends on our diplomats to capitalize on battlefield gains. Despite an admissions rate comparable to Stanfords (sixteen applicants for each position), State has failed to hire people with the skills it acknowledges it needs; it retains virtually all of them (4 percent annual attrition) and trains them in nothing but language. The predictable result is a diplomatic corps whose functions are migrating to other departments, principally the Pentagon.

ideas defining a free society

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announcing
Christopher S. Dauer has joined Hoover
as director of marketing and strategic communications, overseeing the Institutions print publications, webbased content channels, and video offerings. He is responsible for developing communication strategy and launching new products and platforms. A graduate of Brown University, Chris holds an MBA from Stanford.

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2011 Board of Trustees of the Leland Stanford Junior University

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Hoover Institution