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Alejandro A. Chafuen / February 8, 2013

Think Tanks: Masters of the Universe?

Editor’s note: A version of this article first appeared at Forbes.com.

How do think tanks contribute to produce outcomes conducive to better public policy? Working for over three decades in this field, I developed a simple model based on complex inputs. Outcomes are the result of four factors: ideas, incentives, leadership, and providence or luck.

A recent book by Daniel Stedman Jones, “Masters of the Universe: Hayek, Friedman, and the Birth of Neoliberal Politics” (Princeton University Press, 2012), touches on all of these factors. As a source of fundamental ideas, Stedman Jones focuses on four prominent figures, Ludwig von Mises, Karl Popper, and Nobel Laureates F.A. Hayek and Milton Friedman. Stedman Jones’ quote from an April 21, 1978 appearance by Friedman on the BBC’s “The Money Programme” describes the role he thinks they play: “The role of thinkers I believe is primarily to keep options open, to have available alternatives, so when the brute force of events make a change inevitable, there is an alternative available to change it.”

On political leadership, Stedman Jones focused on Margaret Thatcher and Ronald Reagan. Few friends of the free society can quibble with his choices. They are all widely recognized for their contributions in creating the outcome of stopping the road towards socialism. On the role of incentives, Stedman argues that the free-enterprise vision became dominant thanks to a transatlantic network of think tanks, businessmen, politicians, and journalists. This network was held together by the views and intellectual leadership of Hayek, Friedman, et al. Stedman Jones also gives a prominent space to Mises’ “Bureaucracy,” and to Popper’s “The Open Society and its Enemies.” He mentions that this network benefitted from the generosity and leadership of businessmen and their foundations, including: Richard Mellon Scaife, The Earhart Foundation, Charles Koch, the John M. Olin Foundation, and Liberty Fund.

Despite devoting many pages to the intellectual foundations of neo-liberalism, which he defines as “the free-market ideology based on individual liberty and limited government that connected human freedom to the actions of the rational, self-interested actor in the competitive marketplace,” Stedman argues that “luck, opportunism, and a set of contingent circumstances played the most crucial roles.” But when luck, circumstance or providence created the condition, the network was ready: “a genuinely transatlantic enterprise, the network had by the 1980’s become increasingly international through the efforts of such organizations as the Atlas Foundation and the Mont Pelerin Society.” I became member of the Mont Pelerin Society in 1980, and president of Atlas in 1991, so I can give credence and appreciate his analysis.

He quotes from correspondence between Hayek and Antony Fisher, where the latter makes an effort to convince Hayek that the creation of think tanks was not the result of pure luck: “You mentioned ‘luck’ … No doubt luck is important … Was there not an intention on both our parts and consequent action? [to start a think tank] How much is luck?” Fisher founded the Institute of Economic Affairs in 1957, and Atlas in 1981.

Stedman includes more quotes and devotes many more pages to Von Mises, Hayek and Friedman than to Margaret Thatcher and Ronald Reagan. His lengthy exposition of the views shared by these outstanding economists might encourage many to pay attention to their works. This might help balance his analysis that the 2008 crisis was the result of unbridled free markets. The Mises-Hayek-Friedman “club” argues that the crisis was the result of previous interventionism.

The book concludes that “reason-based policymaking needs to return.” For Stedman this means the rule of the enlightened bureaucrat. Those whose work led to a temporal triumph of neo-liberalism also believe in reason-based policy making. But it is a reason tempered by their empirical and theoretical understanding of the superiority of simple rules over the detailed regulation of business and people’s lives. Hayek wrote that “probably nothing has done so much harm to the liberal cause as the wooden insistence of some liberals on certain rough rules of thumb, above all the principle of laissez-faire.” He seemed to have in mind those who, to any policy problem, basically respond, “it is the government’s fault, the free-market will solve it.”

The road back to free enterprise, and away from state and crony capitalism, will require a new generation of think tank leaders who will go back to serious research and proper promotion of policy solutions.

Dr. Alejandro A. (Alex) Chafuen ‘84 is president of the Atlas Economic Research Foundation and a member of the board of advisors for The Center for Vision & Values at Grove City College. (The opinions expressed by the author are his own and do not necessarily reflect those of Grove City College, Atlas Economic Research Foundation, or their boards of trustees.)

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