Why the “Proposed Koch gift to WCU is a Bad Idea”

invisible hand About a week ago , I wrote about the events leading up to the dilemma faced by Western Carolina University faculty and administration with being offered a $2 million grant from a Koch Brothers foundation. What I did not mention is the recent domination of the North Carolina university system by Republican minded-administrators such as Margaret Spellings former President Bush Secretary of Education adding to the complexity.

Mark Jamison continues with the depiction of the dilemma Western Carolina University faces and provides the argument as to why the faculty and administration should reject this Koch Brothers donation. This article can also be found in the“Smoky Mountain News” as a guest column by Mark.

Mark Jamison

The proposed $2 million gift from the Charles Koch Foundation to WCU for the establishment of a Center of Free Enterprise raises several questions.

• Are gifts like these from private donors appropriate at public institutions? Do they entail a certain quid pro quo regardless of protocols to ensure transparency?

• Are certain types of gifts within certain academic disciplines different in their impact on the mission and perception of the university?

• In an era when we have seen the highest concentrations of wealth in more than a hundred years and when there exists a growing concern about the impact of money on the accountability and accessibility of political institutions do these sorts of gifts further a trend away from democratic institutions and public goods? Is this trend health? Unhealthy?

In 1971 Lewis Powell, a corporate lawyer and member of eleven corporate boards, wrote a memo to the Director of the U.S. Chamber of Commerce. Two months after he submitted the memo, Powell was nominated to the Supreme Court. The memo was essentially a diatribe against American Liberalism and a call for action from American corporate and business interests. It recommended a concerted effort to develop an intellectual infrastructure that would support the interests of American corporatism.

The Powell memo has often been credited as the birthing document of the web of think tanks, associations, and groups that advance conservative thought in this country. Another consequence of the memo was a renewed focus on capturing government and making it work directly for the interests of corporate elites.

Over the last generation we have increasingly seen the effects of Powell’s advice in action; especially as economic gains have concentrated in the upper .01% creating a class of billionaires able to buy an outsized voice and presence in politics and policy making.

Not content to simply fund think tanks that use non-profits to promote, advocate, and espouse particular points of view, the billionaire class has moved into other areas. A recent piece in the New Yorker on the Ford Foundation noted that the Gates Foundation, with an endowment of forty billion dollars, has done notable work in the fight to eliminate malaria. But Gates also “spent two billion dollars over eight years in an effort to break up big public high schools and form smaller ones.” Resulting analysis showed the effort had little impact on educational quality but it did spend millions on creating charter schools. Gates has been called “the nation’s unelected school superintendent”.

Mark Zuckerberg of Facebook fame spent over one hundred million dollars in a similar effort in the Newark schools that ended in dysfunction and controversy.

The owners of Hobby Lobby, famous for their suit against the ACA, have set up a multimillion-dollar foundation to create a Bible museum. The Atlantic has reported that as part of that effort the Green family has been acquiring ancient texts and antiquities, some in transactions that ignore international conventions in the trade of historical items. Scholars are concerned that access to these essential texts may be controlled in ways that limit research and scholarship.

The Walton family has placed a significant amount of its inherited fortune in nonprofit trusts, primarily as a way of avoiding taxes. One purpose of these trusts has been to create one of the largest private art museums in the world, Crystal Bridges. It seems we may be returning to a time before the Enlightment when the wealthy controlled arts and literature and the artist created at the whim of a patron.

In many ways these foundations act as a way of molding society in the image of a particular plutocrat. In some ways these foundations act as Super PACs, especially those that exist to advocate on behalf of political causes. There is one big distinction though, these foundations are created under nonprofit statutes so they are effectively subsidized by taxpayers to the tune of forty percent. The New Yorker piece quotes Judge Richard Posner on treating foundation assets as tax exempt,

”A perpetual charitable foundation . . . is a completely irresponsible institution, answerable to nobody. Unlike a hereditary monarch whom such a foundation otherwise resembles, it is subject to no political controls either. The puzzle for economics is why these foundations are not total scandals.”

The ubiquity of private think tanks and foundations assures that there is more than sufficient opportunity for the dissemination of political and ideological opinion. Here in North Carolina we suffer no lack of presence with Art Pope’s John Locke Society and Civitas.

Why then is it necessary to extend the reach of these essentially political organizations into the publicly funded university system? Even if one concedes that accepting donations from wealthy benefactors can be beneficial to a publicly funded university, does a difference arise with respect to what the benefactor chooses to fund?. Leaving the question of agenda setting aside it would seem that there is a fundamental distinction between funding a Center for Bioresearch and funding a Center for Free Enterprise. The one is largely a pursuit of empirically constrained hard science while the other, as indicated by its name, is a study of ideology. This becomes particularly evident when one looks at the specialty of the proposed director of the CFE, Professor Edward J. Lopez. Dr. Lopez focuses on a branch of economics that comes under the rubric of “Public Choice Theory.”

In his book, “Madman, Intellectuals, and Academic Scribblers” Lopez states,

“The basic idea of public choice theory is that economists shouldn’t have one set of theories for a person making a commercial decision and a separate set of theories for that same person making a political decision. Economists working in the public choice tradition argue that if we are going to look at market failure, then it makes sense to see if there is government failure, too. With this perspective in mind, it becomes clear why democracies so often generate inefficient policies and why they allow them to persist.”

The implication is that all the world, every facet of the human experience, is not a stage as Shakespeare wrote; but a market, a market where rational beings make rational choices based solely on profit and loss – maximization of utility.

This is more than merely economics, it encompasses the whole of social sciences as evidenced by a quote Dr. Lopez uses in a book of essays he edited. In “The Pursuit of Justice” (which oddly enough focuses not on theories of justice but on the idea that our legal systems and institutions are fundamentally corrupt because they are victims of pervasive and perverse incentives) Dr. Lopez quotes James Buchanan, one of the founders of the PCT school as saying;

“Public choice should be understood as a research program rather than a discipline or subdiscipline of economics.”

And in fact Dr. Lopez makes it clear throughout his writings Public Choice Theory (PCT) is “intertwined with philosophy, history, finance, psychology, development, linguistics, and other fields;” an all encompassing theory of everything – a dogma.

Matt Yglesias has suggested that PCT fits a syllogism (a logical argument that offers two or more propositions and a conclusion):

P1) Spread skepticism about government officials and their motives

P2) ?

C) Libertarianism

Indeed, this may be a good description of much of Dr. Lopez’s work. The question mark does a great deal of heavy lifting in his arguments but the first proposition is meant to gloss over everything else.

Consider the three questions Dr. Lopez poses in his book, “Madmen, Intellectuals, and Academic Scribblers:”

1. Why do democracies generate policies that are wasteful and unjust?

2. Why do failed policies persist over long periods, even when they are known to be socially wasteful and even when better alternatives exist?

3. Why do some wasteful policies get repealed (for example, airline rate and route regulation) while others endure (such as sugar subsidies and tariffs)?

The first question does not ask “Do democracies generate policies that are wasteful and unjust?”. It assumes that they do which certainly is true in some instances but the framing isn’t about discovering under what circumstances wasteful policies occur, there are no definitions of wasteful, and despite constant references to just or unjust actions Dr. Lopez never gives much of a definition beyond a nebulous reference to “rules” and “property rights”.

As an example Dr. Lopez writes approvingly in a couple of different papers of President Grover Cleveland’s 1887 veto of a disaster relief bill for Texas farmers wiped out by drought. Such aid was not, in Cleveland’s and apparently Lopez’s view, constitutional. Presumably, the implication still holds true.

There is not a great deal of intellectual inquiry here. There is an assumption that we are all homo econimicus, that institutions are subject to the same incentives and rent seeking behavior that individuals always exhibit, and that the answer must therefore be a laissez faire version of society as encompassed entirely by the market.

Throughout his writings Dr. Lopez is adept at telling just- so stories leading us in the direction of his conclusions. For example, in his recent letter to SMN that began with a rebuttal to a previous writer’s assertions about BB&T’s actions during the financial collapse Dr. Lopez references BB&T’s repeated claims that they were forced to take TARP money, a claim that may have some truth but which also ignores the fact that BB&T was also found to be significantly undercapitalized and overleveraged.

Lopez is also much taken with Adam Smith’s metaphor of the invisible hand, perhaps one of the most overused, abused, and misunderstood phrases in the annals of economics. Lopez uses the phrase 11 times in his book while Smith used it three times in his entire body of work; once in a treatise on astronomy; once in “A Theory of Moral Sentiments” in the context of similar needs of both rich and poor for basic necessities ; and once in “The Wealth of Nations” in the context of comparing domestic and foreign manufactures. From those three examples and particularly in the last, a mythology of a self-generating and correcting marketplace has developed to the level of religious or iconic status.

Oddly enough, Lopez never seems to quote Smith during his many discussions of the problems of working folks and the disadvantages and inequalities that labor faces. For example, it is unlikely that Lopez would cite Smith’s take on progressive taxation:

“The rich should contribute to the public expense,” he wrote, “not only in proportion to their revenue, but something more in proportion.” Adam Smith

Dr. Lopez is also adept at portraying his intellectual heroes in the most positive light while subtlety poking figures he is in disagreement with. In one passage, he says about John Maynard Keynes, “He even took both sides in love, not terribly unusual among intellectuals of his circles in that day. As a young scholar, Keynes had male lovers, including the writer and critic Lytton Strachey. But, like Pareto, he later married a Russian woman, the ballerina Lydia Lopokova.”

This puts one in mind of the controversy that arose after the Harvard historian Niall Ferguson took a Keynes quote about how in the long run we are all dead badly out of context and then proceeded to point out that because Keynes was gay and had no children, he had no sensitivity to future generations. I’m not sure what Dr. Lopez hoped to accomplish with this observation but for the life of me I can’t understand how Keynes’s sexual preferences, Russian wife’ or reference to Pareto tell us anything about his economic thinking.

Perhaps Dr. Lopez was trying to make a point that Keynes often changed and adapted his positions, a point that would have been served by offering up this well known quote from Keynes;

“When the facts change, I change my mind. What do you do sir?”

Dr. Lopez has been quoted saying that academic inquiry should not be censored even if unpopular. I heartily agree with him and I would never suggest that his teaching be censored or limited. I would suggest that each instructor, particularly in a public institution, has an obligation to present material in the spirit of intellectual honesty and inquiry and that would include presenting a fair assessment of ideologies or systems that conflict with an instructor’s preferred ideologies or systems. In his book, “Madmen, Intellectuals, and Academic Scribblers” Lopez’s main theme is that ideas should win out in the marketplace. While the marketplace is only a small part of the world and human experience, a point on which Lopez and I would disagree, his basic construction is correct – good ideas; ideas subjected to empirical, logical, and philosophical testing; ideas that advance, expand, or illuminate our concepts of justice; and ideas that have been broadly and fairly debated and contested ought to win our respect.

But the question here is more than what Dr. Lopez teaches or even how he teaches it. At issue is not the legitimacy of one professor’s views. The issue is whether a publicly funded institution ought to take a gift to establish a program with the clear mission to teach a particular ideology, an ideology that is, in fact – broadly contested. This is especially true in a discipline like economics and especially when the proposed center and its proposed leader mix economics, political philosophy, and political science. Maybe the discussion ends up being framed differently if we were talking about a hard science, or medical research, or a purely technical discipline. Even then, there might still be questions about billionaires dictating an agenda but in a discipline that is entirely empirical there are fewer and different problems. The search for facts and the search for truth are two different endeavors; that distinction is both critical and germane to this specific proposal.

Transparency is not the issue, no matter how unstructured the grant the undeniable fact is that $2 million buys influence, it gets phone calls answered, and it gets preferences on the agenda. The simple fact is that one of the basic tenets of the ideology Dr. Lopez preaches is that money talks, it is the measure of the market. More to the point, the ideology that Dr. Lopez espouses argues that institutions, particularly public institutions, are subject to manipulation and perverse incentives. The proposed grant is a demonstration of whatever truth lies in public choice theory.

The land grant colleges and public university systems were built to serve as great equalizers. These public institutions were built to give average folks the opportunity to acquire knowledge and pursue intellectual inquiry. Sadly as our world has graduated from a market economy to a market society, much of the mission of our public institutions has been lost. In a world where billionaires and corporate sponsors face few constraints in their ability to dictate public policy and control public discourse we ought not blithely encourage yet another venue for indoctrination, no matter how much the enticement. I would make this argument regardless of the source of the money whether it comes from the Kochs or some liberal bogeyman like George Soros.

Let Dr. Lopez teach what he wants but let WCU retain its integrity as a public institution, something it cannot do under any conditions if it accepts this gift.

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