talk

of the

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
spring 2012

ReSeARcH FeLLOw RUSSeLL ROBeRtS

Using new media to teach economics

inside
From the directors desk Page 2 Former fed chair Alan Greenspan joins blue-ribbon economists at Hoover conference Page 3
Photos courtesy Russell Roberts

Reading and writing about Iran Page 4 On the road again Page 5 Reboot federal role in K12 education, task force says Page 6 Hoover fellow Michael McFaul confirmed US ambassador to Russia Page 10 Hoover receives unique portrait collection from Bernard Lee Schwartz Foundation Page 10 Retired Admiral Gary Roughead named Annenberg Distinguished Visiting Fellow Page 10 In memoriam Page 11

In a lineup of Hoover scholars, could you identify the rapper? the novelist? the Internet talk show host? Heres a hint: Theyre all the same fellow.

oovers Russell Roberts may look and sound like his fellow scholars, but there arent

many economists whose rap music videos have exceeded five million YouTube views.

His twoFear the Boom and Bust and Fight of the Century, created with collaborator John Papola in 2010 and 2011depict economist John Maynard Keynes squaring off with freemarket proponent F. A. Hayek. Both videos portray the Keynesian versus Austrian schools of economics in an entertaining and approachable way. A third rap video is in the works. Whats amazing to me is the two (rap videos) combined still get about 5,000 views every day, months after their release, Roberts said, adding that many middle and high school teachers use them in the classroom. continued on page 8

ideas defining a free society

FROM tHe

directors desk
As a policy-oriented enterprise on the campus of a major
research university, the Hoover Institution seeks to deploy its unique intellectual resources toward practical, timely application for the betterment of our nation and our world. In recent years, our novel approach has incentivized extraordinary scholars to combine efforts within academic teamsor virtual facultieswith specific objectives defined by the Institution and each teams members. This model, deploying Hoover fellows and other scholars to work together on commonly defined, fully integrated topics and projects, has been a resounding success. I am elated that our culture at Hoover has moved formally to include these scholarly forums as part of the working environment of the Institution. Initially, these groups were funded through one-time grants and contributions. Now, because of their enormous success and the fact that we wish to continue wholeheartedly with these research initiatives, we are moving to build them into our permanent planning going forward. We plan to create an entity that will be known as Ideas and the Public Interest, providing our generous underwriters the opportunity to invest in a specific academic team or to support Ideas and the Public Interest generally. Funds contributed to generally support Ideas and the Public Interest will serve as a source of desired incremental funds as needed for some individual teams, and as seed funding for the launch of new initiatives as restricted funding is raised from early performance success. By using academic and administrative structures already in place, our academic teams leverage precious resources to create disproportionate value in the form of focused, scholarly work on prevailing policy issues. Through Ideas and the Public Interest, Hoover and its unsurpassed community of scholars formally integrate this collective approach to applied scholarship for the greater good.

John Raisian Tad and Dianne Taube Director

Hoover Institution

From left: Former Federal Reserve chairman Alan Greenspan, distinguished fellow George Shultz, and professor John Cochrane discuss ways to reinvigorate an anemic American economy.

HOOVeR cOnFeRence

ormer Federal Reserve chairman Alan Greenspan visited the Hoover Institution in December

to meet with a blue-ribbon group of economists concerning the stagnant economy.

Former Fed chairman Alan Greenspan joins blue-ribbon economists at Hoover conference

Organized by Hoover fellows John Taylor and Lee Ohanian, the conference, entitled Restoring Robust Economic Growth in America, brought together economists with extensive research and policy experience to address issues such as unemployment, policy uncertainty, long-term reforms, and monetary and fiscal problems. In a lunchtime panel with distinguished fellow George P. Shultz and University of Chicago professor John Cochrane, Greenspan argued that the H1B immigration quota is limiting American productivity and contributing to our economic problems. Calling it one of the worst policies in America, Greenspan said that the immigration quota limits the number of skilled workers entering the United States, limits competition, and contributes to making the United States a country of haves and have-nots. Those who would compete with Americans with high skills are not permitted to stay in this country, Greenspan said. Thus, incomes of Americans with those skills are higher than they would otherwise be, which is one of the reasons why weve got such a tremendously skewed distribution of income in this country. Greenspan served as chairman of the Federal Reserve from 1987 to 2006: the second-longest tenure in the position. Only William McChesney Martin Jr. served longer, from April 2, 1951, to January 31, 1970. continued on page 7
ideas defining a free society

RecOMMenDeD ReADInG

Reading and writing about Iran

AbrAhAm D. SofAer
George P. Shultz Senior fellow in foreign Policy and National Security Affairs member, task force on energy Policy

Not surprisingly, my heavy reading is related to what I am writing. Both concern Iran. I am writing a paper (perhaps ultimately a book) entitled Strength, Diplomacy and the Iranian Threat examining why the United States has been so unsuccessful in dealing with the threat that Iran will develop nuclear weapons. The US fixation on the nuclear dimension of Irans recent misconduct is a mistakenot because the nuclear issue is anything less than the single, greatest security threat in the world today but because it is one of the least manageable. It would be impossible legally to justify an attack on Irans potential development of a weapon, and any effective attack would be difficult, costly, dangerous, unpopular with the Iranian people, and might well fail. Other approaches to the problem are also likely to fail. Ignoring, pleading, and making unilateral concessions have led only to acute embarrassment for the administrations involved. Containment is a good idea, but international pressure through sanctions alone seems unlikely to prevent Iran from developing nuclear weapons. So, what should the United States do? Essentially, three things. First, the United States should focus much more emphatically on Irans current misconduct. Iran has been helping terrorists and others kill Americans ever since the bombing of the US Marine barracks in Lebanon in 1983. It is responsible for supplying Iraqis with weapons used to kill and wound hundreds of US GIs. It is helping our enemies in Afghanistan and has been the principal state supporter of terrorism around the world for many years. Second, the United States must do what needs to be done to deter Iran from such acts of aggression. This means attacking Iran but on a legal basis that is clearly justifiable. Lets not make the same mistake that we made with Al Qaeda: treating terrorist attacks exclusively as crimes. They are national security threats. Using the law as a form of defense is likely to result in huge dividends: deterring attacks not only on US soldiers but also on our allies in Iraq, Afghanistan, Lebanon, and Israel. Third, the United States should be prepared for a meaningful negotiation with Iran. As Secretary of State George P. Shultz has said, strength and diplomacy go hand in hand. As we show Iran we mean business, Iran will come to the table to try to work out a better future for itself. My paper will detail the disciplined principles of these negotiations. I have found two books of particular value helping me put my ideas into context. The first is Kenneth M. Pollacks The Persian Puzzle. This clear and balanced history of modern Iran is rich in detail about the very complex society Iran has always been. It is, unfortunately, riddled with the authors explanations and speculation about events that are maddeningly intrusive on the historical account. But that is a small price for the reward of being well informed. The second book I recommend is by my brilliant Hoover colleague Abbas Milani: The Shah. Milani has a depth of understanding about Iran that his personal experience has not distorted. These books complement those of Robin Wright as required reading for those who would try to understand the Islamic revolution.

Hoover Institution

On the road again

Regional gatherings in Santa Barbara and New York, and our annual Board of Overseers meeting in Washington, DC, bring Hoover scholarship to a neighborhood near you! For future dates and locations, e-mail hooverdevelopment@stanford.edu.

Top row (left to right) Director John Raisian, Overseer Mary Myers Kauppila, and Overseer George Siguler at Hoovers regional event in New York; Overseer and New York host Jerry Milbank greets Senior Fellow Victor Davis Hanson; Chairman Herbert Dwight, Overseer Don Tykeson, and Overseer Gail Jaquish greet Wisconsin Governor Scott Walker at Hoovers Washington meeting of the Board of Overseers. Center row (left to right) Overseer Heather Higgins greets US Representative Kevin McCarthy of California; Senior Fellow Tom Henriksen greets Marion Oster and Mona Mapel; Research Fellow Kiron Skinner, Overseer Pitch Johnson and his wife, Cathie, and Senior Fellow Victor Davis Hanson. Bottom row (left to right) Anne and Dana Smith with Senior Fellow Peter Berkowitz; Research Fellow Bill Whalen addresses a next generation Hoover meeting in Santa Barbara; Overseers Walter Blessey and Shirley Matteson with Attorney General Ken Cuccinelli of Virginia.
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new york photos by reflections event photography. Washington photos by Goodman/van riper photography. santa barbara photo by Julie ruggiero

tASK FORce UPDAte

Reboot federal role in K12 education, task force says

Choice and Federalism: Defining the Federal Role in Education (www.choiceandfederalism.org) recommends that Washington limit its education role to what it can do best: encourage states to create level playing fields that expand school options and competition. This would entail providing access to accurate information on school performance so that students and their families can make well-informed decisions about where to enroll. In our view, the federal governments proper mandate, along with providing some of the money, is to enhance educational opportunity and a principal way of doing so is to encourage states to give as many parents as possible

Photo courtesy http://www.K12.com/

what is now usually available only to the affluentthe right to choose where to send their child to school, said task force member Grover Russ Whitehurst, lead author of the report. Schools need to be held accountable for student achievement, but the marketplace discipline of robust competition and choice, combined with ample information about school performance, promises to be more effective than top-down accountability and program requirements imposed from Washington. Specifically, the task force report recommends that the federal government strengthen its responsibility for three activities that cannot be effectively devolved: creating and disseminating information on school performance, enforcing civil rights, and providing financial support to high-need students via backpack funding attached to individual pupils; support informed parental choice with the help of userfriendly Internet choice portals that describe available school options and provide clear and relevant information about school performance; use incentives to promote competitive markets for education services at the local level. Schools should be required to participate in data collection for performance reporting as a condition for receiving federal funds, Whitehurst said. The feds have a critical role in competitively funding designers and

With the No Child Left Behind (NCLB) Act overdue for reauthorization, the Koret Task Force on K12 Education is recommending a new and powerful strategy for fundamental education reformand a major makeover of the customary federal role: allow states receiving federal funding to opt out of traditional federal constraints if they create vibrant marketplaces for informed school choice.

Hoover Institution

former fed chairman Greenspan joins blue-ribbon economists at hoover conference

(continued from page 3) implementers of school choice portals. Choice wont work unless parents are supported with good information, delivered in a usable form. The task force also recommends expanding the charter school sector and encouraging other competitors, such as cyber schools, interdistrict schools, and private schools. Along with this broader array of options, school districts should stop assigning students to schools. Instead, every parent should be required to engage in school choice, thereby easing todays socioeconomic differences among parents in shopping for schools. Today, Washington is stuck in an education policy rut, said task force chairman Chester E. Finn Jr. On one side we find those who would simply let states do whatever they like with the federal dollars. On the other side are those who want the federal government to tighten the centrally prescribed accountability screws even harder. This debate is going nowhere, as is evident from Congresss multiyear failure to reauthorize what just about everyone agrees is a badly flawed law. Mr. Shultz echoed Greenspans concern over the disproportionate distribution of income. Through the poor quality of K12 education among lowincome areas, we are building maldistribution of income into the system, Mr. Shultz said. I think it is a crisis that we are allowing to continue. Theres nothing wrong with these (lower-income) kids. Theres a crisis in the environment in which they are entrapped. Dubbing the current stagnation financial crisis 3.0, Cochrane pointed to the three contributing culprits: the currency crisis, the fiscal crisis, and the banking crisis. Giving a banker a deposit guarantee is like giving a teenager the keys to the car and a bottle of whiskey, he said. The question, all three agreed, is what system will we reconstruct from the ashes? Mr. Shultz called the solutions simple: Reform the personal and corporate tax systems using the 1986 flat tax proposal as a template Focus on the present; the present president and current Congress have no control over what will be spent ten years from now Change Social Security indexing from wage to price indexing Let people buy health insurance across state lines to generate competition
Photo courtesy Vector Resources, Inc.

Reform the monetary policy of the Federal Reserve I think they should get back to the kind of monetary policy that (Paul) Volcker and (Alan) Greenspan had, Mr. Shultz said. It was predictable, consistent with prosperity without inflation. Try the Taylor Rule for example, just to be parochial about it. The Taylor Rule, proposed by Hoovers John Taylor in 1993, stipulates that for each 1 percent increase in inflation, the central bank should raise the nominal interest rate by more than 1 percentage point. It is intended to foster price stability and full employment by systematically reducing uncertainty and increasing the credibility of future actions by the central bank. It may also avoid the inefficiencies of time inconsistency from the exercise of discretionary policy.

Its time to rethink the whole enterprise, Finn said. By remaking its core policies for K12 education to align with those it has long since adopted for higher education, Uncle Sam can provide parents with something nearly all want: the opportunity to choose where their child is schooled.

ideas defining a free society

Using new media to teach economics

(continued from page 1)

Research fellow Russell Roberts devotes an increasing amount of time to what he calls public education, making use of new media to teach economic policy.

Were trying to reach people who are interested in how the world works, he said. Thats everybody from a high school student who is curious about economics to a person who is just trying to make a living and get along and is worried about whats going on in Washington or in the country. We tried to make these lyrics accessible, a little bit amusing. With a goal of reaching a broad base of people, Roberts is not content to communicate through just one medium. I love to teach and Ive always enjoyed explaining things, but people want to learn through other media besides the printed word. It turns out that there is a strong interest in learning and that people have time in their lives when they can listenwhen they are on the exercise machine, when they are driving. So Roberts podcasts (EconTalk www.econtalk.org/). He blogs (Caf Hayek cafehayek.com/). He raps (www.YouTube.com/watch?v=d0nERTFo-Sk, www. YouTube.com/watch?v=GTQnarzmTOc). And he writes novels (The Price of Everything: A Parable of Possibility and Prosperity; The Choice: A Fable of Free Trade and Protectionism; and The Invisible Heart: An Economic Romance). He knows he is making an impact; his fans reach out to tell him so. Some of his favorites?
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Im pretty proud of the fact that a dad writes to say, My son and I listen to the podcast every week on the way to school, and its been a wonderful way to bond, Roberts said. I had a guy tell me his fifth grader has mastered all of the (rap) lyrics and was showing the video to his friend, and he said, Dude, dont you know anything about Austrian economics? But my favorite is the guy who told me he never went to college, that he works for a maintenance company and he waxes floors in buildings late at night, and at three in the morning while hes buffing the floor he listens to my podcast. It was actually the podcast that led to the creation of the rap videos. Roberts explained that Papola, a film producer who had become a fan of the podcasts, called him and suggested the two collaborate. The rest, as they say, is history. The rap videos have been subtitled in eleven languages and viewed hundreds of thousands of times in those subtitled versions. I devote an increasing amount of time to what I call public education, said Roberts. Its so gratifying to know that people around the world are learning a little something from what I do.

Hoover Institution

excerpts from Fight of the Century

KeYNeS
Here we are. Peace out, Great Recession. thanks to meas you seewere not in a depression. Recovery. Destiny. If you follow my lesson. Lord Keynes. Here I come. Line up for the procession.

hAYeK
I dont wanna do nothing, theres plenty to do. the question I ponder is who plans for whom. Do I plan for myself or leave it to you? I want plans by the many, not by the few. Lets not repeat what created our troubles. I want real growth, not a series of bubbles. Stop bailing out losers, let prices work. If we dont try to steer them, they wont go berserk.

hAYeK
we brought out the shovels and were still in a ditch. And still digging. Dont you think its time for a switch from that hair of the dog? Friend, the party is over, the long run is here, its time to get sober.

Russell Robertss YouTube video Fight of the century, created with collaborator John Papola in 2011 and pictured here, depicts economist John Maynard Keynes squaring off with free-market proponent F.A. Hayek.

KeYNeS
we could have done better had we only spent more. too bad that only happens when theres a world war. You can carp all you want about stats and regressions. Do you deny that world war cut short the Depression?

KeYNeS
Youve got on your high horse and you are off to the races. I look at the world on a case-by-case basis. when people are suffering I roll up my sleeves and do what I can to cure our disease. the futures uncertain, our outlooks are frail. thats why free markets are so prone to fail. In a volatile world we need more discretion so state intervention can counter depression.

hAYeK
wow. One data point and youre jumping for joy. the last time I checked wars only destroy. there was no multiplier. consumption just shrank as we used scarce resources for every new tank. Pretty perverse to call that prosperity. Ration meat. Ration butter. A life of austerity. when that war spending ended, your friends cried disaster. Yet the economy thrived and grew faster.

hAYeK
People arent chessmen you move on a board at your whim, their dreams and desires ignored. with political incentives, discretions a joke. those dials are twisting, just mirrors and smoke. we need stable rules and real market prices so prosperity emerges and cuts short the crisis. Give us a chance so we can discover the most valuable ways to serve one another.

KeYNeS
So what would you do to help those unemployed? this is the question you seem to avoid. when were in a mess, would you have us just wait, doing nothing until markets equilibrate?

ideas defining a free society

Photo courtesy Russell Roberts and John Papola

Hoover receives unique portrait collection from Bernard Lee Schwartz Foundation

the Bernard Lee Schwartz Foundation has contributed thirtyfour statesmens portraits to the Hoover Institution Library and Archives, including photographs of such luminaries as Prime Minister Margaret thatcher of Great Britain, US secretary of state Henry Kissinger, and Prime Ministers Moshe Dayan and Golda Meir of the state of Israel.

AP photo

Photo by Bernard Lee Schwartz courtesy Hoover Institution Library and Archives

the portraits, donated by Schwartz Foundation president and Hoover council member Michael Schwartz,

Hoover fellow Michael McFaul confirmed US ambassador to Russia

The US Congress has confirmed Peter and Helen Bing Senior Fellow Michael McFaul as US ambassador to Russia. An expert on US foreign policy, US-Russian relations, political and economic reform in the postcommunist world, and the promotion of democracy, McFaul joined Hoover in 1995. He has written and edited more than twenty books, and penned numerous articles and opinion pieces, as well as serving as an expert commentator on national television and radio. During his tenure in the Obama administration, McFaul has been an integral part of the new forward momentum in relations with Russia. His voice and expertise are valued assets in the current landscape of critical events not only regarding Russia but also transitions to democracy in the Arab world. Before leaving Stanford University to serve as special assistant to the president for national security affairs and senior director for Russian and Eurasian affairs at the National Security Council, McFaul was a professor of political science, a senior fellow and former deputy director of the Freeman Spogli Institute for International Studies, and director of the Center on Democracy, Development, and the Rule of Law.

Retired Admiral Gary Roughead named Annenberg Distinguished Visiting Fellow

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Hoover Institution

Photo by tiffini Jones Vanderwyst, US navy

are the creations of his father, the late Bernard Schwartz, who took up photography at the age of sixty after a successful career in business. In his short photographic career, Bernard Schwartz captured some two hundred distinguished personalities on film, including six prime ministers, a prince, two kings, and a pope. Mrs. thatcher chose Schwartzs portrait for her campaign poster. A 1982 commemorative firstday-cover of a philatelic issue in england features his classic portrait of Lord Mountbatten.

After forty years as a successful businessman, Schwartz (191478) turned his time and considerable talents toward a new career in portrait photography, which had been his hobby since he was a boy. In the space of three years, he was able to capture dozens of portraits of unsurpassed quality. His photographic encounters often ripened into enduring friendships with some of the worlds leading figures.

My life has always been one of service to my fellow man.

Photo courtesy Fund for American Studies

Billie Pirnie

In memoriam
Hoover overseer Billie Pirnie of Montgomery, Alabama, passed away on October 22, 2011, at the age of eighty-nine. As president, ceO, and co-owner of Ropir

Retired Admiral Gary Roughead, appointed in September 2007 as Chief of Naval Operations (CNO) by President George W. Bush, is in residence at Hoover this year as the Annenberg Distinguished Visiting Fellow.
Admiral Roughead, who as CNO focused on military modernization until his retirement from active duty in September 2011, plans to examine the critical role of the military as part of the American way of life. Working in collaboration with former cabinet members Distinguished Fellow George P. Shultz and Senior Fellow William Perry, who are also in residenceAdmiral Rougheads research will contribute substantially to the Institutions focus on the role of military history on current public policy formation. To focus on policy research and to collaborate with esteemed colleagues is an extraordinary opportunity to remain engaged in public policy, Admiral Roughead said. I am pleased to accept the prestigious offer of the Hoover Institution to serve as the Annenberg Fellow. Admiral Roughead is a visionary when it comes to the role of the military in national security, Director John Raisian said. Too much policy dialogue has an absence of history, implicitly suggesting that all new policy issues are sufficiently different that one does not benefit from reflection on past idea formation and practice; we think differently at Hoover, and anticipate that Admiral Rougheads active presence will help us look at how to balance current policy dialogue with more historical perspective.

Industries, as well as chairwoman of three Ropir Industries subsidiaries, she was deeply committed to business and community service. She began her Hoover board service in 2001. In addition, she served on the board of the telecommunications Association of the Southeast, the board of advisers of the Heritage Foundation, and the Montgomery chapter of the Daughters of the American Revolution. My life has always been one of service to my fellow man: first as a registered nurse, then as a wife and mother, and finally as a provider of communication to the public, Pirnie said in a recent interview. Born July 6, 1922, in Huron, Kansas, Pirnie met her husband, Bob, when both were students at westport High School in Kansas city. She earned a nursing degree in 1943 and later a degree in advanced management studies from the University of Kansas, topeka. In the mid1950s, Bob Pirnie purchased the Union Springs telephone company, and together the couple grew it into Ropir Industriesconsisting of the original phone company, com Link cable tV, and Ropir communicationswhich Pirnie ran for more than twenty years, since 1991.

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