What Is A Think Tank?

Special Publications | About


Tuesday, December 20, 2005
by NCPA

What is a think tank? What do think tanks do? Why are they important? These questions are more pertinent than ever in today's public policy environment.

Think Tanks as Idea Factories. A think tank is an organization that sponsors research on specific problems, encourages the discovery of solutions to those problems, and facilitates interaction among scientists and intellectuals in pursuit of these goals. A public policy think tank explicitly focuses on government policies, usually for the purpose of improving those policies or creating viable alternatives.

By their very nature, public policy think tanks are involved with the academic and scholarly world. In fact, the most important sources of political change are not politicians, political parties or financial contributions. Rather, they are ideas generated on college campuses, in think tanks and in other research organizations around the country.

Ideas That Cause Change. As a wise man once said, "Nothing is more powerful than an idea whose time has come." Almost all important political change starts with an idea. And the idea inevitably originates with people who spend a great deal of their lives thinking. Indeed, it's hard to point to any major public policy in the modern era that did not originate in the academic world. Here are some examples:

  • When Chile became the first country to privatize its Social Security system, the architects were U.S.-trained economists who looked to Nobel Laureate Milton Friedman and his colleagues at the University of Chicago for guidance. Since then, more than 30 countries have followed Chile's lead.
  • When Margaret Thatcher set out to privatize the British economy, she relied on the Adam Smith Institute and the Institute of Economic Affairs for key ideas that were later promoted in the United States by the Reason Foundation and others. 2
  • The idea of the flat tax, which has been adopted in Russia, in many Eastern European countries and elsewhere around the world, was originally proposed by Milton Friedman 3 and subsequently promoted by the Hoover Institution. 4
  • Ronald Reagan's supply side economics came from Nobel Laureate Robert Mundell and was popularized by economist Art Laffer and Wall Street Journal columnist Jude Wanninski. 5
  • School vouchers, another idea rapidly spreading around the world, was originally a Milton Friedman proposal. 6
  • Welfare reform, perhaps the most successful public policy reform of the last quarter-century, almost single-handedly flowed from Charles Murray's Losing Ground, 7 sponsored by the Manhattan Institute.
  • Many of the Bush administration's attempts to use market forces to solve environmental problems stem directly from free market environmentalism spawned by the Property and Environment Research Center (PERC) and the Foundation for Research on Economics and the Environment (FREE).
  • Health Savings Accounts and Roth IRAs are only two of the numerous ideas generated by the National Center for Policy Analysis.

Before the collapse of Communism, underground copies of Milton Friedman's book Free to Choose were smuggled into Eastern Europe, where they introduced a generation of students and political dissidents to classical liberal economic ideas. This and other Western publications played a decisive role in bringing about the collapse of Communism and later served as a foundation for countries' post-Communist economic policies.

Origin of the Idea of a Think Tank. Ideas come from think tanks. But where did the idea of a think tank come from? It may well have come from Thomas Clarkson, an Englishman who founded the Society for the Abolition of The African Slave Trade in 1782. By meticulously describing the condition of the slave trade, supplying diagrams of slave ships, and combining factual inquiry with moral argument, Clarkson engaged in a war of ideas.

"Powered by an evangelical zeal, Clarkson's committee would become what might be described as the world's first think tank," writes Lawrence Reed. "Noble ideas and unassailable facts would be its weapons." 8

Think tanks figured prominently in the 20th Century. The Manhattan Project was a very focused think tank of sorts. The RAND Corporation, the Brookings Institution and the Urban Institute are other organizations that left their mark. Of special interest are organizations that sprang up in the latter part of the 20th Century, often for the explicit purpose of defeating collectivism, much as Clarkson sought to end slavery. Among these were the Hoover Institution, the Heritage Foundation, the American Enterprise Institute and the Cato Institute.

No single person was more important in encouraging the spread of think thanks than Sir Antony Fisher. An RAF pilot in World War II who went on to become successful in business, Fisher sought advice from Nobel Laureate Fredrich Hayek on how to stop the spread of collectivism and encourage a resurgence of 19 th century classical liberal ideas. Don't go into politics, Hayek advised. Focus instead on the world of ideas. 9

Fisher started the Institute of Economic Affairs in London, which later became Margaret Thatcher's think tank. Following that success, he helped start the Fraser Institute in Canada; the Institute for Liberty and Democracy in Peru; and the Manhattan Institute as well as the National Center for Policy Analysis in the United States. His Atlas Foundation supplied modest seed money for these efforts and convened an annual think tank conference. By the time he died, Fisher had helped start more than three dozen think tanks around the world.

How Ideas Cause Change. Ideas tend to filter through a hierarchy. They start in the realm of intellectuals. Through conferences, speeches, briefings and reports written for lay readers, the audience expands. The ideas begin to appear in newspaper editorials. Special interests may find an idea to their liking and help it along. Gradually, more and more people become aware of it. Politicians are often the last to climb on board. Still, it's a process that has been repeated again and again.

From the Republican Contract with America to Bill Clinton's highly successful welfare reform, from Ronald Reagan's supply side economics to George W. Bush's plan to reform Social Security - all of these ideas came from think tanks. For that matter, so did Medicare, Medicaid and Lyndon Johnson's Great Society. For good or evil, ideas are powerful engines of change.

Why do so many people view think tanks as impotent - producing papers and reports that collect dust on bookshelves? The answer is: impatience. Ideas take time to cause change. Their impact occurs with a lag:

  • It took 20 years from the time Clarkson started his think tank until Britain passed the first anti-slavery law and 26 more years after that until slavery was finally abolished throughout the realm.
  • It took more than 30 years after Milton Friedman first proposed the idea of school vouchers and the idea of a flat tax for them to emerge as part of the national debate.
  • More than 20 years elapsed before George W. Bush campaigned on Social Security reform - an idea that the Cato Institute, the NCPA and other think tanks originally proposed.
  • More than 15 years elapsed between the time the NCPA first proposed health savings accounts and the time they became available to most people.
  • Even such popular ideas as the Roth IRA and repealing the Social Security earning penalty took a decade.

Bottom line: people who want important public policy changes need to be willing to make long-term investments.

How Think Tanks Function. In general, think tanks that were formed before the emergence of the Internet tend to follow the "one roof" model. The idea was to bring a diverse group of scholars together in one place, so they could interact face to face. One reason for this was communication. Forty or fifty years ago, the costs of communication from campus to campus were quite high, relative to what we experience today.

For think tanks formed in the classical liberal tradition, there was also another reason. When I was a graduate student at Columbia University in the early 1970s, the Reason Foundation attempted to compile a list of all of the liberal arts faculty in the entire country who believed in free markets and personal liberty. The actual criteria were quite loose. They basically included everyone who was not a socialist or a Hubert Humphrey liberal. The list was also very short. As I recall, there were only 15 or 20 names.

In those days, if you were a classical liberal teaching at a university, you were probably the only one on your campus. There was literally no one else to talk to who was like-minded. So places like the Hoover Institution (where as a young Ph.D. economist I was employed) served a valuable function. They brought people together who would otherwise be quite intellectually isolated.

Today, things are different. The academic world is teeming with scholars (especially economists) who believe that markets work and that they are powerful engines of social change. In addition, the Internet has made communication cheap, easy and immediate. As a result, almost all younger think tanks are based on a different model: they are organizations without walls. At the NCPA, our tax specialist is in Boston; our Medicaid expert is in Cleveland; the scholars who model Social Security and Medicare are in College Station, Texas; our Center for European Studies is in Washington, DC; and our administrative personnel are in Dallas.

Think tanks without walls typically have no endowments and are less well-funded than older organizations that try to assemble everyone under one roof. To make smaller budgets stretch further, they economize by contracting with scholars at other institutions rather than employing them. This means that the university pays all the overhead and the think tank pays only the marginal cost of the research it wants. Against these greater efficiencies, the think tank may suffer an identity problem, however. A news story about a scholarly study may mention only the professor/author's name and perhaps the name of the university that employs him - omitting the name of the think tank that actually funded the research.

Marketing Ideas. The notion that ideas can be marketed like products is a fairly new concept. When the NCPA was started in 1983, the typical think tank report did not make use of bolded headings, bullet points for emphasis, call out sentences or visually pleasing graphics. Executive summaries were virtually nonexistent. Annual reports were in black and white and the photos were typically of amateur quality. No think tank had a promotional video at that time, either. The NCPA introduced all of these techniques and today they are commonplace. But the techniques were not original with us. We simply copied them from the world of business. What was original was the insight that ideas can be marketed like products and think tanks could market themselves like a business enterprise.

Intellectual Entrepreneurs. Antony Fisher thought of me as an intellectual entrepreneur, by which he meant someone who applies entrepreneurial skills often found in the business world to the world of ideas. I was not alone. Over the past 25 years, the think tank community has been highly entrepreneurial. Under the leadership of Michael Walker, the Fraser Institute in Canada pioneered techniques for measuring waiting times for medical care in Canada - evidence that was used by Canada's Supreme Court to strike barriers to private care in Quebec.10 Hernando de Soto measured how long it took to get approval to start a new business in Lima - a technique that has been repeated in less developed countries around the world.11 At the NCPA, we calculated the differential Social Security benefits expected by black and white workers (even though all pay the same tax rate), showing that pay-as-you-go elderly entitlement programs discriminate against blacks and other minorities.12

Think Tanks as Businesses. The NCPA is a nonprofit institution - but it is run as a business. We invest in new programs and judge our success by the return on those investments. In 2004, we spent 82% of our donations on programs, with the remaining 9% going to fundraising costs and 9% to administration costs. We have a five-year plan. We have a succession plan, including key-man insurance. Other successful think tanks are also run like businesses, applying business techniques to the world of ideas.

When the NCPA was formed in 1983, there were older, larger think tanks already in existence. Our job was to find a market niche. Ronald Reagan was president and the existing right-of-center think tanks tended to focus on the President's agenda. The niche for the NCPA was all of the items that were not on Reagan's agenda: Social Security, health care, employee benefits and other "social insurance" issues. As it turns out, these are the hardest areas to reform, not only in our country, but all over the world. However, by investing in these especially-hard-to-solve issues, the NCPA built up expertise and institutional memory that could be brought to bear in later years when the body politic was ready to address them.

The Location of Think Tanks. In recent years, there has been a tendency for all organizations interested in pubic policy to move to Washington, D.C. - if they were not already there in the first place. In my opinion, this is a mistake. There is enormous pressure on everyone within the Beltway to concentrate on what Congress and the Administration are focused on. To fail to do so is to risk being characterized as irrelevant. It is in this way that the DC environment stifles creative thought.

My view is: If you want to think about what Congress is not thinking about (and is unlikely to think about any time soon), you need to do your thinking away from Washington. That, in any event, was the strategy followed by the NCPA, which opened a Washington office only when it was clear that Congress was ready to focus on some key NCPA proposals. The year was 1994, and the core tax ideas in the Republican Contract with America came directly from a pro-growth proposal generated by the NCPA and the U.S. Chamber of Commerce. 13

We continue to have an active Washington government affairs office, but its objective is narrow and focused: to provide Congress and the administration with NCPA's scholars'research, testimony and advice and to conduct conferences and briefings on issues of direct interest on Capitol Hill.

Think Tanks vs. Universities. Like think tanks, colleges and universities hire scholars, encourage research and provide a forum for scholarly interaction. So how are these academic institutions different from think tanks? Part of the difference is that the research of tenured professors is unmanaged and undirected. The object of research is up to the whim of the professor. The goal may or may not be to solve an important social problem. Think tanks, by contrast, tend to be very goal-oriented. They employ or contract with scholars to research specific topics and encourage solutions to well-defined problems. Universities tend to be graded based on the academic prestige of their faculty members. Think tanks tend to be graded based on their success in solving real world problems.

Think Tanks vs. Advocacy Groups. In recent years, there has been a proliferation of groups who openly advocate public policy changes (usually on a single issue). These groups, however, are not incubators of new ideas. They are better thought of as lobbyists for ideas. Often they receive financial backing from special interests. They may be very helpful in promoting needed public policy changes, but they are not staffed or led by intellectuals. In fact, they are typically anti-intellectual - resisting ways of thinking that are different from the narrow goals of their financial backers.

The Role of Ideology. To what degree do ideological preferences influence the output of think tanks? Among first-rate research organizations, ideology has no effect on findings of fact. If the economists at the NCPA, Urban Institute, Brookings Institution and the American Enterprise Institute calculate the government's unfunded liabilities under Social Security and Medicare, they are all likely to arrive at similar numbers. Where ideology matters is in deciding what problems to research and what solutions to investigate.

The Brookings Institution is more likely to investigate unmet needs and ask what government programs could solve the problem. The NCPA is more likely to investigate how government policies are causing the problem in the first place and ask how the private sector can be utilized to solve it. Of course, occasionally we see eye-to-eye on problems and solutions. 14

Conservatism vs. Classical Liberalism. The NCPA is often called "conservative" by the national news media. I have never been comfortable with that term; and I avoid it whenever possible.

William F. Buckley once described conservatives as people who "stand athwart history, yelling 'stop.'" That may be an apt description of many people, but it is not a very good description of what most right-of-center think tanks do. For this and other reasons, Nobel Laureates Milton Friedman and Friedrich Hayek avoided the term altogether and called themselves "classical liberals." [See my essay What Is Classical Liberalism?] Nineteenth century liberals were not trying to conserve institutions. They were trying to reform them.

The NCPA is in the classical liberal tradition. We are animated by the same desire to reform institutions that motivated Thomas Jefferson, Abraham Lincoln and other historical figures who worked to empower people and unleash the energy, creativity and innovative ability of individuals pursuing their own interests in competitive markets.

The Future of Think Tanks. I believe that the NCPA, at 22 years of age, is the youngest national think tank on the center right of the ideological spectrum. By that I mean that ours was the last organization to successfully enter the think tank marketplace and address a wide array of public policy issues at the federal level. All of the organizations that have formed since that time have been state think tanks or organizations that focus on a narrow range of issues. I do not expect that to change. Today, our best think tanks are well-managed and so alert to market opportunities that potential entrants into the market are unlikely to find much opportunity.

Although I do not expect to see an increase in the number of organizations, I do believe the national think tanks are on the cusp of a virtual explosion of intellectual activity.

There is enormous untapped potential in the academic and scholarly world. As think tanks grow in terms of budget, skills and expertise, their ability to tap that potential will grow exponentially. The successes we have seen so far are not aberrations. They are the beginning of an intellectual revolution that will set the stage for the policy debates of the 21 st Century.

 

  1. John C. Goodman is president of the National Center for Policy Analysis.
  2. Madsen Pirie, Dismantling the State (Dallas, TX: National Center for Policy Analysis, 1985).
  3. Milton Friedman, Capitalism and Freedom (Chicago: University of Chicago Press, 1962).
  4. Robert Hall and Alvin Rabushka, Flat Tax , 2 nd ed. (Stanford, CA: Hoover Institution Press, 1995).
  5. Jude Wanninski, The Way the World Works (New York: Basic Books, 1978).
  6. Friedman, Capitalism and Freedom.
  7. Charles Murray, Losing Ground: American Social Policy, 1950-1980 , 10 th anniv. ed. (New York: Basic Books, 1995).
  8. Lawrence Reed, "A Student's Essay That Changed the World," Mackinac Center for Public Policy, 2005.
  9. Gerald Frost, Antony Fisher: Champion of Liberty ( London , Profile Books, 2002).
  10. Nadeem Esmail and Michael Walker, "Waiting Your Turn, Hospital Waiting Lists in Canada (15 th ed.) Fraser Institute, Critical Issues Bulletin, October 2005.
  11. Hernando de Soto , The Other Path (New York: Basic Books, 1989).
  12. "The Effect of the Social Security Reforms on Black Americans," National Center for Policy Analysis, Study No. 104, June 1983.
  13. "A Strategy for Growth," National Center for Policy Analysis and U.S. Chamber of Commerce, January 1992.
  14. John C. Goodman and Peter R. Orszag, "Retirement Savings Reforms on which the Left and the Right Can Agree," National Center for Policy Analysis, Brief Analysis No. 495, December 1, 2004.