Reputational Arbitrage

In September 2005, I attended the 2005 State Policy Network annual convention in Charleston. SPN is a trade association of state-based free-market think tanks, and I was there as an employee of the recently-founded Show-Me Institute, Missouri’s free-market think tank.

The Supreme Court had just handed down its infamous Kelo v. New London decision, holding that local governments could transfer property from one private party to promote economic development. SPN think tanks were busy capitalizing on the tremendous public outrage over the decision to promote state-level eminent domain reforms. On the first afternoon of the conference there was a curious panel called “Land and Homes Meet Knowledge and Ideas — The Bridge between Physical and Intellectual Property Rights.” The panel consisted of a mix of serious property rights advocates (Bert Gall from IJ, Chuck Cushman from the American Land Rights Association) as well as lobbyists from a variety of “intellectual property” organizations: the Business Software Alliance, PhRMA, the Recording Industry Association of America, and so forth. And the point of the panel was that we should respond to the Kelo decision by maintaining strong patent and copyright protections.

If that sounds like a non-sequitur, that’s because it is. These issues have nothing in common with each other, other than the fact that copyright and patent law are frequently described as “intellectual property.” Governments are not in the business of seizing patents and copyrights using eminent domain, and the Kelo decision posed no danger whatsoever to the pharmaceutical industry’s patents or the recording industry’s copyrights. Indeed, it wasn’t clear why these lobbyists were here at all; virtually all the regulations that affect the pharmaceutical, movie, music, and software industries—copyright, patent, FDA, telecom regulation, immigration—are made at the federal level.

What was going on is that property rights are popular, while the pharmaceutical and recording industries are not. The panel was a small part of a long-range, carefully planned campaign to hitch their rent-seeking agenda to the broader free-market movement. I don’t think SPN discloses who pays for its conferences, but I’d be willing to bet a lot of money that the “intellectual property” industries wrote large checks for the privilege of putting that panel together. The situation irritated me so much that I wrote a piece for reason denouncing the project.

The campaign to co-opt the free-market movement for the agenda of “intellectual property” intersts continues to this day. Another quasi-think tank called the Institute for Policy Innovation tried to get me fired in 2006 for writing this admittedly intemperate post about a shoddy study they had put out on the costs of copyright infringement. And just today I was followed on Twitter by a representative from the Property Rights Alliance, the (presumably industry-funded) organization that sponsored that 2005 conference and puts out embarrassingly bad “studies” promoting stronger copyright and patent protections.

To be clear, there’s an intellectually defensible argument (made by Richard Epstein here, among others) tying physical and “intellectual property” together. But there’s nothing intellectually serious about the efforts I highlight above. Rather, these projects are a kind of reputational arbitrage. Serious think tanks like the Cato Institute and the Mercatus Center have built up considerable reputational capital among policymakers, the press, and the general public by doing actual public policy scholarship over many decades. Organizations like the PRA and IPI exist to cash in on that reputation by presenting their sponsors’ in trade dress that a casual observer won’t be able to distinguish from the work of reputable think tanks.

Now, copyright and patent policy aren’t the most important issues in the world, and truthfully this particular campaign has been something of a dud. Most tech policy scholars at prominent libertarian think tanks (including Cato, Mercatus, and CEI) are duly skeptical of the recent trend toward stronger patent and copyright protection. I highlight it only because it’s an area I know particularly well from first-hand experience, and it illustrates a depressingly common strategy that special interests use to corrupt the policy process.

Which brings me to this appalling story (via E.D. Kain) documenting that private prison companies were a key lobbying force behind Arizona’s “papers, please” immigration law. If private prison companies had openly drafted and lobbied for a new immigration law that would increase the state’s prison population, it would have been obvious what was going on and the effort would have gone nowhere. So instead, the prison companies went to the American Legislative Exchange Council, an organization that performs think tank-type work for conservative state legislators (and regularly attends SPN conferences), and asked them to draft the language. The legislation was drafted by an ALEC committee, with industry input. An Arizona ALEC member then took the legislation back to his state, where several other ALEC members signed on as co-sponsors.

It’s important to be clear that ALEC isn’t just about this kind of corruption. I imagine ALEC provides real services to its legislator-members, who often have small staffs and benefit from the help of ideologically like-minded policy experts. And ALEC often collaborates with state-based think tanks, many of which employ genuine policy experts. The problem is that the details of legislation drafted this way are likely to be driven by sponsors’ interests. Even assuming that conservatives are going to push for anti-immigrant legislation, there are a number of ways you might do that. If the prison lobby has a seat at the table, the legislation is likely to be written in a way that maximizes the prison population—and the cost to state taxpayers.

Unfortunately, this kind of institutional rot is endemic in the public policy world. This ALEC story is particularly egregious, but most of the time the process is more subtle. Some think tanks (such as Cato) do a pretty good job of insulating their scholars from donor pressure. But there are lots of quasi-think tanks who make no such effort. And the result is a steady gravitational pull in directions that benefit corporate sponsors. People who want to do work that happens to align with the interests of sponsors find there are lots of organizations that want to hire them. People who want to do work that doesn’t align with sponsor interests find their options much more limited, and may leave the public policy community altogether. Over time, the community as a whole becomes more favorable to the interests of the donors.

Moreover, because people move from organization to organization, most people in the more reputable organizations have friends and former colleagues in the less-reputable ones. This makes quality control hard. If your friend is working at an organization that happens to have slightly lower standards for scholarly independence than yours, it would be rude to point that out. And so over time you get a blurring of the line between scholarship and lobbying. Many think tank scholars who wouldn’t feel a need to take the arguments of an industry lobbyist seriously feel more pressure to take seriously, and maybe even promote the work of, their former colleague who is now working at a “think tank” that happens to always advocate its corporate members’ interests.

I think a lot of people inside this community overestimate the extent to which ideology insulates them from the problem. They’ll say “I was a free-market guy long before I took this job, so I’m just getting paid to say stuff I would’ve said anyway.” But the world is a complicated place, and it’s not always obvious how to apply an ideological principle in a particular case. If several of your co-ideologues have already taken a particular position, you might decide to adopt that position yourself rather than taking the time to become an expert on it yourself. And once the community reaches a critical mass, there are growing social pressures not to take what is seen as the “other” side. This is how free trade becomes importing price controls and network neutrality became a matter of religious freedom. Getting the right answer is hard, and you’re just less likely to do it if you have a huge financial incentive not to.

To be clear, I don’t want to give the impression that this is primarily a problem on the “right,” or that it is limited to think tanks. Google has recently been hoovering up talent from academia and worthy left-of-center organizations like the Electronic Frontier Foundation. I’m sure that folks at EFF are more likely to take calls from their former colleagues Derek and Fred than they would from a random Google lobbyist. Similarly, I’m sure that Wal-Mart is getting something for the half million dollars they’ve donated to the Center for American Progress. Some left-of-center groups are also corrupted by traditionally left-wing interest groups like teachers’ unions and trial lawyers. My focus is on free-market think tanks simply because that’s the world I know best. But this is a transpartisan and panideological problem.

I’m not sure what the solution is, but I think the first step is that people need to talk about it more. In particular, members of the public and the press should be more aggressive about demanding donor transparency from organizations that do public policy work, and they shouldn’t take seriously scholars who won’t tell you who’s paying for their work.

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One Response to Reputational Arbitrage

  1. Tom says:

    Great post. The only caveat I’d offer comes from this:

    “And so over time you get a blurring of the line between scholarship and lobbying”

    I think it’s important not to imply that this is a binary relationship. Academia has set it up so as to be a continuum, the position along which is determined by intensity of advocacy. But I’m not sure there are substantial benefits to that approach beyond protecting their profession (it doesn’t do much for policy outcomes). And of course earnestness isn’t a great way to judge this matter, either. We’re left with the alternative of actually judging the objective value of the proposed policy. But of course our inability to do that is why we have this problem in the first place.

    Ultimately I think that institutional policies designed to increase the difficulty of the most crass forms of influence trading, combined with efforts to expand policy capabilities among legislators (campaign finance reform; substantially expanded staff budgets) are probably the only way to address this problem. That, and perhaps the occasional public shaming.

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