William A. Niskanen
William Arthur Niskanen (March 13, 1933, Bend, Oregon – October 26, 2011, Washington, D.C.) was an American economist noted as one of the architects of President Ronald Reagan's economic programme and for his contributions to public choice theory. He was also a long-time chairman of the libertarian Cato Institute.
Niskanen received his B.A. from Harvard University in 1954. He pursued graduate study of economics at the University of Chicago, where his teachers included Milton Friedman and other prominent economists who were then revolutionizing economics, public policy, and law with ideas that would come to be known as the Chicago school of economics. Niskanen received his M.A. in 1955 and his doctorate in 1962, writing his dissertation on the economics of alcoholic beverage sales.
After Chicago, Niskanen joined the RAND Corporation as a defense policy analyst in 1957, using his economic and mathematical modeling skills to analyze and improve military efficiency. Among his accomplishments was developing a 400-line linear programming model of the Air Force transport system. His programmer for the model was a young William Sharpe, who would later win the Nobel economics prize.
Because of his work at RAND, the incoming Kennedy administration appointed Niskanen director of special studies in the Office of the Secretary of Defense. There, he became one of Defense Secretary Robert McNamara's original Pentagon "whiz kids" who used statistical analysis to examine Defense Department operations.
During his time at the Pentagon, Niskanen became disillusioned with the nation's political leadership, later claiming that the president and other executive branch officials "lied with ... regularity" to the public. He frequently quipped that this disillusionment sometimes caused him to question whether the United States truly landed on the moon in 1969.
Niskanen left DOD in 1964 to become director of the Program Analysis Division at the Institute of Defense Analysis. In 1972, he returned to public service as assistant director of the Office of Management and Budget, though his internal criticisms of Nixon administration policy would make his tenure at OMB short.
Niskanen left Washington and returned to academia, becoming professor of economics at the University of California at Berkeley in 1972, where he would remain until he became chief economist of Ford Motor Company in 1975. While at Berkeley, Niskanen would help establish the school's graduate school of public policy. During this time in California, he became acquainted with then-governor Ronald Reagan, who appointed him to a task force on the state's economy.
Ford Motor Company
In 1975, Niskanen was appointed chief economist at the Ford Motor Company under chairman Henry Ford II and president Lee Iacocca. He quickly became critical of Ford's corporate culture and its failure to follow consumer trends, such as the 1970s desire for more fuel-efficient cars because of rising gas prices resulting from OPEC constraints on oil supply.
Foreign automakers, especially the Japanese, were quick to exploit American consumers' demand for more fuel-efficient cars, gaining a growing share of the U.S. market in the 1970s. Ford responded by asking the U.S. government to place import quotas on Japanese cars. Niskanen, a free-trade advocate, argued internally against this policy, saying that Ford needed to improve its products in light of consumer demand. In response to this criticism, Ford fired Niskanen in 1980.
However, Niskanen would not be out of work for long. Incoming president Ronald Reagan appointed Niskanen to his Council of Economic Advisers, which was responsible for conducting and analyzing economic research to inform executive branch policies. The appointment was surprising given Niskanen's hawkishness on deficits and concern about military spending—views that conflicted with Reagan policies.
Niskanen's blunt-spokenness both inside and outside the CEA sometimes caused problems. In a speech before a women's group in 1984, he commented that women's leaving the workforce to raise children contributed to a disparity in pay between the genders. Though broadly accepted and empirically supported today, Niskanen's comment was condemned in 1984, including criticism from Democratic presidential nominee Walter Mondale, who claimed it exemplified a lack of respect toward women by the Reagan administration.
The following year, another of Niskanen's blunt comments would ultimately lead to his departure from the Reagan administration. During the negotiations over legislation that would ultimately become the Tax Reform Act of 1986, Niskanen internally criticized the administration proposal that was drawn up by the Treasury Department under Secretary Donald Regan, telling President Reagan in front of Regan that the proposal was "something Walter Mondale would love." Regan took offense at the comment and, after becoming Reagan's chief of staff, blocked Niskanen's ascendancy to chair the CEA after Martin Feldstein left to return to Harvard. Niskanen served as acting chair for a brief period, but then resigned from the CEA. Niskanen later chastised Regan as "a tower of jelly" in his book Reaganomics.
After leaving the Reagan administration, Niskanen joined the libertarian Cato Institute, where he served as chairman of the board of directors from 1985 to 2008 and was an active policy scholar. He was chairman emeritus of Cato from 2008 until his death in 2011.
Niskanen was a prominent contributor to public choice theory, a field of both economics and political science that examines the behavior of politicians and other government officials. Public choice eschewed the traditional notion that these agents are motivated by selfless interest in the public good, and instead considered them as typically self-interested, like other agents. His chief contribution to public choice theory was the budget-maximizing model – the notion that bureaucrats will attempt to maximize their agency's budget and authority. He presented this theory in 1971 book Bureaucracy and Representative Government.
Niskanen authored several books, academic articles, and essays on government and politics. His most noted work, Bureaucracy and Representative Government, published in 1971, made a great impact on the field of public management and strongly challenged the field of public administration in the spirit of Ludwig von Mises's Bureaucracy. The book was for a long time out of print, but was reissued with several additional essays as, William Niskanen, Bureaucracy and Public Economics (Cheltenham, UK: Edward Elgar, 1994). Niskanen's work was an early text in rational choice models of bureaucracy. In his work he proposed the budget-maximizing model.
Another of his noted works was his 1988 book Reaganomics, which describes both the policies and inside-the-White House politics of Reagan's economic programme. Washington Post columnist Lou Cannon, author of the biography President Reagan: The Role of a Lifetime, described the book as "a definitive and notably objective account of administration economic policies."
Niskanen's final book was Reflections of a Political Economist (2008). The book is a collection of essays and book reviews on public policy and economic topics, and serves as an intellectual biography.
- T. Rees Shapiro. "William A. Niskanen, Jr., economist and former Cato Institute chairman, dies." Washington Post. November 1, 2011. http://www.washingtonpost.com/local/obituaries/william-a-niskanen-jr-economist-and-cato-institute-chairman-dies/2011/10/31/gIQAuM1RaM_story.html. Retrieved November 3, 2011.
- Susan E. Dudley. "The Interview." Regulation 35(1) (Spring 2012).
- Gene Healy. "Niskanen's Death Has Robbed D.C. of Its Most Honest Citizen." Washington Examiner. November 1, 2011. http://www.sfexaminer.com/opinion/op-eds/2011/11/niskanen-s-death-has-robbed-dc-its-most-honest-citizen Retrieved November 3, 2011.
- Cato Institute. William A. Niskanen. 2011. http://www.cato.org/people/william-niskanen/
- Benjamin Zycher. "Thanks, Bill." Regulation 35(1) (Spring 2012).
- Zycher, op. cit.
- David Segal. "William A. Niskanen, a Blunt Libertarian Economist, Dies at 78. New York Times. October 28, 2011 http://www.nytimes.com/2011/10/29/business/william-a-niskanen-a-blunt-libertarian-economist-dies-at-78.html Retrieved November 3, 2011.
- William Poole. "A Remembrance of William Niskanen." Cato@Liberty." November 1, 2011.http://www.cato-at-liberty.org/a-remembrance-of-william-niskanen/. Retrieved November 3, 2011.
- "William Niskanen, Former Reagan Economist and Cato Board Chair, Dead at 78." Cato Institute. October 26, 2011. http://www.cato.org/pressroom.php?display=news&id=203 Retrieved October 27, 2011.
- Koch Brothers File Lawsuit Over The Ownership Of the Cato Institute, 03/01/12 01:41 PM ET, AP via The Huffington Post, Retrieved 2012-03-01
- Kochs launch court fight over Cato, Mike Allen, POLITICO, 3/1/12 9:48 AM EST, Retrieved 2012-03-01
- Library of Economics and Liberty. "Reaganomics: About the Author"
- William A. Niskanen – Former Chairman Emeritus and Distinguished Senior Economist, profile at the Cato Institute webpage