Public Policy Research and Education at Caltech
Caltech takes a uniquely scientific approach to public policy education. It teaches its students the fundamentals of sound, scientific research, and how to apply the results to illuminate issues and arrive at robust solutions. Similarly, Caltech neither solves given problems, nor advocates given policies, but through its research has contributed critical information, which has led to important public policy decisions made in the field.
Applied Research
Caltech's social science researchers have taken on a large number of intriguing issues and produced some very influential policies.
Business economist Colin Camerer, a leading expert in "behavioral economics", has been involved with several policy initiatives about aspects of public policies toward drug addiction. Behavioral economics expands traditional economic theories of how people respond to incentives to include the influences of social norms, impulsiveness, and brain mechanisms. Camerer coauthored a National Academy of Sciences book, Pathological Gambling, about the impact of the explosion of gambling opportunities in the U.S. on individuals, families, and communities. About two percent of people who gamble lose control over their gambling in ways that harm their personal and workplace relationships, and sometimes lead to white-collar crime. The National Academy report cautions that internet gambling (particularly the difficulty of monitoring teenage gambling), and the new rise of pathological gambling among women, requires more research before states and cities hastily create more lotteries, casinos, and other forms of gambling. Camerer has also advised the National Institutes of Alcohol and Drug Abuse about how behavioral economics can inform the "disease" model of addiction, which guides much public policy.
Economist Lance E. Davis focuses on the economic and political policies that underwrite the long-term growth of the American economy. Recently his work has centered on two important policy issues. The first, research conducted with Stanley Engerman of the University of Rochester, deals with the question of the economic efficiency of naval blockades from the 18th through the 20th centuries, from the late 18th century British blockade of France through the late 20th century blockades of Cuba, and more recently, Iraq. In particular, it explores the question of what factors made for some blockades to have proven effective while others have proven at least equally ineffective. The second, research conducted with Larry Neal of the University of Illinois, and Eugene White of Rutgers University, examines the impact of the microstructure of rules that govern the New York, London, and Paris stock exchanges, on the efficiency of those exchanges from the early 19th century until the 1980's.
For the past twenty-five years, anthropologist Jean Ensminger has conducted economic anthropological studies of a small community of nomadic cattle herders in East Africa. The underlying goal of all of her research has been to understand why some countries are rich and others are poor. This work has led to a long-term study of the relationship between national institutions that regulate incentives and the behavior with which citizens respond in the course of their everyday decisions. Recently, Ensminger has used experimental economic methods in Africa and small town America to study the relationship between institutions and norms of fairness, cooperation, and trust. In a counter-intuitive twist, the sixteen society cross-cultural project which she co-directs with Joseph Henrich of Emory University has found that the more market oriented a society is, the more fair-minded and trusting individuals are.
Economist David Grether achieved groundbreaking results with economist and political scientist Charles Plott and graduate student Mark Isaac in a study of airport landing rights allocation. At the time of the Federal Aviation Administration's Deregulation Act of 1978, committees made up of airline representatives at major U.S. airports met regularly to decide by a unanimous vote which airlines would get landing and take-off rights. The researchers asked the question, "What will happen if someone says no?" Their research studied what happens in the event of a stalemate, and how the "default" alternative can influence what the group will do. Grether has also looked at how neighborhood amenities impact surrounding housing values. He challenged the conventional rule of residential property values being adversely affected by close proximity to islands of non-residential land uses, and found that there was actually little or no effect at all. Results showed that what may be considered an "eyesore" in one community is often counterbalanced by its value as a "convenient asset" in another.
Historian and social scientist Philip T. Hoffman uses economic models and comparative historical data to examine how institutions affect long run economic growth. His current work examines how capital markets recover after financial crises. In particular, he is looking at the relaxation of market rules before crises, at the political economy of reforms in their aftermath, and at the role played in long run recovery by informal institutions such as trust.
Economist Matthew O. Jackson uses models to study how networks of job-contacts are important in determining employment and wages. His research shows that an improvement in the employment status of a jobseeker's direct or indirect contacts leads to an increase in the jobseeker's employment probability and expected wages. This helps explain the observed persistent differences in both dropout rates and wages between white and black males in the U.S., yielding clear policy implications for programs such as affirmative action and subsidization of education.
Political scientist Jonathan N. Katz and UCSD Political Science Professor Gary W. Cox, who received his Ph.D. from Caltech in 1983, have recently published a book, Elbridge Gerry's Salamander: The Electoral Consequences of the Reapportionment Revolution. Their research demonstrates the large electoral impact of redistricting pursuant to the Supreme Court's "one man, one vote" decisions in the mid-1960s. Katz is currently working on a new project developing methods for evaluating the fairness of proposed redistricting plans to racial and ethnic minorities as required under the Voting Rights Act.
Political scientist D. Roderick Kiewiet has recently reviewed public school financing in California, and the reasons behind the relatively low level of spending. Kiewiet's research results dispute the conventional wisdom that the combined effects of Proposition 13 and the Serrano equalization decisions (1971, 1976) are to blame. His examination of budget allocations revealed that year in and year out, California's state and local governments have simply allocated a significantly smaller percentage of their total budgets to K-12 education. Kiewiet traces this back to 1968 when per capita personal income in California was 21% higher than in the rest of the country, leading to the dedication of a smaller share of government spending that would still provide considerably more per pupil than the national average. As the gap between income levels for California and the rest of the nation has closed and California's percentage allocation of the budget to K-12 education has remained relatively constant, California's expenditures on public schools have fallen well below the national average.
Historian and social scientist J. Morgan Kousser revolutionized the study of disfranchisement and the history of southern politics by applying statistical methods to election returns to determine who was disfranchised and how they lost their right to vote. He showed that the disfranchisement laws adopted between the 1870s and the early 20th century in the southern U.S. were partisan measures intended not only to disfranchise African-Americans and poor whites, but also to substitute a one-party system for the previous vigorous party competition. Comparing the gradual loss of political rights by blacks after the First Reconstruction (after the Civil War) with the expansion of the political rights of minorities during and after the Second Reconstruction (after the Second World War), he concluded that incremental change in a generally stable political system, not radical or frequent alterations in political leadership, is most conducive to the protection of minority rights.
Political economist Jana Kunicova studies how political corruption varies across democracies and, in particular, how democratic institutions constrain corruption of elected officials. She has explored, both theoretically and empirically, possible constraining effects of electoral rules and parliamentarism, while also addressing the effects of the term limits, federalism, number of parties, party strength and discipline, and district size. Kunicova develops formal models of rent extraction, links them to various institutional settings, and subsequently tests their predictions on cross-country datasets. Her results demonstrate that presidential systems, as well as the proportional representation systems, are more susceptible to political corruption.
Economist John O. Ledyard designed the Automated Credit Exchange, a market for companies to trade pollution credits used by the Regional Clean Air Incentives Market of the South Coast Air Quality Management District in Los Angeles, in 1995. This software accepts complex contingent bids and calculates optimal market prices and transactions. It demonstrates how computationally assisted markets can enable market-based regulatory policies to succeed. Ledyard designed the very successful science instrument management plan for NASA's Cassius Mission. It prevented cost-overruns and allowed all instruments to fly. More recently, Ledyard designed a market -based process to replace NASA's current committee process for allocating Space Shuttle secondary payload resources. The process distributes budgets of tokens to NASA internal organizations, which use these budgets to bid for priority for their middeck payloads. The results of a number of controlled experiments showed that such a system tends to allocate resources more efficiently by guiding participants to make resource and payload tradeoffs. Ledyard's development of combined value function techniques has had considerable commercial impact on logistics measurement. These auctions are currently being considered for use by the Federal Communications Commission for sale of spectrum and by the Department of Defense for use in the acquisition of strategic planning information.
The research of political scientist Peter Ordeshook focuses on constitutionalism and constitutional design, stemming from his interest in the development of Russia's constitution following the demise of the USSR. His extensive work both at Caltech and in Russia has led to a more theoretical study of constitutional design. Ordeshook recently coauthored Designing Federalism: A Theory of Self-Sustainable Federal Institutions with Olga Shvetsova and Mikhail Filippov, both former Caltech Ph.D. students. His research continues, with the general theme of understanding the applications of contemporary political-economic theory to our understanding of democratic stability and transitions to democracy.
Political scientists Thomas Palfrey and R. Michael Alvarez led Caltech's effort in the joint Caltech/MIT Voting Technology Project, which, in the wake of the 2000 Florida General Election debacle, outlines for legislators a new architecture for voting technology. The VTP proposals and recommendations serve as a blueprint, with many being adopted almost word-for-word in the recent federal election reform legislation. Alvarez is currently working with the Department of Defense's Federal Voting Assistance Program's Internet voting project, conducting the program evaluation which would allow eligible voters living abroad to cast votes via the Internet in national elections.
Economist and political scientist Charles Plott was the first to apply modern laboratory methods to complex policy issues, including regulation, deregulation, and anti-trust. His discoveries led to the testing of many theories that could have never been tested with traditional field data. Plott's experiments have focused on anti-trust cases and policies governing advertising in professions such as law and medicine for the Federal Trade Commission, and the allocation of landing rights to major U.S. airports that have led to changes in national policy. He has also worked on policies for the allocation of resources on Space Station Freedom, markets for emissions permits in southern California (RECLAIM), and mechanisms for pricing the use of natural gas pipelines for the Federal Energy Regulatory Commission. His research in auctioning has had a major influence on the rights of private firms to use public rails in Sweden, market processes for electric power use in California, and the sale of Personal Communications Systems licenses used by the Federal Communications Commission.
Economist Simon Wilkie's research is in the area of applied mechanism design, which uses an institutional framework of rules to solve allocation problems. His recent public policy research includes topics such as how to best auction multiple goods, and how to implement competition in the telecommunications industry. Currently serving as Chief Economist of the Federal Communications Commission, Wilkie's job is to help sort out policy issues involved in various communications decisions.
Graduate Student Research
Caltech's unique educational approach to public policy is best demonstrated by the caliber of challenging research produced by its graduate students:
Angela Hung (Ph.D., 2001, currently Assistant Professor of Economics and Public Policy at Carnegie Mellon's Heinz School of Public Policy) studied drug addiction in her dissertation. Her work shows that addiction is sometimes caused by young drug users optimistically underestimating the chance that they will become addicted, and the influence of environmental "cues", like peer pressure and advertising. Using unique week-by-week data on cigarette sales, she found that smokers do reduce smoking when price increases actually occur or are expected to occur (due to announced tax increases or changes in where people can smoke). Hung concluded that an increase of 10% in the cost of smoking cuts smoking by 20%, which means that simple policy changes like taxes do work.
Christina Ramirez Kitchen (Ph.D. 1999, currently Assistant Professor of Biostatistics at UCLA) examined HIV treatments from 1984 to the present and their effects on the progression of HIV. She concludes in her research that despite a current decrease in morbidity and mortality in HIV due to HAART treatments (highly active antiretroviral therapy), this decrease is only transient. According to her findings, current levels are only the result of a period of delayed disease progression and that an increase is imminent. Her research warns that policymakers need to be prepared for this eventual increase in AIDS incidence and mortality, as well as future rising costs associated with HIV/AIDS treatments.
Taking an historical perspective, Reginald Roberts (Ph.D. 2001, currently Visiting Assistant Professor at Michigan State University) questions the general belief that alcohol prohibition policy adoption of the 19th and 20th centuries was due to the strength of interest groups at the state and national levels. Roberts examines state and federal constitutions from 1834 to 1934 to determine what shaped prohibition policy outcomes. His research reveals that the state's ability to enforce prohibition was compromised by the conflict between state policy powers and the federal interstate commerce powers, and that ambiguous wording of the Eighteenth Amendment was a major factor in the failure of national prohibition enforcement. This "federalism" viewpoint sheds light on current models of how moral policies diffuse across states, as well as the likely life cycle of such policies as the "war on drugs" that are tending toward prohibition today.
Kathy Zeiler (Ph.D. 2004) has examined health care contracting and the impact of damage caps on malpractice lawsuits (implemented to increase physician treatment by removing risk). Zeiler's research reveals the unintended consequences of this policy, showing that limiting damages has actually resulted in more lawsuits and poorer care by influencing incentive-driven behaviors of affected parties. She concludes that a theoretical investigation of how current legal rules affect behavior in health care markets is an important step toward successful legal reform.
Studying public policy is only the first step of a scientific investigation leading to public policy solutions. As social scientists, Caltech researchers believe that only by fully understanding all aspects of an issue, including unintended consequences of existing policies, can effective solutions emerge. As educators, they train their students to master theoretical tools for objectively examining data, and then how to apply the results to specific questions and desired outcomes. Adherence to these principles has led to a significant body of groundbreaking public policy research by both faculty and their students.