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Laurence E. Lynn Jr.Editor

Book Reviews

Journal of Policy Analysis and Management, Vol. 18, No. 4, 693–723 (1999)© 1999 by the Association for Public Policy Analysis and ManagementPublished by John Wiley & Sons, Inc. CCC 0276-8739/99/04693-21

Note to Book Publishers: Please send all books for review directly to the new BookReview Editor, Jennifer L. Hochschild, Woodrow Wilson School of Public andInternational Affairs, Princeton University, Princeton, NJ 08544-1013.

David L. Weimer

Economics, Values, and Organization, edited by Avner Ben-Ner and Louis Putterman.New York: Cambridge University Press, 1998, 556 pp., $85.00 cloth.

Debating Rationality: Nonrational Aspects of Organizational Decision Making, editedby Jennifer J. Halpern and Robert N. Stern. Ithaca, New York: Cornell UniversityPress, 1998, 296 pp., $39.95 cloth.

Instrumental rationality requires individuals to have coherent preference orderingsover alternative choices that can be represented by utility functions yielding higherutilities for more preferred alternatives. Most theoretical work in economics, andmuch in political science, makes predictions based on the additional narrowingassumption that the utility functions of individuals depend on their personal gains—the so-called self-interest, or self-regarding, assumption. Despite the considerablesuccess of this narrow rational choice approach, it has also elicited various criticisms,ranging from charges of reductionism and unrealistic assumptions to claims ofimportant predictive failures in empirical and experimental application. In a debateof these criticisms in the context of political science research, Kenneth Shepsleresponded by noting the First Law of Wing Walking: “Don’t let go of something untilyou have something else to hold on to” [Shepsle, 1995, p. 217]. The exploration ofwhat that something else might be is the subject of the edited volumes Economics,Values, and Organization by Avner Ben-Ner and Louis Putterman (hereafter EVO)and Debating Rationality by Jennifer J. Halpern and Robert N. Stern (hereafter DR).

These volumes grew out of conferences that attracted prominent scholars whosework has either directly or indirectly dealt with moving beyond the narrow rationalchoice perspective. Each volume is extremely rich and quite well integrated. Each is

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also substantial: EVO has 19 chapters and a foreword by Amartya Sen; DR has 10chapters. Consequently, although most of the chapters deserve attention, I am unableto discuss them all in this review. I expect that readers interested in the chapters I dodiscuss would find the balance of the volumes interesting as well.

In an extended introduction to EVO, Avner Ben-Ner and Louis Putterman set outnot just an overview of the contents of the volume, but also the framework for aresearch program to explain values and institutions in addition to individual behaviorin economic models. They propose going beyond narrow rational choice byincorporating what is known about the limitations of human cognition and by allowingindividuals’ preferences to be other-regarding and process-regarding as well as self-regarding. They recognize the danger in this broadening:

One difficulty in incorporating bounded rationality and values in economic models has beenthe excessive degrees of freedom these concepts allow the modeler, since it is possible to obtainvirtually any result by invoking suitable definitions of concepts. With so much fluidity and solittle to restrict its range, this route to explaining behavior is understandably regarded as dan-gerously ad hoc. (p. 13)

Herein lies the crux of the problem. Even the most hard-core rational choice theoristswill readily admit that real people almost always care about the well-being of at leastsome others and about the fairness of processes through which private and publicgoods are allocated. These theorists cling to the narrow conception of rational choice,however, because broadening it willy nilly risks losing any capacity for either predictionor general explanation.

Several chapters in the volumes review progress in modeling organizational behaviorand design while preserving the assumption of fixed and self-regarding preferences.In “Game Theory and Garbage Cans: An Introduction to the Economics of InternalOrganization” (DR), Robert Gibbons reviews the economic work based on strategicinteractions among organizational members. He succinctly summarizes thecontributions of theories of agency, specific assets, strategic information transmission,reputation, herd behavior, and institutions to understanding organizations. He alsomakes some effort to connect these rational choice approaches to more traditionaltheories of organizational behavior.

Gibbons touches on the rational choice theory of institutions [Calvert, 1995; Schotter,1981]. The basic idea is to model some recurring social situation, such as opportunitiesfor cooperation among members of an organization, as a repeated game. Interestingsituations arise when the equilibrium strategy in single play of the game does notinvolve cooperation, but equilibrium strategies, perhaps conditioned on previous plays,involving cooperation are possible in the repeated game. The realization of one ofthese equilibria can be interpreted as an institution, specifically the norm ofcooperation. Thus, the assumption that actors are self-regarding can lead to observedbehavior that appears to be governed by a norm. Yet the so-called Folk Theoremreveals that repeated games typically have a multitude of equilibria. One interpretationof leadership in this context is the provision of focal points to help organizationalmembers coordinate to reach a desirable equilibrium. Corporate culture can beinterpreted as cues that organizations develop to help their members coordinate inthe face of new circumstances [Kreps, 1990].

Robert Sugden (EVO) extends this line of reasoning with an eye toward providinga theory of the simultaneous evolution of institutions and norms. In his framework,institutions are conventions for selecting strategies in games involving multipleequilibria. (For example, the convention may be that the first person to a single-lane

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bridge crosses first.) Norms are people’s beliefs about what convention is in force, sothat in game theoretic terms, “behavior is influenced by beliefs about beliefs aboutstrategy choices” (p. 95, emphasis in original). Interestingly, from this perspective wecan expect people to resent someone who deviates from the convention even whenthey themselves view the convention itself as unfair.

Another approach to the study of organizations that falls largely within the narrowrational choice paradigm is transaction cost economics. Oliver E. Williamson, aprominent contributor to this approach, provides an excellent overview in“Transaction Cost Economics and Organization Theory” (DR). He not only identifiesand illustrates in application its salient elements, but usefully connects it to thefindings of traditional organizational theory. He emphasizes that contracts are alwaysincomplete in the sense that it is impossible in the real world to anticipate allcontingencies. This focuses attention on post-contract opportunism as a fundamentalconcern in the design of governance structures for transactions. It also opens thedoor for bounded rationality, specifically in terms of “plausible farsightedness”instead of “hyper-rationality” (p. 174).

Bounded rationality appears in these volumes in two ways: first, in the context oflimited human cognition; second, in the context of evolutionary game theory in whichindividuals are not fully strategic.

The limitations to human cognition reported by psychologists are already widelyknown among social scientists. Experimental regularities in the way people handlecomplex information, especially that involving uncertainty, appear to conflict withpredictions of the expected utility hypothesis central to economic models of choiceunder risk [Kahneman, Slovic, and Tversky, 1982]. In a world in which people tendto follow these regularities, those aware of them may take advantage of them intheir strategies. For example, politicians can take advantage of the tendency of peopleto be risk-averse in pursuing gains and risk-seeking in avoiding losses throughnegative campaigns that emphasize the potential losses from policies they do notfavor [Riker, 1996].

Jennifer J. Halpern (DR) argues that the troubling regularities found by socialpsychologists do not necessarily imply irrationality if we accept that individualsperceive alternatives in personalized ways. She proposes a theory of “bondedrationality” in which social interaction is facilitated when people share, or canunderstand, the personalizations of others. She proposes that, because individualswish to be perceived as rational, they will move toward personalizations that arecommon in their cultures and social contexts. Timur Kuran (EVO) suggests that thepsychological discomfort we often face in making choices shows a divergence betweenvalues and preferences that arises because limitations in cognition require us tocommunicate values in terms of simple rules; the inevitable violation of these rules inmaking choices in a complex world leads to “moral overload.” David Krackhardt(DR) proposes a model of endogenous preference formation that assumes anindividual’s preferences are influenced by another’s preferences in proportion to theamount of time they interact, and inversely in proportion to the amount of time theindividual spends interacting with everyone else. Although most rational choicetheorists will find these assumptions unsatisfying, they provide a basis for generatingtestable implications.

Colin Camerer (DR) argues that economic models should be based on assumptionsabout individual behavior corresponding to what is known about human psychology.He advocates a behavioral economics in which economic agents are allowed “to beimpulsive and myopic, to lack self-control, to keep track of spending and earnings in

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separate `mental accounting’ categories, to care about the outcomes of others (bothaltruistically and enviously), to construct preferences from experience and observation,to sometimes misjudge probabilities, to take pleasure and pain from the differencebetween their economic state and some set of reference points, and so forth” (p. 56).Camerer considers a number of modeling approaches, for example, the possibilitythat some people view some sorts of work effort as having positive rather than negativeutility, and demonstrates the application of behavioral economics to the understandingof leveraged buyouts. Max H. Bazerman, Robert Gibbons, Leigh Thompson, andKathleen L. Valley demonstrate the behavioral economics approach in the subsequentchapter, entitled “Can Negotiators Outperform Game Theory?” (DR). The chapter“Playing the Maintenance Game: How Mental Models Drive Organizational Decisions”(DR), by John S. Carroll, John Sterman, and Alfred A. Marcus, follows in a similarspirit, though more consistently with traditional organizational theory.

A number of the chapters in these volumes point to the results of experiments thatdo not confirm the predictions of game theoretic models based on narrow rationalityas an indication of the importance of process-regarding preferences. Experimentsbased on the ultimatum game have center stage. In this game, one player proposesshares of some fixed amount of money. If the second player agrees, then the playersreceive the proposed amounts. If the second player does not agree, then the playersreceive nothing. Equilibrium under narrow rationality requires the first player tooffer the smallest possible positive amount to the second player, and the second playerto accept it. In experimental settings, first players often offer more than the smallestpossible amount, and second players frequently reject positive amounts that are small.The latter indicates a willingness to bear a cost, the forgone share, in order to punishplayers who are perceived as making unfair offers. Unfortunately, the limited rangeof payoffs in these experiments does not permit them to speak to the relativeimportance of process-regarding and self-regarding in people’s preferences. (I wouldhappily reject a $1 share of $10; I might not reject a $1000 share of $10,000.) Isprocess-regarding sufficiently important to force abandonment of narrow rationalityin modeling significant economic and social behavior?

In “Institutions and Morale: The Crowding-Out Effect” (EVO), Bruno S. Freyreviews empirical literature on tax compliance and public acceptance of the sitingof undesirable facilities to argue that process-regarding and other intrinsicmotivations should not be ignored in economic modeling. Drawing on psychologicalresearch on the “hidden cost of reward,” Frey considers tradeoffs between thestandard price effects of external rewards and their impacts on intrinsic motivations.In some cases, changes in intrinsic motivations can crowd out price effects. Researchthat Frey and colleagues conducted into the willingness of Swiss residents to acceptnuclear waste repositories in their communities provides a fascinating illustrationof crowding out. When asked if they would accept having the facility in theircommunities, over one-half of survey respondents agreed. When told that they wouldreceive financial compensation from the Swiss government for accepting it, thefraction agreeing fell to less than one-quarter! Supplementary questions enable Freyand colleagues to rule out strategic behavior (responses intended to maximize theamount of compensation actually received) and signaling (the offer of generouscompensation signals to residents that the facility is more dangerous than theyinitially thought).

Several contributions to EVO use evolutionary game theory as a way of modelinghow intrinsic motivations evolve. Most evolutionary game theory employs some fitnesscriterion to determine the evolution of strategies among generations of players. Themodels in these chapters consider the evolution of preferences instead.

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In one of the most provocative, but conceptually complicated, chapters, Ken Binmoreextends John Harsanyi’s concept of empathetic utility (what a person would prefer ifhe or she were someone else) to an account of bargaining over the social contractbehind a veil of ignorance, which represents any process that establishes a statusquo. The resulting social contract, which must be an empathy equilibrium, impliessome weights on individual utilities. These weights then appear as norms for guidingchoices when the set of feasible contracts changes. Over time, the weights will readjustto reflect negotiation over the new set of feasible contracts.

In “Why Do We Care What Others Think about Us?” (EVO), Chaim Fershtman andYoram Weiss provide an evolutionary model of social status. The model assumes thatfitness depends only on monetary reward, while preferences may reflect social rewardsas well. The results indicate that socially minded preferences are evolutionarily stableonly if social rewards are neither too small nor too large. With some additionalassumptions about migration among societies, the model suggests that only societieswith social rewards in the intermediate range will survive in the long run. In otherwords, we should expect to find societies in which people care at least somewhatabout what others think of them, but not too much.

Samuel Bowles and Herbert Gintis (EVO) see communities as overcoming freeriding and externality problems by supporting “such prosocial norms as truth telling,reciprocity, and a predisposition to cooperate toward common ends” (p. 207). Severalcharacteristics of communities facilitate cooperation, and hence their persistencethrough differential replication: reputation (low cost of information about others),retaliation (frequent and long-lasting interactions), segmentation (nonrandompairing), and parochialism (limited migration and nonrandom formation of groups).They thus provide a rational choice basis for understanding communal norms.

Beyond these various contributions to broadening the rational choice perspectiveper se, the volumes have a number of chapters with interesting ideas of potential usein approaching public policy problems. For example, Nancy Folbre and Thomas E.Weisskoff (EVO) provide a six-level typology of motives for providing “caring labor”:altruism, sense of responsibility, intrinsic enjoyment, expectation of informal quidpro quo, well-defined and contracted-for reward, and coercion. They note that theremay be different welfare implications from increasing the amount of contracted-forrewards, depending on which of the other motivations the increases displace. SusanRose-Ackerman (EVO) provides a typology for distinguishing normatively amongprices, gifts, bribes, and tips that depends on whether the payment is to a principal oran agent, and whether or not there is an explicit quid pro quo.

Who should read these books? I think they would be extremely valuable for twotypes of scholars: those who are hesitant to leave the familiar ground of narrow rationalchoice, and those who have previously rejected rational choice as an inappropriatebasis for organizational theory. Those who already fall between these extremes willfind, especially in EVO, many cutting edge ideas that are likely to shape the futuredirection of organizational scholarship.

DAVID L. WEIMER is Professor of Public Policy and Political Science at the Universityof Rochester.

REFERENCES

Calvert, R.L. (1995). The rational choice theory of social institutions: Cooperation, coordina-tion, and communication. In J.S. Banks and E.A. Hanushek (Eds.), Modern political economy(pp. 216–267). New York: Cambridge University Press.

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Kahneman, D., Slovic, P., & Tversky, A. (Eds.) (1982). Judgment under uncertainty: Heuristicsand biases. New York: Cambridge University Press.

Kreps, D.M. (1990). Corporate culture and economic theory. In J. Alt and K. Shepsle (Eds.),Perspectives on positive political economy (pp. 90–143). New York: Cambridge UniversityPress.

Riker, W.H. (1996). The strategy of rhetoric: Campaigning for the American Constitution. NewHaven, CT: Yale University Press.

Schotter, A. (1981). The economic theory of social institutions. New York: Cambridge Univer-sity Press.

Shepsle, K.A. (1995). Statistical political philosophy and positive political theory. Critical Re-view, 9(1–2), 213–222.

Paul C. Light

Social Programs That Work, edited by Jonathan Crane. New York: Russell SageFoundation, 1998, 324 pp., NPA.

Let’s face it. Public policy and management scholars thrive on failure. It providesthe grist for our policy analysis and the lessons learned for our management cases.Like cutting away on a cadaver, we learn how our institutions are held together, howthe political tissues are connected, and where mortality and morbidity reside.

Unfortunately, our focus on failure can wear down both our students and weakenour own confidence in the value of our teaching. Occasionally, just occasionally, weneed to know that our scholarship and teaching can lead to better outcomes, greaterimpacts, and more efficient and effective institutions and policies. Sometimes wefind that inspiration in a teaching case about some mythic heroic leader whosurmounted all odds to bring innovation or excellence to fruition. Other times wefind a tiny program that actually delivers what it promised. But all too often we havenothing but our own faith to fall back on. “Yes, Virginia, there is a Santa Claus.”

Now comes a book that both inspires and reassures, not with empty promises orsingle-shot analysis, but with deep assessment and rigorous evaluation. Well written,introduced with an incisive first chapter summarising the ten chapters that follow,Jonathan Crane’s Social Programs That Work is that rare book that informs and inspires.It is well worth using as a core text in any policy analysis class, and should be requiredreading for any faculty member about to teach a core course on any subject. It is thatreassuring. One can only hope that other subfields follow suit.

There is no question that other subfields could take a similar course. Indeed, Craneoffers a clear roadmap in an introductory chapter titled “Building on Success.” Thechapter is a tour de force both in describing each of the ten program-specific chaptersthat follow and in outlining a methodology for separating programmatic successesfrom failures. The chapter begins with an answer to those who believe that nothingworks. “This is simply not true,” Crane writes on page 1. “A number of programs havehad a substantial, positive impact on the lives of the people they have served andhave benefited society as a whole. These programs are not miraculous. They do notcompletely solve any social problem. They do not help all of the people they serve oranything close to 100 percent. But they do substantially reduce the rates and severityof particular social problems among participants.”

The heart of Crane’s chapter is an analysis of the eight programs that form the basisfor the book. Each program produced either (1) extraordinarily large benefits per

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dollar of cost (the Reading One-to-One early rating program, the High-Scope PerryPreschool Program, the Project ALERT substance abuse prevention program, andthe Life Skills Training (LST) drug abuse prevention program), (2) unusuallyconvincing evidence that the program delivers substantial benefits regardless of cost(the Success for All preschool and elementary school advancement program), (3)convincing evidence of long-term effects (the Chicago Child-Parent Center andExpansion Program, High-Scope again, the Abedecarian Project for at-risk children,and the LST program again), (4) evidence of cost-effectiveness on a national scale(the Women, Infants, and Children nutrition program), or (5) new hope of makingprogress to solve a seemingly intractable social problem (an assortment of welfare towork initiatives that led to welfare reform in 1996).

After giving readers a broad introduction to each of the programs, Crane reviewsthe complicated system for actually picking the “Social Programs that Really Work,”which was the title of the 1995 University of Illinois conference that spawned thebook. This is the most important contribution of the chapter, indeed the book, for itgives readers ample cause for confidence in sampling the chapters that follow. It alsogives students ample instruction on how to use evaluation aggressively, and makesthe book a valuable supplement for any evaluation course.

In all, Crane lists 13 criteria for judging program success. Some involve simplecommon sense, including statistically significant effects on the treatment group, sizeof effects, and the program’s cost-benefit ratio. Others are more novel, including thelength of the effect, success of similar programs, and the potential for scaling up.Crane and his coauthors are not interested in programs that are one-site, one-shot,small-sized miracles. Instead, they are concerned with finding programs that cangrow into major solutions to long-standing problems. Thus, Crane lists among hiscriteria whether more is necessarily better, whether the program has been replicatedsuccessfully, and whether the uniqueness of the program explains its success. Whyscale up if something other than the program’s uniqueness is the source of success?

Crane and his colleagues are also concerned with the quality of the research thatmight prove cause and effect, and list the evaluation design and the independence ofthe evaluators as key criteria. How one knows what works is central, therefore, towhether one actually knows at all.

Much as one can admire the commitment to rigor in the list of criteria, there aremissing items. It would be useful, for example, to consider the political costs of scalingup as a criterion. Just because a program is doing well on a small scale does not meanit is worth the political capital needed to expand. Which of the assorted preschoolprograms, for example, would warrant the greatest political investment? Is there anyordering of effects that might make investment in preschool programs the preferredfirst option?

The political barriers to actually adopting social programs that work is apparent inthe tenth and final chapter of the book on welfare reform, which was authored byLawrence Mead. As Crane admits, the Mead chapter is an outlier itself—that is, unlikethe other chapters, which feature a single program, the Mead chapter is more anamalgam of available evidence, some of it of exceedingly poor quality, than acompelling examination of rigorous evaluation. Mead nevertheless argues that workrequirements can reduce welfare dependency when coupled with training programsof one kind or another, drawing inferences across a stack of anecdotes and morelimited studies.

Coming at the end of the book, Mead’s chapter shows the power of a single, cost-saving idea for shaping political action more in spite of solid evidence than because of

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it. “In a few years,” Mead concludes, “the effect of work policies will probably be sufficientfor everyone to recognize. Dependency will be reduced visibly, and the debate willinstead be over whether this is good.” Unfortunately, Mead’s chapter does little to supportthe overall thrust of the book, and would have fit more tightly in a book titled “SocialPrograms that Might or Might Not Work.” It would have been better perhaps to end thebook with a short conclusion explaining how such sweeping reform could happen absentbetter evidence and how policy analysis might cope with the continued reminders thatwhat works does not necessarily find space on the legislative agenda.

Like any edited volume, there are gaps here and there in the text. But all of thechapters are reasonably well written and argued, and a sampling would be of value ina variety of settings, both in the core curriculum and on Capitol Hill. Most importantly,readers will come away from the book with greater hope that some things do work insocial policy, and that good research is not always about slicing up a cadaver. SocialPrograms That Work is a profoundly uplifting book and one well worth consulting forthose of us who sometimes wonder whether there are any successes that are theproduct of simple hard work, not miracles.

PAUL C. LIGHT is the Douglas Dillon Senior Fellow at the Brookings Institution.

Leland Gerson Neuberg

Work and Welfare, by Robert M. Solow. Princeton, NJ: Princeton University Press,1998, 119 pp., $19.95 cloth.

This book contains the two Tanner Lectures given by Solow at the PrincetonUniversity Center for Human Values in 1997. An introduction by Amy Guttmann(center director) and a preface by Solow precede the lectures, and comments (withresponse from Solow) by Gertrude Himmelfarb, Anthony Lewis, Glenn C. Loury, andJohn E. Roemer follow them. Solow’s preface stresses that he drafted the lecturesbefore Congress passed, and the President signed, the 1996 welfare reform act, at apoint when he was certain (and hoped) that the President would veto the bill. Hislectures therefore aim at generalities on the issue of the relationship of welfare andwork rather than at specific commentary on the 1996 legislation.

“My aim in these two lectures is to locate the work-welfare alternative at theintersection of two social norms or virtues or ‘human values’: self-reliance andaltruism” (p. 5), Solow explains. He argues that to replace unearned welfare benefits,in whole or in part, with earnings is a good idea for two reasons. First, “altruism isscarce; there is never enough to go around” (p. 3), so that to replace welfare benefitswith earnings conserves the limited altruism available. “Taxpayers will feel better notmerely because less is demanded of their limited altruism but also because they cansee that their altruism is not being exploited” (p. 5). Second, because self-reliance isso much a part of how we define ourselves, recipients of welfare benefits will feelbetter about themselves if earnings replace their welfare benefits.

Solow considers that his claim about taxpayers is not in need of argument. In hisfirst lecture, entitled “Guess Who Likes Workfare,” Solow defends his claim thatrecipients of welfare benefits would prefer to replace them with earnings. In his secondlecture, entitled “Guess Who Pays for Workfare,” Solow agues that to move welfarerecipients into the workforce will be a costly endeavor, with workers footing part ofthe bill in the form of increased competition for jobs. Throughout the lectures Solow

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draws heavily on evidence from studies by the Manpower Demonstration ResearchCorporation (MDRC). He explains:

Much of what I know about welfare and its reform comes from my long membership in theBoard of Directors of the Manpower Demonstration Research Corporation. MDRC has broughtsome serious science to the study of interventions aimed at employing the disadvantaged,where there used to be—and to some extent still is—a desert of uninformed ideology [p. xviii].

With liberal foundation seed money, MDRC emerged in the early 1980s and began aseries of studies of welfare-to-work alternatives. Their studies were mostly state-fundedrandom assignment social experiments. By the late 1980s, partly at the request ofSenator Moynihan, MDRC was providing major research input to congressionalcommittees struggling with welfare reform legislation.

The first lecture defends the claim that welfare recipients prefer earnings to benefitsby quoting participants in a recent Canadian welfare-to-work social experiment whoaffirm it. Next Solow cites an MDRC survey of welfare recipients in a mid-1980sseven-state welfare-to-work program who worked for their benefits at a minimumwage rate. He calls those interviewed “a casual sample” (p. 11) and says:

Here I want to report some attitudes, which seem to have been carefully elicited. Across theseven states, 70 percent of those interviewed said that they were satisfied (either “strongly” or“somewhat” satisfied) about receiving benefits that are tied to a job, as compared with justreceiving benefits. With some variation from state to state, again roughly 70 to 75 percent saidthat they felt better about getting welfare checks now that they were working for them [p. 11].

Solow then quotes an MDRC survey of “single mothers . . . asked to make explicitcomparisons of work and welfare and the choice between them. The source of thegeneral preference for work was confirmed” (p. 12). Finally, he cites MDRC researchthat “concludes that although most welfare recipients—always excluding the clearlydisabled and the mothers of very young children—could probably work at some time,many of them could not work steadily” (p.15). He adds that some of those on welfare,given their educational levels, have very low earning capacities.

To end this lecture, Solow draws on the research that he cited to sketch an economicmodel of welfare. He posits limited altruism, an internalized norm of self-reliancethat values earning a living, and a frequency distribution of earning capacity in thesociety with those in the lower tail unable to earn a decent living. He asserts that“[w]e know that most people, given the option of receiving the same $X a month,either as wages—net of the costs associated with working—or as a handout, wouldprefer to work for their money” (p. 18). He acknowledges that this assumption is toosimple but defends it as follows:

You may notice that I have been tacitly assuming the norm of self-reliance to be internalized ineveryone to roughly the same extent. It is no doubt more likely that some people feel it moreintensely than others. In that case a person is described by two characteristics: earning powerand degree of self-reliance (not to be confused with capacity for self-reliance). A theoreticalstory can still be told, but it is more complicated because one needs to know the frequencydistribution of pairs of characteristics. Since no one actually knows anything about that, thecomplication does not seem worthwhile. (If the characteristics are statistically independent,not much would depend on the complication anyway.) [p. 19]

The Solow model implies that “the welfare rolls are made up of those whose earningpower is considerably less than the standard benefit, enough less to outweigh the

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norm of self-reliance. There is a balancing act between economic incentive and thework ethic” (pp. 18–19). If returns to their employment rise to the level of the standardbenefit (either through higher wages or supplements for the work for which they arequalified, or increased levels of qualification), welfare recipients will leave the rollsvoluntarily (always assuming that jobs for them exist).

Although Solow’s assumption that most people prefer earnings to an equal amountin a handout is plausible, the texts that he cites provide only questionable evidencefor it. Since the Canadian study participants “chose to enroll in the program” (p. 8),they are a self-selected sample of welfare recipients. The seven-state study participantswere welfare recipients required to work for their benefits at a minimum wage rate.However, the MDRC survey sample of them was stratified by state while the reportedresponse average that Solow cites was “the total nonweighted average percent ofresponse in each category across states” [Hoerz and Hanson, 1986, p. 33]. Hence thereported average was not necessarily an unbiased estimate of the mean welfarepopulation attitude. Pavetti, the author of the second MDRC study that Solow cites,stresses that “[t]he sample for this study was not selected randomly, nor were attemptsmade to make the sample representative” [Pavetti, 1993, p. 4]. Instead, Pavetti recruitedvolunteer welfare recipients to interview. Finally, might not those on welfare portraythemselves to possibly intimidating survey researchers as more eager to work thanthey are?

Even if Solow is right about “most people” (including most welfare recipients), forhis model to imply the existence of a voluntary departure from the rolls’ equilibrium,his assumption would have to hold for all welfare recipients. The New York subsampleresults of the MDRC survey of participants in the seven-state study suggest a way tocharacterize some of those who may not prefer earnings to a handout of the sameamount. Only 10 percent, in contrast to 20 to 50 percent in the other six states, of theNew York subsample held jobs in the two years prior to the survey, and “[t]he averagegrade level completed in school was lowest of all in New York” [Hoerz and Hanson,1986, p. 10]. Of 72 interviewed in New York, 81 percent agreed that “I feel betterabout receiving welfare now that I am working for it” [Hoerz and Hanson, 1986, p.32]. Yet only 57 percent answered “satisfied” to “How satisfied are you about receivingwelfare benefits like this—that is, tied to a job, instead of simply receiving yourbenefits?” [Hoerz and Hanson, 1986, p. 32]. Desire not to fail at work as they hadearlier done in school could conflict with desire for self-reliance in some people.Those people could be ambivalent about the choice between work and welfare for thesame amount of money—that is, they might neither prefer one over the other nor beindifferent concerning the two alternatives. For them, a voluntary equilibriumdeparture from the welfare rolls might not exist.

In his comment, Loury suggests a way to characterize some others of those whomay not prefer earnings to a handout of the same amount. He argues that to grow upin a housing project environment and be the only one who “works for ‘chump change’at a fast-food franchise, an individual would have to behave heroically. We cannotexpect heroism as the norm” (pp. 52–53). Thus, some might resent their opportunity-deprived environment, and that resentment might dominate their internalized normsof self-reliance in preference formation. Such people might be indifferent to the choiceof receiving $X a month as a handout or receiving some $Y > $X (= “chump change”)as wages. For them, voluntary departure from the welfare rolls would require wagesgreater than the standard welfare benefit.

The second lecture addresses the question of jobs for former welfare recipients.Solow first sketches two extreme scenarios that he thinks are unlikely. In scenario 1,with no other options, former welfare recipients accept lower wages than going rates

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and an elastic demand for labor opens up jobs for them; eventually they improvetheir training and education and move up the employment ladder, successfullycompleting the welfare-to-work transition. In scenario 2, each welfare recpient whofinds work displaces a lowest-level worker because the demand for labor is completelyinelastic. Solow suggests “[a] more accurate understanding will lie somewhere betweenthe extremes” (p. 26). Former welfare recipients will displace some lowest-levelworkers. Also, they will work for sufficiently low wages that employers will substitutethem for second-level workers on a more than one-for-one basis. So wage reductions,job creation, and job displacement will propagate up the employment hierarchy,damping out as they proceed.

The Solow scenario generalizes the extremes, is plausible, but is completelyspeculative. He wants “to describe in theoretical but commonsense terms theconsequences of withdrawing welfare benefits and forcing the former recipients intothe labor market” (p. 24). Yet his scenario presupposes assumptions whose alterationcould change it. For example, he implicity supposes a fixed demand for the highest-level workers. However, suppose that technological change increases demand for thehighest-level workers and a shortage develops. Employers might seek the second-highest-level workers and pay them increased wages. Then laid over the Solowscenario, wage increases, job creation, and job displacement might propagate downthe employment hierarchy, again damping out as they proceed. Economic theory asyet provides little knowledge of the effects on wages, employment, and unemploymentof withdrawing welfare benefits and forcing former recipients into historically evolvinglabor markets.

For a clue to the fate of welfare recipients forced off the rolls, Solow next turns tothe MDRC random assignment social experiments. He explains that these experimentsinvolved welfare applicants randomly assigned either to welfare or to some form ofworkfare, and stresses that “[d]ifferences in outcomes can thus be imputed to theeffects of whatever mandatory requirements were imposed by the workfare programbeing tested” (p. 33). He argues that “[i]t cannot be assumed that these experimentsanticipate the likely outcome of an all-out imposition of time limits, work requirements,or simply the closing-down of AFDC. They do give us some quantitative insight intothe likely fate of welfare recipients tossed into the open labor market” (pp. 33–34).

As an example, Solow considers the California Greater Avenues for Independence(GAIN) experiment. In his description of GAIN, a treatment group member alternatedbetween basic education, supervised job search, and unpaid workfare activities whilereceiving the standard welfare benefit, and a control group member received thestandard welfare benefit. During the three-year followup period, researchers foundthat 57.6 percent of those in the treatment group and 51 percent of those in thecontrol group held a job at one point or another. Solow concludes that “the net impactof the GAIN program was to increase the fraction ever employed by 6 percentagepoints. This difference is statistically significant, but it is fairly small” (p. 35). Headds: “One cannot be sure that this small margin is an indicator for the future, butthe burden of proof is on anyone who thinks that welfare recipients forced into thelabor market will be very successful in the search for jobs” (p. 35).

In fact, the GAIN experiment treatment offered those assigned to it a choice betweenthe program that Solow descibes and a threatened, but not always executed, 20-percentreduction of welfare benefits—the portion regarded as supporting the family headbut not the children [Riccio et. al., 1994, pp. 3–5]. Hence, the GAIN treatment wasless extreme than forcing welfare recipients into the labor market by cutting off all oftheir benefits. Further, welfare applicants were told that they would be randomizedbetween GAIN and welfare and required to report to an orientation meeting. Those

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who reported to the meeting were randomized, but “nearly a third of all mandatoryregistrants never appeared at an orientation” [Riccio et. al., 1989, p. 98]. So GAINprobably underestimated the employment impact of forcing welfare recipients intothe labor market by cutting off all of their benefits.

Solow ends his lectures with two policy conclusions that he says follow from hisanalysis. First, to move people from welfare to work will require an “expensive effortto increase the demand for unskilled and unqualified labor” (p. 39). Second, sincemany former welfare recipients will be unable to work regularly and/or full-time, andmost will receive low wages, a successful transition from welfare to work will requirea system that “packages” earnings with transfers. He mentions one possibility: furtherexpansion of the Earned Income Tax Credit. In his comment, Roemer fleshes outSolow’s model with mathematics and confirms that the transition will be expensive.Roemer also calls for greater allocation of public funds for education and training ofthose with weak educational backgrounds.

In her comment, Himmelfarb follows up a Solow remark that modern economistsrarely speak on “human values” by pointing out that Adam Smith wrote The Theory ofMoral Sentiments before The Wealth of Nations. Solow responds by defending thepractice of economists since Smith to start with his idea that “the market mechanismcould create order, and efficient order, out of the uncoordinated actions of greedypeople” (p. 87). He summarizes the history of economics since Smith: “It took a century(Walras, Pareto) to get a logically coherent picture of how a complete system ofcompetitive markets functions, and a century more (Arrow, Debreu, many others) toget a rigorous understanding of the limited reach of the Invisible Hand” (p. 87). Infact, however, the modern general equilibrium theory research that Solow describessupports claims for neither a more nor a less “limited reach of the Invisible Hand.”Economic theory amounts to not much in the way of science as yet.

Common sense suggests that some workers (including former welfare recipients)will find themselves worse off if all welfare recipients are forced into the labormarket by cutting off all of their benefits. Neither economic theory nor socialexperiments add further insight as to how many will be worse off and how muchworse off they will be—information that policy planners would reasonably like tohave. Under such limited information circumstances, Solow’s call for “packaging”work with transfers and job creation is readable as a plea for common decency tocomplement common sense. In her comment, Gutmann elaborates the “packaging”notion into an idea of reciprocity. The conservative demand that welfare recipientsshould work in exchange for welfare benefits is reasonable. So too is the liberaldemand that society should supply transfers to supplement earnings, and createjobs where markets fail to do so, in order that none become worse in resourceswhen the welfare rolls contract.

From the perspective of reciprocity, what is alarming about the 1996 reform is itsone-sidedness. The poor are being held to their side of the reciprocity bargain—nomore benefits without work. Society, though, is not required to reciprocate. Statesare free to develop their own approaches. Some are governed by some sense ofreciprocity (e.g., have introduced state earned income tax credits) and some arenot. In his comment, Lewis asks: “Why did we abandon the federal guaranty at atime when the country was at a high point of prosperity, very likely the greatestprosperity of any country, ever?” (p. 56). He answers by suggesting that the prosperityitself may have made us all into Social Darwinists. Solow responds that “[i]t ispossible that the welfare state, as it actually developed, undermined self-relianceenough to undermine itself” (p. 86). Is social science yet up to answering the questionthat Lewis asks?

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Work and Welfare is a valuable introduction to the web of issues surrounding thewelfare reform controversy that has raged since the late 1960s. Solow is probablyright that what impeded sensible welfare policy development for 30 years wasideological rigidity. However, he surely exaggerates when he supposes that the infantsciences of economics and social experimentation can help much to make povertypolicy. More important than the research he cites is his humane prescription ofcommon sense and common decency, tied to a notion of political compromise andarticulated into a political theory of reciprocal obligation. From such a perspective,the 1996 welfare reform makes the current political task one of encouraging states todevelop policies that hold up society’s side of the reciprocity bargain.

LELAND GERSON NEUBERG was a 1997–1998 Visiting Scholar at the Institute onRace and Social Division, Boston University.

REFERENCES

Hoerz, G., & Hanson, K. (1986). A survey of participants and worksite supervisors in the NewYork City work experience program. New York: Manpower Demonstration Research Corpo-ration.

Pavetti, L. (1993). Learning from the voices of mothers: Single mothers’ perceptions ofthe trade-offs between welfare and work. New York: Manpower Demonstration ResearchCorporation.

Riccio, J., Goldman, B., Hamilton, G., Martinson, K., & Orenstein, A. (1989). GAIN: Earlyimplementation experiences and lessons. New York: Manpower Demonstration ResearchCorporation.

Riccio, J., Friedlander, D., Freedman, F., Farrell, M.E., Fellerath, V., Fox, S., & Lehman, D.J.(1994). GAIN: Benefits, costs, and three-year impacts of a welfare-to-work program. NewYork: Manpower Demonstration Research Corporation.

Robert Hunt Sprinkle

Life without Disease: The Pursuit of Medical Utopia, by William B. Schwartz. Berkeley:University of California Press, 1998, 159 pp., $22 cloth.

The purpose and practice of medicine in and beyond fin de siècle America are thesubject of a new book by an extraordinary physician. Dr. William Schwartz is amongthe most honored of nephrologists, and for two decades now he has also been amongthe most credible of health care, health policy, and science policy commentators,both in the United States and abroad. Dr. Schwartz has observed much, and he isexquisitely well qualified to judge what he has observed, and judge it he does in Lifewithout Disease: The Pursuit of Medical Utopia.

Immediate impressions of this work are clarity and authority. Dr. Schwartz isparticularly adept as a critic of managerial misperceptions and the policy trendsattributable to them. The “closing” of beds and of units, floors, wings, and wholehospitals often makes sense. Yet it results only in one-time savings and may be offsetby substitutions from less expensive facilities to more expensive. Reductions in thepremium costs of health insurance, as observed during the rapid-growth phase ofmanaged-care corporations, tended to be temporary and were largely explained bythe dropping, degrading, or denying of coverage. The substitution of outpatient for

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inpatient care has saved the most money, though “saved” here might more accuratelybe “redistributed.” Scrimping on “health maintenance” has also saved money, onsomeone’s account, but is more interesting as an irony than an economy. He recognizes,as many do not, that health maintenance organizations (HMOs) increasingly resemblethe indemnity insurers upon whose inefficiencies they were supposed to improve;the point-of-service insurance option, more and more popular despite its price, is aquasi-indemnity mechanism. Federally sponsored clinical guidelines, which in theirhundreds were to form the keystone of quality and cost control in the currentadministration’s 1993 restructuring plan, were never likely to prove useful, except tolawyers, or to save money; having myself labored on the guidelines for sickle-celldisease and unstable angina pectoris, I can attest to the fairness of these criticisms.

Futility of the “one-time reduction” in cost is a major theme. Yes, insurancepremiums have fallen, but only to rise again from a lower base. If his book weregoing to press in 1999, Dr. Schwartz could make this type of argument even moreforcefully than he has. Yet he may sometimes have made it too forcefully. Many “one-time reductions” have eliminated or reduced costs that otherwise would have recurredin every subsequent pay period or billing period, and some of these costs were sure tohave increased at a rate exceeding that of inflation in the general economy. Decreasingthe certification level required to join a nursing staff and substituting the work ofgeneralists for the work of specialists decreases not just payroll and reimbursementobligations but also exposure to cost escalation, since a more elaborately trainedstaff will expect to use and will agitate to acquire new technologies earlier in theirproduct cycles. Similarly, cutting back the aggressivity of care—as, in Britain, forpatients 75 years of age or older—changes not just the level from which costs willescalate but also reduces systemwide commitment to activities whose costs tend toescalate most rapidly. Quibbles aside, Dr. Schwartz is clearly more intrigued by ratesof increase, which he fears will remain high permanently, than levels of expense,which he recognizes as sure to be exceeded later if not sooner, even in real terms.

Dr. Schwartz attributes high rates of health care cost increase almost wholly tounderdisciplined appetites for technological advancement. Levels of expense,suppressed as they may be by temporary expedients, are determined ultimately byrates of increase and will surely soon prove unsustainable, making the least popularof all health care policies—rationing—the most confidently predictable. Inferring fromhis title a conclusion he never quite states, Dr. Schwartz seems to be arguing that “lifewithout disease” may be possible, as extrapolated from current research to the not-so-distant reality of the year 2050, but that “the pursuit of medical utopia” will stall.Some advances will reduce costs, but most will not, or at least not for quite a whileafter introduction, and, anyway, the range and multitude of advancements, not justtheir audacity, will force total cost up and up until capped, painfully but justifiably,by the guiding fist of rationing. It is in this context that Dr. Schwartz, otherwiseresentful of the mess it has made of his profession, seems to accept that managedcare is here to stay and argues that the rationing blamed for its disrepute is actuallynecessary, that it serves the collective good.

This last view, which dominates half the book, is hard to reconcile with other insightsinto the nature and quality of managed-care operations. One reason may be that themanaged-care behavior that Dr. Schwartz, like most of the distinguished circle ofmicroeconomists with whom he has collaborated, calls “rationing” is something else.Rationing might first suggest that each managed-care corporation is allotted a limitednumber of certain goods or services, such as bone marrow transplants, and then thecorporation distributes that allotment internally, either on the basis of predicament

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or priority or as the prize won in a competition, such as a sympathy-engenderingcontest or a game of chance, such as a lottery. This is not the case. Rationing mightalternatively suggest that each managed-care enrollee has a right to one bone marrowtransplant, need it or not, or has a partial right that might or might not be tradable ina secondary market. This likewise is not the case. Rationing might instead suggestthat the means with which to purchase bone marrow transplantation is distributed inanalogous ways but that the purchase itself is made “out-of-plan.” Finally, rationingmight imply that a managed-care corporation has established a business strategy inwhich an undisclosed number of any listed benefits will be funded in a particularreporting period. That number might be zero or some small positive integer or evena fraction, and it might be raised if the corporation’s “medical losses” on other frontsare less than projected. This is the case, and it strains the meaning of the word andthe patience of the public.

The not-really-rationing behavior exhibited by managed-care organizations maybe better understood as “delivery reluctance” [Sprinkle 1999]. This phenomenonapplies more or less vigorously in a corporately self-interested way to the delivery ofany and every good or service, since each is funded from cash whose flow may beinvested and whose residuum may be pocketed. The rationing that many Americansrecall from the Second World War and the rationing that a struggling nation mightimpose upon itself even today in peacetime was, or would be in the future, quitedifferent, both structurally, as discussed above, and—here is the more practical politicalpoint—morally. Every month, some number of women with widely metastatic andconservatively unmanageable breast cancer discover that the insurers they chose inhealth during “open-enrollment periods” at work have made “hard choices” to callbone marrow transplantation in their cases “experimental” and thereforemisallocations of the “scarce resources” contributed by other premium payers. Thesewomen are unlikely to find their willingness to sacrifice for the greater good of fellowenrollees to be at all comparable to their willingness to sacrifice for the greater goodof fellow citizens all in the same boat, all holding standard second-class tickets. Peacein dying is also unlikely to be enhanced by the impression, sometimes accurate, thatinsurers could fund some number of extra procedures by divesting marketablesecurities or by reducing executive bonuses or shareholder dividends.

Dr. Schwartz, whose fiscal pessimism is a function of his technological optimism,advances what is in spirit a half-transposed Malthusian argument. The ReverendThomas Malthus, who gets a mention late in Life without Disease, taught a generationof aspirants to the East India Company’s administrative service that a famine-pronepopulation when too well fed would increase geometrically while its productivecapacity at best would increase only linearly, the potential totality of arable andgrazable land being fixed. The famous error here is generally said to have been afailure to envision innovation. In contrast, Dr. Schwartz seems to be arguing that it isinnovation that increases geometrically, with popular expectations both pushing andbeing pulled along, while society’s ability or willingness to charge and pay itself tocare for itself is ultimately fixed. Indeed, in the United States, as throughout thedeveloped world, health care’s cost and economic share have been rising, just linearlybut nonetheless steadily, and even now, we are told, unsustainably. It is innovation,then, that is revealing—more than obviating, this time—resource scarcity, and it isresource scarcity that is forcing restraint through rationing. Here Dr. Schwartz, inthe best of company, loses his way.

Where is the evidence of this resource scarcity? It is resource abundance that hasproduced and promises to continue producing new and better goods and services

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which, subsidized or not, will find profit-making market-clearing prices or beabandoned in favor of older or newer goods and services that will. The author citesan increase in total spending, after all, rather than any sign that total spending has hita ceiling or is about to hit a ceiling or even has a ceiling. Roughly 15 percent ofAmerica’s gross domestic product is generated by activities related to health care,and almost all of this activity circulates money and creates jobs in an internal market.Is 15 percent too much? Is it too little? Has the rise to current levels been too fast? Ithas been far slower since 1950—the start of the half-finished 100 years Dr. Schwartzinvites us to consider—than the recent and unresented rise of spending on personalcomputers and, for that matter, Internet stocks. As health care spending, which exactlyequals health care earning, most of it taxable, has risen and risen again, the UnitedStates has become ever more powerful, ever more productive, ever more prosperous,ever more able to sell its outputs abroad, and ever more eager to trade its increasinglydisposable wealth for the cheaper outputs of lower-wage economies, all the whileminimizing inflation and maximizing employment. It has even balanced its budget,helped by cheap oil and canny bookkeeping. There are resource scarcity problems,severe ones, millions of them, in American health care, but they are artifacts of personaland political misfortune rather than national economic limitation.

Dr. Schwartz makes sense when predicting persistently strong demand for the newestand best diagnostic and therapeutic modalities and persistently strong support forthe basic and applied life-sciences research, largely American, that make suchmodalities possible. He makes less sense when predicting “a widening gap betweenwhat is medically possible and what is medically customary” (p. 63). Already only 5percent of our population obligates 50 percent of medical expense, an unmaintainabledisproportion. Or is it? These numbers, borrowed from colleague Henry Aaron, meanboth more and less than they appear to. They do not describe a wealth-disparity orincome-equity problem. Unambiguously, the 5 percent are worse off than society’sresidual 95 percent and would gratefully trade places with them. The 95 percent havenot yet entered their inevitable serious-illness phase, but they will, cohort by cohort.The sickest 5 percent might someday obligate less than 50 percent of expenses evenwithout economies in “illness care” if more effective preventive care becomes availableor if effective preventives become more expensive but not much less frequently used.Nicotine patches or aspirin might somehow become “right-priced” to reflect,respectively, smoking cessation’s or stroke prevention’s enormous potential value tothe purchaser. That said, all these healthier purchasers would still someday becometerminally ill, whether hit by a bus in the prime of life or septic from a bedsore inlong-term care. It would be a perverse health care system indeed that did notconcentrate its efforts upon them.

In a way other than the one Dr. Schwartz must mean, this gap between what ismedically possible and what is medically customary has already been widening, andfor reasons having less to do with resource scarcity than, oddly, resource excess. Theimportation of the hospice; the development of the “living will” and the “advancedirective for terminal care”; the success or near success of “right-to-die” ballotmeasures; the prolonged impunity of Jack Kevorkian; the popularity of “alternative,”“natural,” and “supplementary” services and products; and the centrality of “patientcompliance” as a topic in clinical training and pharmaceutical development are allsigns of an often forgotten master force, “demand reluctance” [Sprinkle, 1994a]. Weall want the best for ourselves, for our families, for our friends, and, most of the time,for strangers, but we all know that the best possible is nearly always less than themost imaginable. What Dr. Schwartz seems really to mean here is that the cost of“what is medically possible” will too greatly exceed willingness to pay.

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Whose willingness? Dr. Schwartz seems always to mean society and society’s agents:the health care insurer—public or private, revenue-maximizing or profit-maximizing—and the employer. The willingness of the individual to pay gets little attention. Fewindividuals, foresighted or not, could ever save enough of their income to afford themost expensive rescue—or the most expensive death—that medicine may offer orimpose. Few would have to, of course, since most will die cheaply or dwindle away. Butsome would have to afford it. So, most buy insurance or authorize their government touse their taxes or their employer to use their foregone wages to buy insurance on theirbehalf, as well as to subsidize the purchase of insurance for or by fellow citizens withno jobs or bad jobs. Does this pooling of money by principals make agents the truepurchasers whose willingness to pay ultimately matters? Commentators comfortablewith America’s “insurance illusion” may think so. Others may think differently, rangingfrom the wild-eyed libertarian, the free-market romantic, and the rarely seen right-of-center consumer advocate all the way to the architects and architectural secretarieswho buy medical savings accounts, regardless of tax disincentive.

Dr. Schwartz is not much interested in reconsidering the willingness-to-pay problemor exploring the nature of insurance or considering ways to reform the proteanAmerican insurance industry. His subject is elsewhere: “Given the virtual certainty ofa mounting imperative to ration care, we will soon need to decide how we will allocatethis country’s enormous but not inexhaustible healthcare resources” (p. 102). Allocatingthose resources to managed-care corporations has not been the solution that manyhoped it might be. Managed-care corporations are unable to grow profitably by“disciplining” their customers excessively; this we all now know. They are able torename themselves, to restructure themselves, to fold their tents, to merge, but theyare not able to resist patient pressure to keep almost up with progress. If their federallygranted litigation protections are weakened or removed, as may be less likely nowthan when Life without Disease went to press, managed-care corporations would befar less able than now to frustrate their customers’ intentions to get full value, as theysee it, for their premium dollars.

How else might rationing be achieved? Dr. Schwartz suggests that we head towardan old and theoretically still-appealing goal, a right-pricing, bang-for-the-buck goal:equalization of marginal benefit across all health-affecting activities. So, a dollar’sworth of brain surgery should be just as beneficial as a dollar’s worth of a bedpan, ora dollar’s worth of penicillin, or a dollar’s worth of aspirin. Of course, goods andservices are worth different amounts to different patients in different settings. Forexample, aspirin’s value for routine headache is real enough but enormously lessthan its value for heart-attack or stroke prevention or its value in an episode of unstableangina pectoris. Supposedly, the medical staff of a large HMO, maybe in coordinationwith the community at large, could rank all the uses and utilities of aspirin—andeverything else—and decide not to support any services near the bottom of the list.About 10 to 15 percent would have to be cut. Presumably, this means 10 to 15 percentthat are “up the list” from the low-benefit services that a conscientious physicianwould hardly ever recommend anyway, on clinical grounds alone. Moreover, theefficacy of a good, such as a drug, is independent of its newness, assuming it is usedcorrectly. Its price, though, is not independent of its newness, nor is its priceindependent of competition effects. In contrary fashion, the efficacy of a service tendsto be lowest when new, since its practitioners are still learning its subtleties, but itsprice when new is high. Accordingly, the recommended ranking would have to beredone frequently. Help might be found in “outcomes” research, yet most everythingbad that Dr. Schwartz has to say about the clinical guidelines movement could beadapted to the closely related “outcomes” movement.

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The weaknesses of such a plan are hard not to notice. Dr. Schwartz sees them clearlyenough in his own critique of the Oregon Medicaid scheme earlier in the book. Heholds out some hope, though, that his own less formal version of the expected-benefit-per-dollar strategy would prove inoffensive enough to succeed: “Like the belt-tighteningfamily, the managed care group should be able to maximize benefits by being morestringent across all areas of expenditure, rather than by eliminating any areas entirely”(p. 110). This sounds like better advice, organizationally. For some readers, though,the figure of speech chosen to deliver this advice may not quite serve. By adding a“family” metaphor to his previous “community” metaphor, Dr. Schwartz may strike asour note with citizens unready to accept the moral authority of for-profit corporations.Indeed, this admittedly hypersensitive objection may get to a surprisingly pragmaticpoint. A community ethic—pitching in, expecting no more than one’s share, helpingout the hardest hit—used to count for a lot in American health care. In quickeningpursuit of a still-receding “efficiency,” we have replaced it, for the most part, with acorporate ethic, and when this ethic speaks of rationing, the modal popular responseseems to be resentment, even contempt. The “bills of rights” pending in statelegislatures nationwide suggest as much, as does agitation for amendment of thefederal law—ERISA—that may make these bills dead letters after enactment.

All of this service to the corporatized collective good puts physicians and nurses inan uncomfortable position, or it should, anyway [Sprinkle, 1994b]. We know a lotmore about this position than we used to. “Gag” now has a contractual connotation,as does the vapid structural-functionalist term “provider” [Sprinkle, 1997]. Dr.Schwartz is not much help here. The physician must be a brave rationer for society’ssake and in the interest of society’s agent, the managed-care corporation: “Squaringthis new mandate with the physician’s traditional ethical imperatives will be a challengefor the medical profession in the years ahead” (pp. 112–113). Here is a safe predictionabout a dangerous predicament, but here also is a disheartening and not obviouslynecessary capitulation. Awkward organizational initiatives are assured, yet “it is onlyby testing such approaches in the real world that better ones may be developed” (p.113). Embittered challenges are likewise assured; some critics will attempt redressthrough legislation, others relief through litigation. “In the long run, however, eventhe courts will have to acknowledge the altered fiscal realities of a new era” (p. 114).

Dr. Schwartz sees and foresees those realities in what may be the right light butfrom what may also be the wrong perspective. Life sciences progress is, as he stresses,expensive. It is actually more expensive than most analysts and commentators everimply. Much of it is publicly funded, from the start if not to the finish, and almost allof it is publicly subsidized in one or more of several ways: research grants, traininggrants, tax breaks, intergenerational transfers, orphan-drug incentives, disease-specificassistance, and so forth. Dr. Schwartz feels that the grand total price for enjoying thebenefits of life-sciences progress is barely payable now and sure to rise. Sometechnological innovations will be cost-reducing, he says, but not enough to bring thisprice within our means. Health care, its prices tied to the ever-rising cost of progressand the ever-lengthening list of patient expectations, is too big an industry. Dr. Schwartzdoes not explicitly state that health care is too big an industry. Hardly anyone everdoes. But his arguments require him to hold this opinion, or, at least, to acknowledgethis conclusion. Year after year, we spend too much money, representing too big aslice of our gross domestic product, trying to preserve or restore health or to delaydeath. We ought to spend much of that money—and almost all of the money that wemight add to our current yearly expenses—on something else.

The bill for life-sciences progress and its exploitation keeps coming to the Americaninbox and the money—personal or public, principal or interest—needed to cover all

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obligations keeps going to the outbox. The way it gets there is roundabout, annoyingto many and embittering to some, but the money does get there, in ever-increasingamounts. Why should we care? There might be three answers. First, we could bestealing talent and effort from worthier goals—national defense, maybe. Second, wecould be stealing talent and effort from industries with better export or spin-off orstimulus potential, such as financial services, information technology, agriculturalbiotechnology, or specialty manufacturing. Third, we could be stealing from ourselves,many of us feeling that we pay more than our share and most of us convinced that weget less than we pay for.

This last, though it needs restatement, is surely the popular answer. Part of thestealing-from-ourselves perception is explained by America’s “charity problem,” itsperennial unreadiness to deal gracefully with, which also means to finance efficiently,the bills of citizens who enter the health care marketplace unable to buy what theycredibly need. Some of the remaining part is explained by price levels, which areexceptionally high in the United States, despite “market mechanisms” [Evans, 1997].Neither gets much attention. Rationing, of course, requires only an apparent scarcity.The reality of that scarcity or, if unreal, the reasons for its perception are beside thepoint—or, in fairness, beyond the author’s topic or his book’s scope.

In his several looks abroad, Dr. Schwartz has found little evidence suggesting thatAmerica’s current health care financial “system” could be much improved. Britain,which he and Henry Aaron examined at length in The Painful Prescription: RationingHospital Care (Washington, DC: The Brookings Institution, 1984), is already a rationer,but an archaic one. Managed-care thinking might have helped the British, but itsimportation from America during the Thatcher-Major years was less successful andmore disliked than anticipated, and New Labour, which rode its defense of the NationalHealth Service resoundingly into power, has promised to fund the chronicallypenurious NHS more realistically. Continental Europe likewise offers little inspiration.Its organizational and financial achievements, which Dr. Schwartz slights but whichmany Americans admire, have not prevented technology-driven cost increases, norhave they made commonplace the most sophisticated practices. This “expensive-and-obsolete” characterization, while too thinly detailed to be seriously objectionable, is,nonetheless, inconsistent with the impression many American patients must haveformed, noticing that numerous important drugs and devices are introduced into theUnited States with the claim that they have been used safely and advantageously foryears by millions in Europe. Canada is said to be “deceptive” in the portrayal of itscost efficiencies, and Canadians are said to be flocking to private supplementalinsurance. Many if not most of these flocking Canadians, however, are “snowbirds”needing enhanced travel insurance so that they can qualify for admission to hospitalsin the American Sun Belt. Furthermore, as in Britain, the last transition in Canada’sfederal government is thought largely to have reflected citizen dissatisfaction withhealth care underfunding, rather than rising cost. Countries that have establishedhealth care as a citizenship right may operate their systems in a manner that Dr.Schwartz would call “rationing,” but some of these countries routinely generate vitalstatistics that are hard not to envy [Mackenbach, 1991]. At least one country, Sweden,not only enjoys better results but spends less per person while buying more, asdemonstrated through the comparative analysis of purchasing power parity withinhealth care sectors [Gerdtham and Jönsson, 1991].

When it comes to health care technology, the United States is a nation of “earlyadopters,” as we would be characterized if we were buying computer software. Earlyadopters pay a lot because they pay first, before the product cycle has made standardwhat initially had been exceptional. We all—North Americans, Europeans, and many

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others—are in an extremely expensive era with respect to some technologies but in abargain basement era with respect to others. In the future we will know enough to docheaply what today we do dearly, but in that day there will be tests and treatmentsjust coming within our grasp but still lying beyond what our budgets arguably shouldbe allowed to support. Roughly half of Life without Disease is a structured review ofwhat those technologies are likely to be.

Many readers will find Dr. Schwartz’s scientific and technological predictions fascinating.These are undeniably well informed, and many, doubtless, will land close to their marks.The shorter-range predictions, being, in a sense, market predictions, may be less bankablethan they seem. The longer-range predictions, being less directly extrapolated from currenttechnology than from current science, may, paradoxically, be better bets.

The best comment on the life sciences and the technologies that they encourage,allow, or explain is offered in another context, a discussion of antibiotic resistance. Itis from the past, not the future:

I have vivid memories of my episode of “double pneumonia” as a twelve-year-old in the 1930s,debilitated by a severe cough, malaise, loss of appetite, and a high fever. No drugs, not even thesulfa drugs, were available; mustard plasters were applied to my chest in the vague hope of“stirring up the circulation” in my lungs. The local doctor came to my home each day, exam-ined me sympathetically, and left. Everyone seemed to be aware that soon either the feverwould break and I would recover, or it would continue unabated and I would die. This recollec-tion underlines the striking contrast between that preantibiotic era and the era of now-famil-iar “miracle” drugs like penicillin and streptomycin. (p. 145)

This recollection also brings to mind the fact that penicillin, the product of an Anglo-American alliance not against Streptococcus pneumoniae or Staphylococcus aureus butagainst the Axis powers, was initially so expensive as to be priceless. No market anywherehad yet groped its way to a quotable value, yet penicillin was so highly valued that itwas recycled. The urine of a recipient was collected, its dissolved penicillin precipitatedout and then given as a “shot in the arm” to the next designated patient, whose treatment,though successful, might be discontinued, with lethal result, if a higher-priority patientbecame available. Here was a case of true resource scarcity, though not exactly a caseof rationing. Rather than leading to an acceptance of limitation, it led, in instructivecontrast, to an enormous investment in the producing and cheapening of the prizeditem, to the routine and often unnecessary hospitalization of patients needing it, to theoverbuilding of hospitals themselves, to the medically and environmentally dangerousoveruse of a still-wondrous but now dirt-cheap commodity, and to the necessity ofusing grandly more expensive newer agents as substitutes. Penicillin was not really thefirst topic of such a story and was certainly not the last. It is this same story in superficiallydissimilar forms that explains why so many of us spend our careers generating andconsuming so much of our national income. It also explains why we and our successorsare highly likely to continue doing so, some happily, some not.

R.H. SPRINKLE is a physician and policy scholar at the School of Public Affairs,University of Maryland.

REFERENCES

Evans, R.G. (1997), Sharing the burden, containing the cost: Fundamental conflicts in healthcare finance. In Health politics and policy (3rd ed. pp. 265–287), T.J. Litman & L.S. Robins(Eds.). Albany: Delmar Publishers.

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Gerdtham, U.G., & Jönsson, B. (1991). Price and quantity in international comparisons ofhealth care expenditure. Applied Economics, 23,1519–1528.

Mackenbach, J. (1991). Health care expenditure and mortality from amenable conditions inthe European community. Health Policy, 19(2–3), 245–255.

Sprinkle R.H. (1994a). Remodeling health care. Journal of Health Politics, Policy and Law,19(1), 45–68.

Sprinkle, R.H. (1994b). Profession of conscience: The making and meaning of life-sciencesliberalism. Princeton: Princeton University Press.

Sprinkle, R.H. (1997, Summer). Corporatism in question: A note on managed care. Report ofthe Institute for Philosophy and Public Policy, 17(3), 13–17.

Sprinkle, R.H. (1999). A moral economy of managed care. Upublished paper.

Susan M. Sanders

Evaluating the Healthcare System: Effectiveness, Efficiency, and Equity, by Lu AnnAday, Charles E. Begley, David R. Lairson, and Carl H. Slater. Chicago: HealthAdministration Press, 1998, 334 pp., NPA.

The Road to Nowhere: The Genesis of President Clinton’s Plan for Health Security, byJacob S. Hacker. Princeton, NJ: Princeton University Press, 1997, 239 pp., NPA.

In reading two books on health care and health care policy in the 1990s, one wouldexpect to find many common concerns about how we provide, consume, and pay forhealth care in this country. And, in fact, the authors of each of these two books doaddress how we might reduce costs and expand access to health care for the nation’s43 million uninsured people. They do this, however, by taking two completely differentapproaches. The approach of Aday, Begley, Lairson, and Slater, in Evaluating theHealthcare System: Effectiveness, Efficiency, and Equity, is that of health care research.Specifically, they identify indicators of the health care status of the people in thiscountry; they establish the criteria of effectiveness, efficiency, and equity to evaluatethese data; and they make some judgments about where we are and where we oughtto go in order to improve the health care status of the people of this nation. By contrast,Hacker, a political scientist, takes a less normative approach about what ought to bein a health care reform package, and instead describes the components of the Clintonreform proposal, how it took the shape it did, and why, ultimately, it became thelatest health care reform effort to take the road to nowhere.

Hacker, using the agenda-setting research of Kingdon, Baumgartner and Jones,and others, spins the tale of how two similar but ideologically inchoate policy streamsworked their ways to the top of the new administration’s policy agenda. Specifically,Hacker illustrates how the resulting health care reform package, “managedcompetition within a budget,” languished absent policy particulars, a sad but notunsurprising result of trying to meld a centrist and politically intractable positionwith two similar but ideologically incompatible policy streams.

The first stream Hacker describes, resulting in the Jackson Hole plan, wasdesigned to control escalating costs by managing competition without settinggovernmental limits on health care spending. Cast as a neoclassical economicapproach to health care reform, the Jackson Hole plan argues that properlydesigned incentives, the availability of health care data, and competition amongproviders would reduce health care spending and promote a more efficient use of

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medically scarce resources. At the ideological basis of this proposal are emphaseson individual responsibility, limited government involvement in the provision ofhealth care, and market-driven competition.

The second stream, which Hacker calls the “liberal synthesis,” also included someform of managed competition, only within a budget. While the proponents of thisstream were also concerned about rising costs, they were more interested in expandingaccess to health care to the nation’s growing population of uninsured people. Eventhough the liberal synthesis wanted to expand access, they did not want to proposenew taxes, impose extensive regulations, or suggest that the best alternative to truereform might be the politically inflammatory plan of universal coverage under a single-payer system such as Canada’s. Thus, they supported managed competition withnationally imposed budgets and capitated payments to public and private plans. Thesize of these budgets would vary by need and, presumably, would provide coveragefor all. In contrast to the Jackson Hole plan, the ideological components of the liberalsynthesis were the beliefs that the government should take a more activist role in theprovision of health care and that the community was primarily responsible for insuringthe health of all its citizens.

Because these two policy streams offered the prospect of a partnership between thepublic and private sectors, they were both attractive conceptually to the Clintonadministration as managed competition within a budget. Proponents of the two plansskirted the issues of raising payroll taxes and regulating rates for providers, twofundamental components of the “play or pay” plan that the President had onceadvocated, but recently abandoned as politically intractable.

While Hacker explores a number of reasons for the failure of the Clinton plan, itseems difficult to deny the importance of two ideological tensions that have frustratedhealth care reform efforts since the 1930s. Hacker develops the complexity ofnegotiating the territory of the first tension, which is the degree to which thegovernment should become involved in the provision, regulation, and financing ofhealth care. The second tension, the debate about whether health care is a right forall or a benefit conferred upon individuals because they worked for it, paid into it, orwere old or poor enough to be entitled to it, is less prominent in his analysis.

If the two policy streams that flowed into the Clinton reform plan were soideologically inconsistent, and if the resulting tensions had, in one form or another,sabotaged reform efforts since the 1930s, how was it that these streams neverthelessmoved so rapidly onto the Clinton agenda? Illustrating again the power of the literatureon agenda setting and policy development, Hacker argues that policy entrepreneurs,chiefly economists and policy analysts who were constantly on the lookout for waysto package and repackage their ideas into policy constructs that appeal to differentpolitical constituencies, played the major role in lifting health care reform onto theClinton agenda. Hacker illustrates how focusing events, such as Democrat HarrisWofford’s (PA) election to the U.S. Senate made health care reform a policy issuethat, as Wofford campaign architect Paul Begala said, could “turn spit into gasoline”(p. 10). Moreover, there was the state of the economy. Specifically, Americans werebecoming increasingly edgy as the economy waned and the ranks of the “deserving”uninsured, or those middle-class people who had lost their jobs and, with them, theirhealth care benefits, began to swell. Political operatives such as Begala and JamesCarville sensed this. So too did the media, especially Michael Weinstein of the NewYork Times, who saw the Wofford election as an opportunity to become a bully pulpitfor health care reform. The rise of reform was almost inevitable, Hacker argues, whenthese factors were combined with the rapidly increasing costs of health care.

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While Hacker’s acumen is most evident in exploring and analyzing the complexities ofthe rise and fall of Clinton’s health care plan, he also serves students of the political processin two other ways: first, by illustrating the usefulness of frameworks such as Kingdon’s inthinking about how to design and promote policy alternatives; and second, by identifyingthe important roles that nonelected agents play in the design of policy alternatives.

Even as aspiring policy analysts find Hacker’s analysis instructive, they will besurprised that he views the policy analytic approach as “a flawed mechanism forachieving political compromise,” (p. 179), and that he concludes that policy analystspay too little attention to political processes, to implementation, and tocommunication. In view of the rich tradition of literature on political feasibilityanalysis, the importance of communication, and the need to consider implementationat each stage of the policy process, especially given the early contributions to the fieldby the likes of Meltsner, Bardach, Williams, and Pressman and Wildavsky, one wondershow Hacker can move from his analysis of a particular group of policy analysts involvedin the Clinton reform effort to a critique of the entire policy analytic approach. Thus,his conclusion that the policy analytic approach takes “a view of politics [that]systematically underappreciates ‘the role of justification, communication, andpersuasion in the formation and development of public policy’” (Hacker, and Hackerciting Majone, p. 179) and, therefore, “misses the very essence of politics” (p. 179)seems overgeneralized in an otherwise thoughtful and careful effort to document theparticulars of why Clinton’s plan for health security ultimately rose and fell.

While Hacker’s perspective is that of a political scientist, Aday, Begley, Lairson,and Slater are health care researchers with strong sociological, business, andeconomics backgrounds. As such, they provide data and methodologies with whichto analyze the health care status of this country. Moreover, they provide a conceptualframework for how to construct health care reform strategies, even as they critiquestudies and reform efforts to illustrate the use of their methodology. Perhaps mostimportant for policy analysts, their book illustrates why it is important to evaluatehealth care and the strategies one designs by applying the criteria of effectiveness,efficiency, and equity.

Effectiveness. For Aday et al., effectiveness is not simply a question about whetherthe structures and processes of medical care result in “clinical improvement of healthbenefits achieved by patients” (p. 46), but also whether anything is being done toimprove the health status of the community through enhancements in the physical,social, and economic environment. At the heart of their discussion of effectiveness isthe concern about the quality of medical modalities being used and the quality of lifefor subpopulations such as the poor.

Efficiency. For Aday and her colleagues, the concept of efficiency does not differdramatically from an economist’s concerns about efficiency: Health care goods andservices are limited. As such, both economists and Aday et al. are concerned aboutproviding health care without wasting resources. Moreover, given that in 1995, theUnited States spent 13.6 percent of its GDP on health care (p. 105), Aday et al. arealso concerned that the costs of the inputs to the production of health care goodsresult in maximum improvement in health. For Aday, et al., such a percentage of theGDP seems inappropriate, not simply because of the level of spending relative to thatin other developed countries. Rather, the authors are concerned that (1) “governmentpolicies or private market failures [have] led to excess supply of, or to excess demandfor, health services” (p. 106); (2) there is substantial underinvestment in selectedpreventive services relative to procedure-oriented care “that is costly and may addlittle to health at the margin” (p. 164); and (3) indicators of the health of the people of

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the United States compared to many other countries are relatively poor, given highrates of spending.

Thus, the concerns of Aday et al. are not unlike the Jackson Hole group or theliberal synthesis: They want to contain costs and they are not opposed to managedcare as a vehicle for reducing excess capacity, even though “micro-incentives have yetto demonstrate long-term cost control, making allocative efficiency uncertain” (p.163). However, they continue to distinguish themselves from the Clinton health caredebate as they take a systemic look at the inputs and outputs of health care (ratherthan focusing almost exclusively on incremental policy changes), curing illness, andfunding a fundamentally inefficient health care industry.

Equity. In defining equity, Aday, et al. are not only analytically rigorous but alsoeloquent as they argue for distributive justice as a criterion for evaluating thestatus of the health care system. Specifically, equity in health care, they argue, isboth procedural and substantive: It is not only concerned with fairness but alsowith (1) enhancing access to medical care; (2) reducing health disparities amongvulnerable subpopulations, such as the poor and the elderly; and (3) assuringstakeholder participation, especially from among these vulnerable populations.Given these criteria, it is not surprising that Aday et al. conclude that the goal ofequity “has not been achieved to a substantial extent” (p. 233). Moreover, with thefailure of Clinton’s health care plan, the growing tensions between managed caredentities such as employers, consumers, providers, and insurers; and the failure ofHMOs to reduce long-term costs while providing basic benefits to enrollees, onewonders whether new reform efforts that promote equity will surface. If they do,what form will they take?

If health care reform were again to become the issue and the possibility that it wasduring the early days of the Clinton administration, one could turn to Evaluating theHealthcare System to begin to draft an assessment of the state of health care in theUnited States. It would be difficult to find a more comprehensive or methodologicallyinstructive text from which to start such an analysis. Aday et al. have not only providedan analytical roadway for health and policy researchers, but also they have set forththe health reform implications of their research.

One of their many significant conclusions in terms of future policy design is thatthe health of the population, except for all but the vulnerable populations such as thepoor and the elderly, may be more related to nonmedical factors than to “massiveand expensive efforts to improve medical care effectiveness through professionalperformance and regulation of outcomes and assessment” (pp. 92, 98). Therefore, incontrast to increasing expenditures for curative dimensions of care, they argue thatmore resources should be devoted to prevention and to the social, economic, andphysical determinants of health.

Conclusions such as these have far-reaching implications for public policy and fordecisions about where to allocate health care resources. But more often than not, asHacker illustrates, the political process responds to constituencies and interest groups.And more often than not, the political process results in incremental rather thansystemic change. Thus, one wonders whether the data and insights from healthresearchers such as Aday and her colleagues will ever become a policy stream aroundwhich constituencies rally to promote prevention and cure by taking a systemic lookat how the environment, the health care delivery system, and the characteristics ofthe population affect the health status of the people of this country. Because of theabsence of such political constituencies and the tradition of the incremental formationof public policy brought about largely through compromises such as the one developed

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by the Clinton administration, one wonders if the approach that Aday et al. advocatewill ever find its way onto a presidential policy agenda in the way that Hacker describes.

REFERENCES

Kingdon, J.W. (1984). Agendas, alternatives, and public policies. New York: HarperCollins.

Baumgartner, F.R., & Jones, B.D. (1993). Agendas and instability in American politics. Chi-cago: University of Chicago Press.

Majone, G. (1989). Evidence, argument, and persuasion in the policy process. New Haven, CT:Yale University Press.

SUSAN M. SANDERS is Associate Professor of Public Policy in the Public ServicesGraduate Program at DePaul University.

Jorge Niosi

Limited by Design: R&D Laboratories in the U.S. National Innovation System, by MichaelCrow and Barry Bozeman. New York: Columbia University Press, 1998, 321 pp., $40cloth.

This book is the first major synthesis of a series of research projects that ProfessorsMichael Crow (Columbia University) and Barry Bozeman (Georgia Institute ofTechnology) have conducted since 1984. The goal of these projects was to understandthe missions, structure, and behavior of over 16,000 public, private, and universityresearch and development (R&D) laboratories that constitute the backbone of theU.S. national system of innovation. The five consecutive projects completed up tonow have already produced over 50 scientific articles, most of them signed by theauthors of this book. Over the years, Crow and Bozeman have visited hundreds oflaboratories, mostly in the United States, but also in other countries with a view tocomparative research, including Canada, Japan, and South Korea. The book is awelcome addition to their production, as it summarizes the main research findings,discusses public policy with regard to government labs, and suggests new policyrecommendations to deal with this vast array of organizations.

The main thesis of the book goes as follows: the U.S. laboratory system is large andcomplex, and no easy catch-all policy will improve its efficiency. Laboratories werecreated with different missions, and they have developed (or were given) new onesover the years. Simple indicators of performance (such as counting publications,patents, or cooperative agreements) would not be enough; some laboratories weredesigned to conduct basic research, others to assist government, still others to helpindustry, and many have developed mixed or complex missions down the years. Thesemissions can only be studied by using a combination of indicators. On top of that,many of them are under mixed jurisdictions, such as the so-called GOCO (government-owned, company-operated laboratories). Still, they represent an invaluable asset forboth science and the economy, and any policy concerning them should pay dueattention to their variety and evolution. In order to impose some coherence on sucha variegated set of organizations, Crow and Bozeman have developed a typology oflaboratories by crossing two ordinal variables: the level of government influence(indicated by public funding) and the level of market influence (indicated by the typeof output that the lab is supposed to produce). Thus, laboratories with high government

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influence and low market influence, producing public goods (such as scientific articlesand papers), are called “public science labs,” while those having low governmentinfluence and high market influence (producing mostly prototypes and internalreports) are named “private technology labs.” This typology goes beyond the traditionalprivate public university classification of R&D labs.

Besides the general issues just summarized, the book contains an analysis oftechnology transfer patterns of some of the major public laboratories; again, varietyis the most frequent result: some labs have been very effective in transferringtechnology, while others have not even tried or could not conduct such transfersdue to their specific missions centered around basic research, which has little interestfor industry.

The general issues are supported by statistical figures, but more often by some 50“vignettes,” or short case studies, on specific laboratories, plus an abundance ofexamples and illustrations chosen from the many visits and surveys that the authorshave conducted.

This book should be read by any public policy designer who wishes to producelegislation in order to improve the effectiveness and efficiency of R&D laboratoriesin the United States (and in other developed countries), as well as by researchmanagers, particularly in larger organizations.

A few critical comments may be of help for future research and publication of thisproductive research team. First, the book seems to me somewhat too skewed towardthe empirical side. Granted, the complexity of the U.S. R&D system is such that athorough empirical analysis is necessary. However, one can gain major insights fromboth theory and international comparisons. The theoretical literature on institutionsand the economy, for instance, is now huge: It covers issues such as contracts,governance, incentives and rewards (see. for example, Furubotn, E. & Richter, R.,(1997). Institutions and Economic Theory, Ann Arbor: University of Michigan Press).Some of these issues may affect the performance of the R&D labs, and it would beinteresting to understand how the design of the contracts of the R&D personnel orthe different governance structures affect the labs’ performances. The twoenvironmental variables identified by the authors (government and market influences)may not entirely explain the efficiency and the effectiveness of the labs. Internalvariables may also be key in understanding why some labs perform better than others.For instance, contracts within government labs may be redesigned to improvetechnology transfer by providing incentives to researchers to quit the labs and foundnew startup firms licensing the technology from the labs, as Industrial TechnologyResearch Institute of Taiwan (ITRI) has done so successfully. In short, more theoreticaldiversity may lead to the understanding of new dimensions of the labs’ structuresand performance.

Second, international comparisons may also provide useful insights for both newanalytical comprehension and public policy recommendations. How did Japan,Korea and other countries solve similar problems and needs? What can be learnedfrom their internal routines and national policies? It has been shown that industrialorganization patterns (such as quality control, just-in-time, or concurrentengineering) can be successfully imitated and adapted from one country to another.Public research organizations should also be able to adopt management schemesfrom abroad. If the United States has emulated the German university system sincethe late 19th century, is it possible to learn from foreign experiences in R&Dlaboratory management and policy?

Nevertheless, this is a highly readable, well-documented book on the U.S. R&Dsystem. The result of many years of painstaking research, it will represent a landmark

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in the understanding of the most complex and largest set of R&D organizations inthe world.

JORGE NIOSI is Professor of Management of Technology in the Department ofAdministrative Science at the Université du Québec à Montréal.

Charles J. Wheelan

Spinning Wheels: The Politics of Urban School Reform, by Frederick M. Hess.Washington, DC: Brookings Institution Press, 228 pp., $39.95 cloth, $16.95 paper.

Frederick Hess, assistant professor of education and government at the Universityof Virginia, asks an important question: Why have 30 years of nearly constant schoolreform generated so little change in student performance? Indeed, from Sputnik to ANation at Risk to the present enthusiastic embrace of charter schools, reform hasbecome the status quo. We have very little to show for it.

Mr. Hess argues in Spinning Wheels: The Politics of Urban School Reform thateducation leaders deliberately engage in “policy churn”—initiating but never effectivelyimplementing a broad array of reforms—because it suits their political and careerinterests, which are at odds with the interests of the students they are hired to serve.The public, says Mr. Hess, is both impatient and unable to judge the effectiveness ofany particular reform in the short term. Thus, superintendents are able to pass offaction as effectiveness. “Reform essentially becomes a tool that legitimizes theperformance of urban school districts” (p. 5), Hess notes. Meanwhile, the tenure ofurban superintendents is short—a mean 3.8 years in Mr. Hess’s survey—so a flurry ofreforms look good when the superintendent begins searching for his or her next job,often in a larger district.

The government and foundations enable this policy churn by offering grants forfashionable programs; districts have an incentive to heap on the new reforms. Teachers,having seen myriad reforms come and go, avoid investing time or energy in newpractices that will soon be gone. The net effect is that very little attention is given toimplementing a few carefully selected reforms, which Mr. Hess says is the key to realacademic improvement. In short, most urban districts are spinning their wheels.

Mr. Hess’s theory is provocative and certainly borne out by anecdotal evidence. Thecase he builds in his book, however, is less persuasive. The most fundamental problemis the source of the data. The study is based on 325 structured telephone interviewswith “informed observers of the local education scene” in 57 urban school districts.In each district, Mr. Hess began by locating and interviewing the local educationreporter, who then led him to his other respondents: the head of the teachers’ union,the “most knowledgeable” senior school administrator, the head of the local chamberof commerce (or other influential business group), the head of the “most influential”local minority organization, and the “most knowledgeable” school board member.

The respondents were asked a number of open and closed-end questions about fivedifferent areas of reform popular in the mid-1990s: day and time measures, curriculum,evaluation, professional development, and site-based management. The questions weredesigned to elicit an objective measure of how many significant reforms had beenundertaken in each of these areas in each district. For example, if four out of sixrespondents in a district answered that a significant curriculum reform had beenundertaken, then curriculum reform was recorded as 0.67. The same subjects were thenasked to evaluate the success of these reforms and a similar numerical score was assigned.

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Such an approach may generate valuable data on the breadth of reforms beingundertaken. However, the methodology seems inappropriate for measuring the successof those reforms. Indeed, Mr. Hess’s approach is called into question by his owntheory. He hypothesizes that superintendents systematically mislead the public intobelieving that their flurry of reforms are synonymous with school improvement. Hissurvey respondents could certainly be subject to the same misperceptions. His“informed observers” are presumably more knowledgeable than the public at large,but business leaders, education reporters, and even school board members are stillremoved from day-to-day school operations and have an imperfect knowledge of thesuccess of reforms in the short term. (As a journalist and a former school boardmember, I can speak to this directly.) It seems inappropriate to test a theory involvingthe difference between perception and reality with survey data.

The book’s conclusions are also seriously flawed in their treatment of causality.Mr. Hess points out, for example, that the districts perceived as most successfuloften have long-serving superintendents who have tackled fewer kinds of reformthan average. He sees a prescription in this: Be more patient with education leadersand focus on a small number of reforms. But, of course, the relationship maywork in the other direction: Superintendents who are successful are likely to bekept on the job and districts that have had success with a single effective reformhave no reason to try other kinds of reform. If Mr. Hess were to study hospitalsusing the same methodology, he would find that patients given many differentkinds of treatment often die, while patients given only a single kind course oftreatment are likely to survive. Is this a dangerous case of “treatment churn”? Ofcourse not. When faced with a desperately ill patient, doctors will cycle throughall available treatments hoping to find one that will work for a dying patient,leading to the noncausal association between the number of treatments and death.It would be wrong to conclude that patients would do better if they were restrictedto a limited number of treatments, as Mr. Hess has essentially prescribed for oururban school systems.

The reader is left with two basic questions that Mr. Hess fails to answer sufficiently.First, if policy churn is indeed a major obstacle to urban school improvement, whydo voters (and parents) put up with it? Mr. Hess is correct that a clever policy churnercan give the illusion of success in the short term, but 30 years is a long time for theAmerican public to believe that success is just around the corner.

And second, what are we to do about it? Mr. Hess’s proposed solutions, to which hedevotes only a few pages of the book, are nothing new, nor do they necessarily followfrom the research he presents. He advocates more accountability, increased emphasison outcomes, and less short-term visibility for school leaders. The first tworecommendations have been embraced by almost every thoughtful observer of urbaneducation; the last recommendation seems both impractical and incompatible with ademocratic institution.

For all that, Spinning Wheels identifies a serious issue. The education establishmentis prone to fits of fashion, with new kinds of reform constantly bumping the old onesoff the stage. What exactly do we have to show for decades of experiments, grants,experts, and best practices? Mr. Hess fails to prove, however, that policy churn is acause of poor urban performance rather than a symptom of it.

CHARLES J. WHEELAN is the Midwest Correspondent for the Economist and an AdjunctLecturer at Northwestern University.

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Frank Fischer

The Experimenting Society: Essays in Honor of Donald T. Campbell, edited by WilliamN. Dunn. New Brunswick, NJ: Transaction Press, 1998, 232 pp., NPA.

Donald Campbell devoted much of his career to advancing his concept of the“experimenting society.” First put forward in 1971, the experimenting society denoteda utopian vision of a society organized around scientific inquiry, indeed a particularmode of scientific inquiry—experimental research. Most fundamentally, Campbell’sproject was grounded in a mix of Popperian epistemology, in particular the principleof falsification and a piecemeal approach to social engineering, and the pragmatismof John Dewey. In its broadest conception, the experimenting society envisioned asocial order organized around inquiring institutions designed to facilitate reformthrough social learning.

The book is a kind of Festschrift for Campbell, who died in 1996 before it wascompleted. The volume carries an essay by Campbell himself, offering the maincontours of the experimenting society, both its social theory and methodology.

The chapter is an updated manifesto for carrying on the cause. Against thisbackground, the book proceeds on the assumption that “Campbell’s vision of anexperimenting society continues to supply a useful point of departure for addressinga range of complex and seemingly unmanageable problems facing the United Statesand other later twentieth-century societies.” The reader expecting a systematicassessment of Campbell’s work should beware. While his oeuvre clearly raises therelevant questions, few of the authors in the volume address Campbell’s contributionto these questions in anything more than a general way. Indeed, after paying theirrespects, most of the contributors spin off into what might be described as post-Campbellian territories. Intended or unintended, the reader can easily get the messagethat while Campbell raised the important questions, his approach is no longer takenas a viable avenue for social reform. Most of the contributors offer critiques that atbest limit Campbell’s work to an important place in the history of policy science. Formost of them, new departures now travel down a different road.

The essay by Dunn is the main exception. Acknowledging Campbell to have been amethodologist of the first order, Dunn rigorously addresses Campbell’s epistemologicalwritings, or what he chose to call “naturalistic critical realism.” Not only are thesethe terms that would have most interested Campbell, they are the ones in which hesought to ground his experimenting society. The essay is all the more interestinggiven that Dunn heretofore had been among Campbell’s critics. In earlier writings,Dunn saw the need to replace Campbell’s concept of the “reform as experiment” with“reform as argument.” In light of contemporary postpositivist contributions to socialscience, Dunn argued that experimental knowledge and its relation to action have tonow be understood interpretively in terms of argumentation. In this volume Dunnretreats, emphasizing the ways in which Campbell struggled with later works on thesocial construction of reality. Toward this end, Campbell accepted new “postpositivist”elements borrowed from social constructivism, feminist epistemology, and interpretiveinquiry generally. For Dunn and others this pushes him into the postpositivist camp.

In my reading, however, this acceptance fails to do the job. Campbell did indeedgrapple with these ideas, but rather than draw out their full implications forknowledge and action, he tried to build them into a revised version of theexperimenting society. This, in itself, is admirable and reveals much about the man’s

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mind. Throughout his career Campbell continued to grow and expand intellectually.But celebration of this intellectual openness can overshadow the fact that Campbellat bottom still sought to privilege the experimental method and the principle offalsification. In short, social constructivism in his work was more a corrective to bebuilt in than a new avenue to travel.

Postpositivism has come to mean different things to different people. But in anoriginal—and still critical—meaning of the term, positivism’s emphasis on empiricismloses its privileged status. Empirical analysis remains an important part of socialresearch, postpositivism relegates it to just one of the many modes of inquiry. Hence,as falsification loses its decisive role, qualitative interpretation emerges to mediatebetween methods. Campbell can be credited with an effort to incorporate the insightsof these challengers, but his basic purpose remained unchanged: to shore up ratherthan discard his experimental approach. This is unlikely to convince mostpostpositivists, certainly not the social constructivists among them.

The remainder of the contributors, with the exception of two pieces that have nothingto do with Campbell per se, emphasize the core problem confronting the experimentingsociety—namely, its application and relevance to a political world. Campbell is stillseen to harbor a traditional—one can say “technocratic”—understanding of politics.For Fuller, Kelly and Gregware, and Beauregard, the question is, who participates inthe experimenting society and under what conditions? In different ways, they arguethat the concept requires a more participatory conception of democracy. Fuller seesthe need of “incorporating science within the framework of a democratically governedexperimenting society.” Kelly and Gregware, describing Campbell’s vision of theexperimenting society as an “improved status quo society,” call for a “policy scienceof democracy” that will advance human development, political liberty and socialjustice. This more democratically inclusive experimenting community, they argue,“is grounded in a different understanding of reality and ways of knowing both ethicsand empirical reality than Campbell’s experimenting society, which is burdened withattributes and assumptions of the classical worldview.” Beauregard extends thisdifferent understanding of reality by identifying a need to set the project in themulticultural context of social action. An experimenting society needs to be sensitiveto the fact that social reforms are enmeshed in the spaciality and historicity of sociallife; only in this way can it be designed to coexist with oppositional movements andthe ideological debates that characterize an open, vigorous democratic public sphere.

Peters and Holzner also emphasize the problem of politics, but pull up short ofcalling for a different kind of democracy. For them, the challenge is to transformscientific practices. The basic question of how we can move toward an experimentingsociety, according to Peters, is essentially a question of how to “overcome resistanceinherent in almost all political systems to experimentation.” In his view, the bestapproach is to develop new analytical techniques. In particular, he calls for new policydesign techniques and a more sophisticated understanding of social learning. Holznerfocuses more on the experimenters themselves. Emphasizing the institutionalconditions under which scientists work, he points to the fact that science has oftenbeen shaped and facilitated by ruling elites. He argues that the experimenting societymust require scientific establishments to internalize the values and norms of servicefor the empowerment of others. Both of these approaches—that of more democracyand more open scientific practices—are important, but one is inclined to ask if thelatter is really viable without the former. Leaving scientists to police themselves hasthus far proven to have its limits.

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Having sided with the critics, I would nonetheless close by saying that most of thebook is well worth reading, especially for those fascinated by the intricacies of socialepistemology. Insofar as the issues Campbell grappled with are sophisticated enoughto stimulate considerable reflection—and disagreement—reading this volume can bea useful exercise for those who are interested in the theoretical and methodologicalinterconnections between knowledge and policy.

FRANK FISCHER is Professor of Political Science at Rutgers University.