What NBER Does: Marty’s Lesson

So Google Inc. now is pushing further into the business of content. Founders Sergey Brin and Larry Page confront the universal question of the information business: How do you add value?The proximate example is Wikipedia, which adds value by collating facts already known. Wikipedia bends over to be objective and to reject elitism — its hallmark is that anyone may contribute, or edit anyone else. As a result, Wikipedia’s pages are fact-rich.When it comes to ideas, though, Wikipedia sometimes falls short, featuring a duel instead of a conversation. The rest of the Web, too, seems less about uncovering truths than about cornering an opponent in a “gotcha” moment.Other, less obvious, models of value creation exist. One is a private nonprofit office with an old-fashioned name: the National Bureau of Economic Research. NBER officers don’t talk about NBER in these terms, but the Cambridge, Mass.-based organization is, in its way, an anti-Wikipedia.The story of NBER starts during World War I when America was just becoming a national economy. Or at least thought it was, because in those days there were few official numbers.Enter two men. The first, Malcolm Rorty, was a statistician at American Telephone & Telegraph. The second was Nahum Stone, a government tariff expert and labor arbitrator. Rorty was on the right — he would later worry about the “demoralization” that might be caused by the Wagner Act, a new labor law that gave unions power to insist on a union-only shop. Stone was on the left. In his youth he had even translated Karl Marx’s “Critique of Political Economy.”No matter. The men shared a goal: better standards and numbers. They decided to create an office that would generate the missing data. An old timer’s description of their purpose sounds similar to Wikipedia’s: “The crucial question was how to obtain objective knowledge and — also essential — how to assure the public would accept it as objective.” Universities supported them, and in 1920 the NBER was born.From its start NBER did two things. The first was to tap experts to do number-crunching. The mysterious business cycle got attention from scholars. The NBER’s director of research, Wesley Mitchell, led the lengthy study of national income, generating early versions of our gross domestic product.NBER researchers thought of work in years, not days, or page views. Even today, NBER scholars are rigorous — their papers stick to the topic and don’t include pictures of the authors’ babies, academic enemies, or family cats. Google’s very formula rewards popular sites by moving them up in the queue. NBER papers aren’t afraid to take unpopular views; if they’re interesting, NBER promotes them.The second thing that the NBER did was provide a culture of collegiality. Scholars came to the NBER to try out ideas.“Democrat or Republican, you set party aside and turned to empirical evidence when you got to NBER,” a Dartmouth College professor, Douglas Irwin, says.Martin Feldstein, NBER president until June, widened the organization’s net to include more scholars from different universities. And he continued the tradition of comity, making the NBER a sanctuary where ideas ranged far beyond techie GDP questions. Disagreement under Mr. Feldstein got encouragement. Mr. Feldstein’s successor, James Poterba, now also plays such a host role.The result has been splendid success. NBER’s method created value appreciated even by anti-elitists. Across the nation, NBER papers are viewed as among the most authoritative by economists.NBER helped Washington officials learn how to keep the books on the national economy — not always perfectly, of course, but still with more science than when lawmakers operated in the dark. And NBER has become the umpire of the business cycle.The No. 1 domestic economic question today is whether America is already in recession. It is the NBER that will make that call.Many thousands of policy words are being spent analyzing whether the NBER’s definition of recession — “a significant decline in economic activity spread across the economy, lasting more than a few months” — is right. But few question the ump’s authority. Financial-market television hosts, the Drudge Report, the Treasury — all hang on the NBER’s word.The NBER sanctuary has become particularly important because of a general impoverishment of the policy debate.Democrats furious at eight years of opposition leadership have resorted to personal invective. Instead of debating the White House on the income-tax rate, they have simply labeled President Bush stupid.Republicans, too, have dumbed themselves down. As a publisher at HarperCollins, Adam Bellow, wrote recently of the post-Cold War decline in discourse, conservatives once talked about principles such as communism and free markets. But now, “metaphorically speaking, the Berlin Wall had been replaced by the Jersey Turnpike,” — topics such as John Edwards’s infidelity dominate.To be sure, the NBER refuge has sometimes failed. When, for example, a few years ago, Harvard University President Lawrence Summers wanted to raise questions about the dearth of women in the higher sciences he met with fellow academics at NBER. Unfortunately, some of the non-NBER attendees misrepresented him to the rest of the world. Mr. Summers was forced from his job. A chance to solve a problem was also lost.Any hunt for a philosophy of content ought to include a range of sources. Some of the answers that the new media world seeks lie in cyberspace. Others can be found in the old Bureau.Miss Shlaes is a columnist for Bloomberg News.

What NBER Does: Marty’s Lesson

What NBER Does: Marty’s Lesson

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