Think Tank in Corn Country. Move to Indiana provides down-to-earth view and welcome distance from power centers. HUDSON INSTITUTE

CAN a major American think tank find happiness in a midsize Midwestern city? Ask the Hudson Institute.

Five years after moving here from Croton-on-Hudson, 45 miles upstream from New York City along the Hudson River, the professionals in this 28-year-old public-policy research organization answer with a resounding, ``Yes.''

Known for contrarian views - it pooh-poohed the now-discredited ``limits of growth'' thesis when it was still fashionable and foresaw Japanese economic might when the ``Made in Japan'' label still meant cheap and second-rate - the institute continues to baffle accepted wisdom by thriving outside the Northeast Corridor.

``It's that search for the common attitude - being close to common sense - that argued for being away from the East Coast,'' says R. Mark Lubbers, Hudson's corporate vice-president, from his upstairs office in the stately yellow-brick-and-leaded-glass mansion that now houses the institute. ``That's the intellectual force that moved us.''

``We strongly believe,'' adds Mitchell E. Daniels Jr., now in his second year as president, ``that perspective is enhanced by distance.''

Distance from what? Washington, New York, and other centers of power. ``Long-term thinking in Washington,'' quips Mr. Lubbers, extends for ``about two weeks. It's a tactical city.''

And that, notes Mr. Daniels, is not conducive to the Hudson's brand of future-oriented thinking. ``It is very, very hard to think in other terms when you're in a town which hangs breathlessly on how Congressman so-and-so will vote in this afternoon's subcommittee markup,'' he notes.

Not everyone in the think tank world, of course, shares that view. ``It's true that one can get lost in the forest and see only the trees,'' says Bruce MacLaury, president of the Brookings Institution in Washington. ``But the privilege and obligation of being in a think tank is to see forests. I'm not sure that distance is the only device by which one gets perspective.''

A. Lee Fritschler, former director of the Center for Public Policy Education at Brookings, agrees. For him, the value of a Washington location is that one can ``bring in major public-policy leaders on a regular basis for lunch.''

But the issue of location, he adds, ``cuts both ways.'' He finds in his present position - president of Dickinson College in Carlisle, Pa. - that ``government and public-policy issues are not as much of a person's life as they are in Washington - there are other things in life.''

And that, say Hudson Institute personnel, explains the perspective they seek. Nor are they alone. Both the Carter and Reagan administrations favored a dispersal of influence and power away from Washington toward the states. The last three years, in fact, have seen a growing number of small, regional think tanks springing up around the nation.

Also being tested is the Hudson Institute's own prediction concerning ``the end of geography'' - the coming of an age in which air travel and electronic communications are lessening the need for locating right in the nation's power centers.

Underlying these trends, however, is yet another issue, rarely addressed but still potent: the age-old debate, prominent in the works of such American authors as Sinclair Lewis and Sherwood Anderson, about whether the Midwest can provide adequate intellectual nourishment for serious thinkers.

At the time of the Hudson Institute's move in 1984, that question formed a kind of obbligato to the discussions in the national news media. Founded in 1961 by physicist-turned-futurist Herman Kahn, the institute had rapidly assumed its place alongside such venerable competitors as the Brookings Institution and the Hoover Institution.

It made its mark largely through Mr. Kahn's own dynamism and insight: his conviction that free people and institutions are best able to cope with change, his awareness that science and technology must play a dominant role in that change, and his well-known contrarian stance concerning the limits of conventional thinking.

``Herman Kahn was a wonderful populist - he was not an elitist at all,'' says Lubbers. ``He loved people.'' The ivory-tower elitism and ``Eastern snobbery'' often associated with a think tank, he adds, were ``just not Herman.''

But with Kahn's death in 1983, the institute nearly foundered. ``Absent the personal force of Herman Kahn, we had to find another way to structure [the organization],'' notes Lubbers. One way to continue ``thinking outside the box,'' in Kahn's phrase, was to move outside the box. There was also another reason: money. Lacking the kind of endowment possessed by the older think tanks, the Hudson Institute had to scramble for a budget. Much of the funding had come because of Kahn's own reputation.

SO under Kahn's successor, Thomas D. Bell Jr., the institute decided to sell its 22-acre, seven-building estate in New York. Phoenix beckoned, as did Austin, Texas, and Columbus, Ohio.

But Indianapolis called the loudest - in part because a vigorous and conservative business community liked the institute's right-of-center reputation and in part because the Indianapolis-based Lilly Endowment (the nation's fifth-largest foundation) made a five-year, $2.5 million grant for relocation and operating costs.

Lilly Endowment vice-president Michael A. Carroll has no qualms about the investment. ``They really do add a special dimension'' to the community, he says, noting that the institute has taken an active role in the city, often providing speakers for local groups from among its many visitors.

For a while the institute undertook some local policy studies - working on statewide projects in Oklahoma and Michigan, and doing some specific studies in Indiana. Recently, however, it has turned its attention back to national issues - in part, say Hudson officials, because the state-based projects soaked up so much staff time that they were not cost-effective.

Operating on a $5.5 million budget, the institute retains 45 staff in Indiana and 12 in Washington. And it continues to maintain its national reputation. Case in point: The book ``Workforce 2000: Work and Workers for the 21st Century,'' published in 1987 by Hudson senior fellows William B. Johnston and Arnold H. Packer, has had wide circulation.

Brookings president MacLaury calls it ``a first-class job,'' adding, ``I was jealous we did not do that.''

And while Daniels admits that the ``principal disadvantage'' of the new location is its effect on recruiting, the institute has recently added some strong talent - most notably George A. Keyworth II, former science adviser to President Reagan and now director of research at the institute.

Such appointments don't surprise Lubbers. With Washington only 75 minutes away by air, he says, ``Most people get a look at the new Indianapolis and realize that they can be on Capitol Hill more quickly from here than from downtown Manhattan.''