Roger Noll thinks he's got answer to inept government

From welfare to the space shuttle, government programs have shown a discouraging tendency to go awry. But Roger Noll, an economist at the California Institute of Technology, argues that these problems can be reduced, transforming politics into something more than just the art of the possible. He hopes his research will help make political decisionmaking more effective through a new discipline called institutional design.

In an interview here, Dr. Noll offered the following comments:

What do you mean by 'institutional design?'

People realize that you need an engineer to design a dam before it is built. We hope to offer the same kind of expertise on the design of institutions.

Suppose everyone agreed that a new agency should be set up. Even where both Republicans and Democrats agree on a policy, you still need special expertise to get people to do what you want them to do and be happy about it. We would like to be able to tell Congress that there are nine ways to set up such an agency, all have the following predictable characteristics, and then say, ''Now you choose which you want.'' To do this takes a lot of hard work, both theoretical and empirical.

Today, Congress uses two basic ways to get things done: buy it or pass a rule to make it happen. We tend to forget that there is wide range of ways by which we can accomplish our goals.

This isn't only a problem in government. In the corporate world people tend to make decisions in only three ways: hierarchically, by salary, and by voting. This is one reason why big, complex corporations have trouble allocating their research resources well. So it is the smaller, more homogeneous companies that tend to make the big breakthroughs.

Do you have any illustrations of other ways to make decisions that work?

I was involved in the design of the method PBS [the Public Broadcasting System] now uses to choose its programming. All the station managers get together and vote with dollars - within certain limits - on various program proposals.

This decentralizes program management. It has the virtue that, when a politician objects to some program the system is carrying, there is no one he can blame. It also provides a mechanism which reflects what the communities want to see. Because the voting is with dollars, the stations that are most successfull in fund-raising have a greater influence.

PBS is very happy with the process. Since it was adopted, you haven't heard any scandals where politicians have attacked PBS programming. Also, there haven't been any jerky programs catering to political biases. And the audience rating of the system has risen substantially. . . .

Do you have any other illustrations of innovative approaches?

We have just finished a big study on how to implement a market-based emissions control system in California. It looks very promising.

[Emission control trading is an approach studied by the US Environmental Protection Agency under President Carter. This involves the buying and selling of permits allowing the emission of certain levels of air pollutants. The system is structured so that each time a transaction is made, the amount of pollution is reduced. If a factory cut its emissions by a certain amount, for example, it could sell a percentage of the reduction to another factory.]

Both Governor Brown [former Gov. Edmund G. Brown Jr.] and President Carter were completely, ideologically opposed to incentives and market mechanisms for environmental control when they came into office. By the time they left both had switched positions.

Everybody thought that when Governor [George] Deukmejian and Ronald Reagan came in, it would be less difficult to sell them on the idea. So far this hasn't been the case. The Republicans simply want less-stringent regulations. They don't seem to care about the system. Apparently, they haven't thought through the fact that, even if they get what they want, the country will still be stuck with an inefficient system.

This is a reform whose time has come. But it probably requires a Democratic administration. . . . The public distrusts Republicans on environmental issues so probably won't let them make such a sweeping change.

You have studied other types of federal regulatory activity. There is a popular impression that the federal bureaucracy is out of political control, that bureaucrats are creating their own rules. What have you found?

So far, we've found no evidence that this is the case. Sometimes, regulatory agencies are out of control of the President. When this happens, they have generally allied themselves with their congressional subcommittees.

The FTC [Federal Trade Commission] is perhaps the best example of this. In the 1970s, people said repeatedly that the trade commission was out of control. But it turns out that it was reflecting exactly the policies advocated by its oversight committee.

At the time, the members of this committee held extreme views on what the FTC's role should be. Then, in the 1978 elections, the composition of the committee was radically altered. There was a 50 percent turnover in its membership. All of a sudden, not only the administration, but the committee was attacking the agency. It only took the FTC a year to come back into line.

What about cases where regulatory agencies are 'captured' by the industries they are supposed to be regulating?

This does happen. Take the case of the Atomic Energy Commission in the 1960s. The notion that it was following the interests of the nuclear power industry was right. But this was because there was no organized opposition. . . .

Since the industry has become controversial, this no longer is the case. If you go to the Atomic Industrial Forum [the industry trade association], they will complain bitterly about the Nuclear Regulatory Commission. In fact, a big fraction of the industry's costs are now regulatory. . . .

You have also studied federal research and development activities and are highly critical of a number of big programs, including the space shuttle, the synthetic fuels program, and the Clinch River Breeder Reactor. Even those that are technical successes are economic failures. Do you have an explanation for this?

The government is particularly bad at the procurement of new technologies. Basically, you have to find ways to do this without big budget outlays. . . .

They realize that technology development is not a good area for the pork barrel. For one thing, there is a long lead time before the political benefits - the creation of large numbers of jobs - are realized. For another, unlike most major construction programs, there is a clear-cut way that the success of such a project can be judged. A new technology is subject to a very hard-nosed decision by the private sector when they decide whether to buy it. If they don't, then the politicians have to scramble around to find a scapegoat.

But there are certain cases, such as the recent energy crisis, where the politicians feel forced by public opinion into such a program.

Once they start, then the congressmen tend to want to get as quickly to the political returns as possible. And these come, not in the research phase, but in the demonstration phase.

This is one reason why there is a rush to commercialization, which is a primary cause of the failure of these projects.

What happens when a big development program begins to fail?

What Congress can't do, once they begin spending the big bucks, is turn off the spigot. You get a concentrated block of votes from members whose reelection is at stake. Other members are reluctant to oppose them because of the basic nature of political pork: Once you begin knocking somebody else's out of the barrel, your own pork is at risk.

Instead, the goals of a project are gradually redefined so the failure is less apparent.

A good example is the space shuttle. This is basically a catastrophe. Initially, there were two reasons for building the shuttle: to satisfy private launch demands for things like communications satellites; and to facilitate the commercialization of space.

But since its inception, the number of missions has been cut by 60 percent. In particular, all the private and space commercialization missions have been eliminated.

As NASA realized this, they began to redefine the shuttle's goals as cheap, low-Earth space science and military missions. So, for all the money, we've got something that can only do what expendable launch vehicles already do.

Have there been any goodm examples of federal technology development?

Yes. Agricultural research, for instance, has been extraordinarily successful. Although agriculture is man's oldest technology, it has ranked one of the top three or four in technical progress, in large part because of the federal Agriculture Extension Service. Unlike the shuttle, this is a highly decentralized program and there is little congressional oversight.

Are there any other reasons why Congress seems to have such problems handling technology development?

Part of the problem is . . . that congressmen do not understand the basic nature of research very well. Another reason is that technologists are not very good at articulating the reasons for research.

All around the world, when someone says, ''I know more than you do, trust me, '' people grab for their wallets. And rightfully so. There is a general distrust for expertise which they know can be used in self-serving ways. The people have been burned repeatedly by experts. A good example is nuclear power.

You believe that specialists can help make our institutions better. Yet institutions are built from people, and people are not interchangeable, like steel girders. Their personalities will have an effect. How do you take this into account?

There is considerable evidence that the rules of the game are crucial to how well we achieve our collective objectives. If you have a case where an agency has been wasting money for 40 years, you can be sure it is not because of the people at the agency, but [because of] the instructions they have received.

Also, bear in mind the fact that we're not after perfection. We're just after better. In this area, that's good enough.

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