Besides producing a new kind of professional, these developments also prompted the creation of a whole new ecology of institutions selling economic analysis to the government. The impetus came from the premium PPO offices placed on data gathering and evaluation, Berman shows. In 1967 Assistant Secretary of Planning and Evaluation William Gorham, another RAND alum and LBJ appointee, successfully pushed for 1 percent of funding for child health legislation to be set aside to evaluate the policy. The move rapidly became standard practice, and soon hundreds of millions of dollars were available for evaluation research across the federal government. Much of it would be contracted out to new policy research organizations—the Urban Institute, MRDC, and Mathematica (not to be confused with the software)—that were modeled after or strongly influenced by RAND. And who better to staff their swelling staff ranks than economics and public policy graduates?
It would be hard to overstate the impact this new regime had on every aspect of American governance. Systematically and persuasively, Berman documents how it touched nearly every major policy area of the late 1960s and ’70s. The effect was to dismantle the expansive social philosophy reflected in the landmark Great Society legislation passed in 1964 and 1965—in health care, housing, civil rights, education, and poverty—and replace it with a narrow economic logic that prized efficiency above all. As Berman slyly observes, there had been no “scoring” of the 1965 Medicare bill by the CBO: the office did not yet exist.
Take education. The 1965 Higher Education Act prioritized direct institutional aid as a public good, especially in grants to public universities. But by 1969, the analytical office of the Department of Health, Education, and Welfare (HEW), led by Johnson appointee and Harvard economics PhD Alice Rivlin, argued it would be more efficient to direct aid to individuals using student loans (then not in wide use). Not only would society reap productivity gains from the increased earning power of college graduates, but the government would no longer be subsidizing tuition for students who could afford to pay. Rivlin’s work would serve as the intellectual blueprint for Nixon’s 1972 Higher Education Reauthorization Act, which permanently tilted federal aid toward loans—setting the modern tuition arms race in motion. A similar pattern unfolded at the Department of Housing and Urban Development, whose economists successfully militated to reorient federal policy away from public housing funding in the early 1970s and toward the “efficient” solution of low-income family vouchers for market housing (today’s Section 8).