On Balance: Interview With Richard Zeckhauser

August 14, 2019

By Thomas J. Kniesner

In the following interview I asked Richard Zeckhauser to recount what it was like to be part of the “Whiz Kids,” the name given to a group of experts with which Robert McNamara (then Secretary of Defense and later President of the World Bank) surrounded himself in order to turn around the management of the United States Department of Defense in the 1960s. The group sought to shape government decision making by bringing in economic analysis, operations research, game theory, and computing, as well as by implementing new methods, such as Planning Programming Budgeting System (PPBS). Their efforts did a lot to extend and solidify the influence of the principles of benefit cost analysis in U.S. Federal government decisions.

The interview with Richard is a complement to Alain Enthoven’s new article, “How Systems Analysis, Cost-Effectiveness Analysis or Benefit-Cost Analysis First Became Influential in Federal Government Program Decision-Making," appearing in the upcoming Summer 2019 Journal of Benefit Cost Analysis (Volume 10, No. 2). There Alain recounts in detail his experience as a Whiz Kid and the origins of the cost-benefit analysis movement in government as a tool for planning and budgeting.

TK: What did you know about PPBS and the Whiz Kids before you began working in DC?

RZ: I didn’t really know much because they were just starting, and I never studied anything like that in school. But I had several fortunate circumstances that changed my life. The first was that Tom Schelling was my advisor as an undergraduate and later graduate student at Harvard.

Tom asked me: ”Would you like to go to work for my friend, Alain Enthoven, this summer?” This was immediately after I graduated from Harvard, and I went not even definitely knowing that it was at the Pentagon. I talked to Alain on my first day and found that he had actually read portions of my undergraduate thesis.

So, I walked into his office, and we talked about my thesis for about 20 minutes. I said to myself this is going to be great. I will be having these high level discussions. But then he asked: “Do you know how to add, multiply, subtract and divide?” I replied that I did. Then he said, “Do you know what marginal analysis is?” I replied that I did. And then he said: “That is all you’re going to need to know.” I tell this story to my students because I want them to understand that although we will discuss important high-level issues in my course, the real required ingredient for effective analysis is good common sense.

TK: So, what happened next?

RZ: My immediate boss was a guy named Joe Peck, a really lovely man. Joe was a professor at Yale. Alain was the Deputy Assistant Secretary of Defense and Joe was the Deputy to the Deputy Assistant Secretary. He was the second most senior person in the office. At that point there were 11 people in the office; I was the most junior. Basically, Joe got the assignments and I worked alongside him. My first assignment was to help decide how many people should be in the Air Force.

There were about 900,000 people in the Air Force and the question was should it be 900,000 or 890,000, or 880,000. I was supposed to figure it out. I didn’t have much of an idea what to do with the Air Force, but I thought the theory would be to propose cutting and see how the Air Force responded. We ended up at 890,000.

TK: What happened when your summer was up?

RZ: On my last day I went in to thank Alain for the summer. He asked me what I was doing next year. I replied that I was going to Harvard Business School. He said, “Well, why are you doing that?” I said, “Well, I like the fact that they have this case approach. That means that your exams are all cases. You don't have to really know anything; you just have to be clever.” And I thought that I would be an okay businessman.

Alain bluntly asked why don’t you get a PhD in Economics? I hadn’t thought about that course, and I asked him why I should follow that path. He replied that I seemed to like economics and seem to be good at it. So, I went to Harvard in economics and continued to work summers in DC and at RAND while a student.

TK: I know that you never worked on Vietnam War issues because you felt that one needed a lot of institutional knowledge to do so. However, that war was in progress during your time at RAND. Thus, you must have crossed paths with another notorious economist, Daniel Ellsberg. Anything interesting you can share?

RZ: I knew Dan very well because he preceded me as a doctoral student of Tom Schelling. Dan at RAND lived in domestic tranquility with a charming wife named Carol, the daughter of a Marine Colonel, two kids and a house with a swimming pool. I came back to RAND two summers later. Dan had divorced Carol and had become an incredible war hawk. In Vietnam, I was told, he liked to go on patrols with our troops and would ask for a gun to shoot at the enemy. That is something you are obviously not allowed to do as a RAND employee.

TK: How does the story of Zeckhauser and the Whiz Kids end?

RZ: After graduating with my PhD, I started as an assistant professor in the Harvard Economics Department. Two years later, Tom Schelling and my other mentors said that the university was starting a new school, the Kennedy School, that cared a lot of PPBS type issues and that I should go with them as a founding member. I assumed that I would be teaching economics. They said no that I would be teaching a course that was basically much more oriented toward policy analysis and things like that, and that the economics courses were already taken. I joined the Kennedy School at its outset, and pursued my career long interest in benefit cost analysis and policy analysis more generally. Serendipity complemented my interest in rigorous policy planning and evaluation to produce this happy outcome.

Tom Kniesner holds a PhD from The Ohio State University in Economics. He is currently University Professor and Chair of the Department of Economic Sciences at Claremont Graduate University in Claremont, CA, where he lives and is the Editor-in-Chief of the Journal of Benefit Cost Analysis.