How Do Think Tanks Work?

ZEW President Achim Wambach has spent a research stay in the USA. In an interview with Leibniz Magazine, he describes the role of think tanks in the USA, among other things: They are often closely linked to politics and are partly privately funded. US think tanks work closely with science, but pursue clear political goals, in contrast to the more state-funded research institutes in Germany, which provide independent findings to politicians.

An interview with Lea Hampel for the Leibniz Magazin.

LEA HAMPEL, LEIBNIZ Mr. Wambach, last year you left your institute and Mannheim behind for three months to travel across the USA. What inspired this journey?

ACHIM WAMBACH On the one hand, it was a classic academic trip. I had several invitations from US universities to give lectures. But I was also interested in understanding how economic policy advising works in the US. We at ZEW Mannheim are very active in policy advising ourselves, so I wanted to know how the exchange between science and policy is managed there, and if there is something we can learn from them.

Where did this interest come from?

When I took this position, I looked into US think tanks, which have a completely different self-image than ours. In the US, they say, “We are independent because we don’t receive money from the government!” In Germany, we would say, “We’re independent because we don’t take money from businesses; we’re funded only by the government!” That difference made me curious.

Which institutions did you visit?

The Peterson Institute for International Economics, or just “Peterson”, is a leading think tank in policy advisory work, so visiting them was a must. I also gave a lecture at the Brookings Institution and went to Resources for the Future, a climate research institute. Besides think tanks, I also met economists working in government agencies and international organisations. For example, I visited the Federal Trade Commission and the Council of Economic Advisers, which advises the US President. I also met with colleagues at the International Monetary Fund and the World Bank in Washington.

Were you met with openness?

You never know what might have been left unsaid, but my impression was that the conversations were very candid. We talked about US and European relations with China and what to expect if Trump is re-elected.  

Many think tanks have a clear mission and want their ideas to make it into legislation.

How do your US counterparts work differently from you?

Think tanks in the US are strongly engaged in policy advising, but always try to keep a foot in science. That’s why it’s often researchers who write the papers. But their primary goal is to influence policy rather than conduct research. In Germany, research institutions like ours are science-based, and we have a mandate to transfer our findings to policymakers. We provide our scientific insights without any ulterior motive. These are essentially two ends of the same spectrum.

How does this difference play out in practice?

In the USA, there’s a very different exchange with politics: I visited the Tobin Institute at Yale, which sends selected staff to government agencies for a year, all while continuing to pay their salaries. This allows them to access relevant data and connect with key people. What’s interesting is that when a new administration takes office, hundreds of positions are filled with new people. Often, those from the outgoing administration spend a few years in a think tank, only to return to government when the political winds shift. It creates a close relationship between think tanks and politics. On the other hand, top academics spend a year or two working for policy institutions such as the Federal Trade Commission or the Council of Economic Advisers. The chair of the Council is even a member of the Cabinet. After two years, they return to academia with first-hand knowledge of what issues are pressing for politicians, how to craft texts that resonate with them, and who the right audience is for certain topics. It’s a very different way of bridging the gap between academia and politics. No one here would come up with such an idea. We have a lot to learn from each other: how to involve researchers in policy-making while maintaining their independence.

This brings us to the classic criticism that think tanks are not truly independent and have hidden agendas. But the landscape is more diverse than that, right?

Yes, it’s very diverse. I came to realise that not all think tanks are the same. My interactions have mainly been with independent think tanks that are more academically oriented, because that’s my background. These think tanks are often funded by foundations and companies that support the presence of evidence-based voices in public discourse. In Europe, the closest comparison might be the Bruegel think tank in Brussels. One think tank president told me that a sponsor once asked him to fire an employee. Instead, he cut ties with the sponsor because independence was paramount. But there are also think tanks that are closely linked to political parties.

Since the 1980s, there has been a huge increase in the number of think tanks in the US, alongside growing societal polarisation. Are these phenomena related, and does this divide show up in think tanks?

Many think tanks have a clear mission and want their ideas to make it into legislation. Take the upcoming election: the Heritage Foundation has an entire government programme ready to go, should Donald Trump be re-elected.

Is there a Democratic equivalent, and has there been enough time and capacity after the switch from Biden to Harris to craft a robust programme for the event that Kamala Harris wins the election?

Vice President Kamala Harris is part of the current administration, so she will draw on the policies laid out by Joe Biden, as well as insights from her ministries. To get a sense of what Harris might do, it could be helpful to look at the studies coming out of the Brookings Institution. While it’s a non-partisan institution, their content can offer some insight into the thinking of Democrats. 

Critics argue that think tanks lack transparency and an established code of conduct. What was your observation?

The think tanks I interacted with do have compliance rules, but there have been debates and adjustments in recent years. At Brookings, for example, some sponsors withdrew their support and the think tank had to close its office in Qatar due to heavy criticism. While they emphasise their independence, it’s hard to completely rule out external influence on research.

So, you would agree that there is still some influence?

Yes. In some cases, you could say that a think tank is supported because its views are in line with what companies find favourable. Others strive for independence and aim to be perceived as such by the public.

Protecting independent research is something we must be vigilant about.

Let’s talk more about your trip. What was your daily routine like in the US?

Half of my time was spent on academic work – giving lectures and meeting colleagues. The other half was spent visiting institutions. I gave talks on European economic and climate policy, discussed ZEW’s research topics and took part in lunch debates on current studies or topics such as the elections in Argentina. Washington, with organisations like the IMF, is home to fascinating discussions.

How much of an issue was the presidential election campaign, which is now in full swing?

Surprisingly, the subject was treated rather low-key. I think people didn’t want to engage with it at the time – it felt like too much crystal ball gazing and not intellectually satisfying. However, you could sense in the debates how much the country is divided. When I was there, the Middle East conflict was flaring up and the tensions were palpable, especially on university campuses.

Would a Trump re-election make a difference for think tanks?

Absolutely, and now the studies that are looking into this are starting to come out. But a Trump presidency isn’t just an economic issue – it would have repercussions in many areas, including diplomacy.

What would another Trump presidency mean for these institutions?

The think tanks I visited generally try to remain as independent as possible from whoever is in power. So there is some truth in their claim that they are independent because they don’t rely on government funding. In Germany, we have many institutes with a transfer mandate that are publicly funded. This system works because we don’t have to worry that a change of government will cut our funding if we don’t toe the line. Protecting independent research is something we must be vigilant about.

Do we need to rethink our concept of independence?

Complete independence is an illusion, but the question is how we can safeguard it as much as possible. That’s why we have academic freedom, the Leibniz Association, and various committees, as well as long-term funding agreements. There are many filters in place. But there’s no such thing as absolute security.

Should we emulate the US model of private funding?

In Germany, there’s a lot of scepticism about private funding. In Berlin, we’re seeing more think tanks of this kind emerging, though they often come with an agenda. Both systems have evolved historically, and ours has proven to be quite stable. However, we must remain conscious of the need to defend our independence.

Should there be more private funding?

If there were clear rules and limits, yes! A good example is the Bruegel think tank in Brussels, which caps private donations from any single company and has many corporate sponsors, along with compliance rules. So far, Germany’s current system has served us well, however.

Why is such extensive and increasing policy advisory work even necessary?

We’re seeing it in Europe and Germany too – the pace of policymaking is speeding up. A good example is the energy crisis and the gas price cap. Within three months, a mechanism that manages billions in spending had to be developed. No institute that takes a year and a half to come up with research results could have helped in that situation. They need reliable data in six weeks, for example on the energy consumption of companies and households. In Germany, a commission of researchers and politicians was set up, and we ran calculations for the ministries. A think tank focused exclusively on policy advice is simply better equipped for such tasks. I think we could benefit from more economic think tanks here.

Isn’t it a problem that this short-term focus always leads to some kind of oversimplification and ultimately competes with long-term research?

Simplification is essential. A map is helpful because it reduces the complexity of geography to its basics. The goal isn’t to oversimplify but to condense the information down to the core. We spend a lot of time and energy on that. Long-term research is essential to make this reduction possible. This knowledge from research and literature is necessary to be able to say what needs to be taken into account.

As researchers, we have a special responsibility because “science” is still perceived as a reliable source of truth.

If there are more think tanks with their own agendas, isn’t there a risk that distrust in political decisions and institutions increases?

The political landscape includes us all and is represented by a multitude of voices. I think it’s absolutely acceptable if an industry raises concerns and states that a measure hurts its members. This is lobbyism and frowned upon, but the concerns may be right all the same. And actually there are laws, and these can be drafted either smartly or not so smartly. It’s good if such interventions prevent mistakes. It’s not good if, as a result, long-term analyses are no longer listened to.

And isn’t it a problem for think tanks in a post-fact society that they provide a basis for arguments for a seemingly objective truth in each case, thereby reinforcing the divide?

On a positive note, this means that we need more reliable analyses rather than fewer. Of course you quickly find arguments in favour of many things, and they reinforce the post-factual trend. But I believe that this makes more in-depth, reliable and independent analysis all the more important, and research institutes such as ours live on that. 

But at the same time we have the following situation: When a lot of knowledge is generated by think tanks, it’s often generated where there’s a lot of money. If you look at the philanthropists who support the major think tanks in the US…

Of course they influence the public debate – that’s why money flows into these institutions. NGOs do the same, sometimes even with government funding. Ideally, those who receive the information know who has what interests when presenting their arguments. Policymakers should be able consider this in their decision-making. But it’s even more important for the public to take this into account. As researchers, we have a special responsibility because “science” is still perceived as a reliable source of truth.

You’re an optimist by nature, aren’t you?

I’ve done a lot of advisory work, with all the frustrations that entails. But there are many in politics who genuinely want to hear the arguments and openly discuss the constraints they face. In recent crises, the government has been quick to engage with researchers and take their arguments on board.

You’ve repeatedly mentioned the close exchange between science and politics that’s typical in the US. In Germany, this “revolving door” phenomenon often meets with scepticism, as seen in the recent Graichen affair at the Ministry of Economic Affairs.

I wouldn’t say the US system is categorically better. Researchers there are typically only involved in politics for one or two years, which isn’t enough time to fully grasp everything. This depends heavily on the individual. But I do think it’s great that knowledge from the political sphere flows back into science.

What other ideas did you bring back from your trip?

We regularly evaluate how we can improve our research and knowledge transfer. This trip has been very stimulating in this process. For example, we’re now holding more stakeholder events to strengthen our outreach.

What did you think of Washington, D.C.?

Metaphorically speaking, the city is smaller than I expected – I literally ran into colleagues in the hallways. When a think tank holds an event, people from across the street can quickly drop by. It’s a very international city, and I cycled a lot.

How many burgers did you have to eat?

Travelling helps to dispel stereotypes. You can eat very well in Washington. I didn’t gain any weight, and jogging along the canal in Georgetown is fantastic. My university colleagues are all fit and well-toned; regular gym visits are part of their routine.

You posted a lot about your trip – how were the responses?

Yes, it was my first time doing this, and it was a lot of work. Thanks also to my team at ZEW for doing the research and checking the accuracy of the numbers. The reactions were very positive. I received tips for future posts, and some lively discussions emerged.

One commenter suggested your next trip should be to Luxembourg, as it’s the second largest recipient of German direct investment.

Interesting, isn’t it? But it’s actually a statistical artefact, because so many banks are based in Luxembourg. My next stops, however, will be Rome and Paris – the capitals of the major EU partner countries. Academic economic policy advice works very differently there.

This article was published in German on 14 October 2024.