In Washington and around the globe, faculty are helping policymakers untangle knotty problems.
The school’s history of engagement with government stretches back to its earliest days. | Keith Negley
When California Congressman Ro Khanna first proposed that he and Jonathan Levin organize a meeting in Washington, DC, between leading business schools and elected officials, Levin, the Philip H. Knight Professor and Dean of the Stanford Graduate School of Business, was enthusiastic. But he had one condition: the Silicon Valley Democrat had to find a Republican co-sponsor. “I wanted to be sure we were talking to people from both sides of the aisle,” Levin says.
At a time when partisanship has colored virtually every conversation inside the Beltway, Levin wanted this gathering to cultivate, if not common ground, then at least mutual understanding.
Khanna recruited Sen. Todd Young of Indiana to cohost a daylong series of meetings in July. The impetus, Levin says, was a recognition that the velocity of change has put new demands on business leaders and created a new imperative for the people who train them. “The issues we’re talking about — how government engages or intervenes in the economy, and how the government is going to work with the private sector to stop climate change or manage the future of new technologies — every business school is thinking about those questions.”
Dean Jonathan Levin with Sen. Todd Young (left) and Rep. Ro Khanna (right) on Capitol Hill | Courtesy of U.S. Senate Photographer
Deans from 10 business schools joined dozens of members of Congress to talk about manufacturing, immigration, the labor market, AI, climate change, and their impact on the future of the U.S. economy and business education. The discussion on manufacturing, for example, centered on how to reverse a decades-long decline in employment in the sector, Levin notes. “What does it mean to think about pulling the supply chain back onshore, and how might that affect how we teach students about operations, about globalization?”
To his delight, the meetings were interesting, as expected, but also remarkably, well, collegial. “The entire discussion was exceptionally thoughtful and serious — and really nonpolitical,” Levin says.
Levin and business school deans meet with Lael Brainard (third from right), director of the National Economic Council.
Whether there will be more meetings like this is an open question, according to Levin — a future one might involve bringing members of Congress to campus for a day of talks. Regardless, the substantive nature and tone of civility in the sessions signaled that there is an appetite for quality debate about the country’s economic challenges. “The day left me feeling very positive about our elected leaders,” Levin says.
The day in DC also exemplified the GSB faculty’s engagement with U.S. and international policymakers in a range of roles, including advising, official appointments, and strategic outreach — continuing a history of involvement that stretches back to the earliest days of the school. “Part of what the business school can do, along with alumni and graduate students, is help business be a contributor to solving big problems of the world,” Levin says.
A Legacy of Engagement
After the 2008 financial crisis rocked the global economy, Anat Admati vowed she would do whatever she could to improve the system. Admati, the George G.C. Parker Professor of Finance and Economics, intensified her efforts to share her expertise with the people who control borrowing, lending, and investing. Then in 2016 she had a long conversation with former GSB Dean Arjay Miller.
Miller was over 100 years old but still possessed the sharp insight that students from his era remembered. Chatting with Admati, Miller noted that when he was vice board chair at Ford Motor Company in the 1960s, he realized that “the mayor of Detroit had bigger problems than Ford did,” she recalls. “He wanted to ensure people in government are as equipped to deal with challenges as those in the private sector.”
Professor Anat Admati has presented her ideas to policymakers in the U.S. and Europe. | Jolanda Flubacher
Shortly after Miller’s death a year later, Admati found new inspiration in a speech referenced in his obituary. Delivered in 1968 at a conference of economists, Miller’s remarks (see sidebar) implored researchers and professors “to assume a larger role in helping to resolve the critical social problems our nation faces.”
“It blew me away,” Admati says. “He said academics have expertise and are less conflicted than people in government or industry. They are the ones to solve our problems.”
Admati has tried to educate influencers both inside and outside of government. At the World Economic Forum in Davos, she warned about the “house of cards”–like vulnerability of a global financial system built on opaque chains of debt; she described the impact of ineffective regulation at the European Parliament; she gave a keynote address at a conference on financial stability sponsored by the Federal Reserve Bank of Cleveland. The list goes on.
Admati concedes that her efforts are often thwarted by special interests. “It can be frustrating. A dedicated policymaker told me he would speak with senators, and it’s like his words were written on ice. As if it didn’t happen.”
“What keeps me going are cases where I clearly make a positive difference,” Admati says. Fresh on her mind was a two-hour seminar she gave recently to the leadership and staff of a Canadian banking regulatory agency. “The way they thanked me was heartwarming. Two weeks later, I had another conversation with the agency’s CEO. He told me the staff were still talking about the session and how much it motivated them.”
Material Changes
The hard work of making change often begins with someone doing the deep analysis necessary to propose a new way of doing things. Stefan Reichelstein is one of those people. Reichelstein, the William R. Timken Professor of Accounting, Emeritus, has devoted his research over the past decade to finding answers to vexing sustainability issues, such as how to decarbonize heavy industries like cement manufacturing.
The production of cement accounts for 8% of annual global carbon emissions — a startling statistic on its face, but more so because abatement is dauntingly difficult. Several leading cement makers have committed to net-zero emissions goals by 2050 but need help figuring out how best to achieve that while also remaining profitable. Reichelstein, along with three other researchers, began a dialogue with a European cement manufacturer to evaluate which levers could be deployed in time to meet these emissions targets — an assessment that also had to consider the EU emissions trading system and the prospect of subsidies that individual European governments use to incentivize the adoption of decarbonization technologies.
“We started the dialogue with the cement companies, but the audience really should be the people in Brussels or Berlin who ultimately have to write a check” to cement companies that hit their emissions targets, Reichelstein says.
Reichelstein also was a coauthor of a recent paper that described a framework for carbon reporting aimed at bringing credibility and transparency to corporate environmental claims. “It’s very analogous to what we see in financial accounting, namely companies preparing an end-of-year balance sheet and flow statement that tells the public what the company has been doing. In this case, in terms of improvements in carbon emissions.”
The paper immediately found some traction. “There was a lot of interest from different companies, and we’re now in the process of refining and stress-testing the proposal,” Reichelstein says.
On the Policy Front Lines
GSB faculty have been involved in government policy circles for decades, service that sometimes requires multi-year commitments. In July 2022, Susan Athey, PhD ’95, the Economics of Technology Professor, took a partial leave to work as chief economist in the antitrust division at the Department of Justice. In addition to reviewing proposed mergers, she helped lead an effort to write new merger guidelines, a working version of which was released last summer.
According to Athey, the guidelines, produced jointly with the Federal Trade Commission, are revised every 10 to 15 years. “The goals were to update the guidelines to reflect the kind of patterns of mergers that we’re seeing and to bring in modern economic tools that apply to those types of mergers,” she says. “One of the big themes in mergers over the last 15 years has been acquisitions by dominant firms, not of firms that directly compete with them, but of firms that have products that rivals use to compete or products that might help [rivals]. Those types of mergers did not receive much attention in the previous guidelines.”
Such mergers may involve complementary products but also create barriers to entry, she notes. “Suppose there’s a product that consumers use to compare prices across different e-commerce platforms. If it was a very popular tool and then the dominant e-commerce platform for a market segment bought it and started down-ranking competing e-commerce platforms, that would decrease competition between the platforms.”
Athey says her team introduced new language to give clearer guidance about how the DOJ would assess such a situation. “A general-purpose platform acquiring a small niche platform might not appear to raise competitive concerns through a traditional lens,” she says. “But it may be that one of the only paths for entry is to enter in a niche, so buying a niche player removes a potential direct competitor. And that might be a particular concern for platforms, where the economies of scale are very important.”
Elsewhere on the Hill, Levin and Darrell Duffie, the Adams Distinguished Professor of Management and Professor of Finance, collaborated recently on a report for the President’s Council of Advisors on Science and Technology. Levin, who is a member of PCAST, co-led the working group on Extreme Weather Risk in a Changing Climate and recruited Duffie to help. “It was an amazing opportunity to collaborate with leading climate scientists and economists,” Duffie says.
The report the panel presented to the Biden administration included three recommendations aimed at predicting the effects and assessing potential mitigations of wildfires, floods, droughts, and other weather-related hazards. “We found a compelling case to apply state-of-the-art extreme weather computation to improve risk management at the local level; for example, to increase the effectiveness and availability of insurance and to assist people with locating and designing their homes and businesses more safely,” Duffie says.
Professor Darrell Duffie has collaborated with Treasury officials and climate scientists. | David Paul Morris/Bloomberg via Getty Images
Duffie has a long record of policy work. He has examined alternatives to the benchmark interest rate known as LIBOR, proposed safeguards for nascent digital currencies, and analyzed the U.S. treasuries market, among other projects. “As an academic, this is the sort of policy work that one feels a responsibility to undertake when asked,” he says.
Athey agrees. “I have been given a huge privilege to be a professor at a top university with the opportunity to build expertise, and I do feel a sense of responsibility to use what I’ve learned for public service when the opportunity arises,” she says.
Levin is grateful that GSB faculty — including others who have advised on law enforcement reform, technology, and homelessness — are willing to put their shoulders into helping policymakers address contemporary problems. He believes they also can play a role in helping to “restore people’s faith in our capitalist system.”
“Capitalism has been an incredible engine of growth and opportunity, essentially doubling standards of living every generation,” Levin notes. “But we are having a debate right now about how the problems we face at the societal level — climate change or inequality or adverse effects of technology — get addressed. Should they be solved by corporations? Do they get solved by consumers and investors? Do they get solved by the government? These are fundamental questions about capitalism and its relationship to government that we are debating in a much more profound way than we’ve done in decades.”
He is careful to point out, however, that the GSB’s essential mission has not changed. “We are not an advocacy organization. Our job is to produce ideas and educate great leaders, full stop. But having said that, our faculty get involved because of their deep expertise; they are being asked to pitch in and solve big societal questions that have risen to the level of federal policymaking. And that’s a wonderful thing. I applaud the faculty who spend their time doing that.”
Somewhere, Arjay Miller is clapping as well.
Public Service Announcement
Arjay Miller’s message on the “awesome and urgent” task facing business professors still feels relevant more than five decades later.
On December 29, 1968, future GSB Dean Arjay Miller spoke to a meeting of the American Finance Association and the American Economic Association in Chicago. At the time, Miller was vice chairman of the board of Ford. Over the past several decades, the speech has been referenced as a source of inspiration at the GSB, and its call for academics to become more involved in the public sphere continues to resonate. Below is an excerpt from his remarks.
The dispossessed in our society have no problem in recognizing — and demanding — such basic quantitative objectives as more income, more jobs, more health care, to name just a few. These goals are important in themselves, and they are a foundation for the achievement of such broader goals as dignity and self-respect, social harmony, and cultural advancement.…
[L]et me urge that academic people, whatever their field of learning, assume a larger role in helping to resolve the critical social problems our nation faces. Universities should, of course, maintain their primary emphasis on teaching and research, but this does not mean that they cannot relate more effectively to the problems of the “outside world.”
The university has two advantages in this respect: first, it has the interdisciplinary talent and intellect to deal with complex problems and, second, university people can be more objective than either business or government people, who are direct parties of interest in most problems.…
There can be no doubt about the magnitude and gravity of the present challenge to our free society. The task we face is both awesome and urgent.
But there can be no doubt, on the other hand, of our power to meet our problems and achieve a better society. Having that power, we have also an obligation to recognize the challenge and the opportunities and to make a beginning. Let us not fail to use all of the vision, goodwill, and power at our command.
For media inquiries, visit the Newsroom.
Explore More
