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The Balanced Excellence of George Leland Bach

Content first appeared in Stanford Business magazine in Fall 1983.

In recent years, the phrase “balanced excellence” has frequently been used to describe Stanford GSB’s commitment to quality across the entire spectrum of its activity. That term also seems an apt reference to the career of George Leland Bach, Frank E. Buck Professor of Economics and Public Policy, who retired in 1983 after four and a half decades in academe. Master teacher. Path-breaking researcher. Visionary educator. He was founding dean of the Carnegie-Mellon University Graduate School of Industrial Administration and has been a central figure in the academic development of Stanford’s Graduate School of Business over the last two decades. He is the author of one of the most popular college textbooks in economics and has been a longtime leader in a national program to increase general economic literacy in the United States. He is the recipient of major awards for his career contribution to business education and to economic education, and has twice received university-wide awards for excellence in teaching. He has been a senior consultant to the Federal Reserve over a period of more than 20 years.

What has given Bach himself his greatest satisfaction?

Paramount, he says, is his role in what has come to be called the revolution in business education over the past 25 years. That takes in the seminal part he played in founding the Carnegie-Mellon School of Industrial Administration, where the revolution started, and in continuing the revolution at Stanford. It also includes his leadership in devising and implementing the nationwide Ford Foundation program of the 1960s and ’70s that stimulated change and established higher standards of excellence for business education. Greater emphasis on the underlying disciplines and analytic methods, a new “core” for the MBA curriculum, and greatly increased emphasis on research and PhD programs were central parts of the “new look.”

Of great importance to him is the thrust he has helped give to the course and research area; Business and the Changing Environment, a course he was instrumental in installing in Stanford GSB curriculum, is now a required part of all MBA and undergraduate programs professionally approved by the American Assembly of Collegiate Schools of Business (AACSB)-Dow Jones Award in 1975 for distinguished service in business education. Also significant to Bach has been his continuing involvement in furthering the teaching of basic economics. As chairman of the National Task Force on Economic Education, a joint venture in the 1960s of the American Economic Association (AEA) and the committee on Economic Development, he played a key role in developing an across-the-board program to improve the teaching of economics from kindergarten through college. As a member for 14 years, most of the time as a chairman of the AEA’s Committee on Economic Education, he had a major part in implementing the Committee’s recommendations. Among the action programs developed by the Committee were a national CBS-PBS year-long television course in economics, summer programs in economics for secondary school teachers, economic literacy tests, and activities to stimulate research in the field. He continues to serve as vice chairman of the national Joint Council on Economic Education (JCEE), which works closely with elementary and secondary schools throughout the country. The JCEE now has programs under way reaching some 20 million students through schools that have agreed to insert special courses or units in economics between kindergarten and 12th grade. Bach’s part in developing these programs was recognized in special awards given him by the AEA and the Joint Council, for outstanding contributions to the teaching of economics.

But the most satisfying thing, Bach says, is to do a first-rate job yourself. Among the 10 books he has written is Economics: An Introduction to Analysis and Policy, one of the nation’s most widely used basic texts in college level economics. “How else could I teach economics to anything approaching two million people?” (Prentice-Hall, publisher of Economics, says more than two million people have learned their basic economics from Bach.) And he is especially proud of the two major teaching awards he has received, one of them the Walter J. Gores Award for outstanding teaching at Stanford (in both his Stanford GSB courses and the large elementary freshman-sophomore economics course); the President’s citation was for “his magician’s touch in teaching 300-person lecture courses as if they were intimate discussion groups.”

What of the other arrow in the complete scholar’s quiver — research? Of the 100-odd articles Bach has published, economists single out his early path-breaking investigations of the causes and effects of inflation, especially those on the distribution of income in a democratic, pluralistic society. He paralleled this with work on the differential impacts of tight money used to fight inflation, which led to fundamental questions about the efficacy and equity of different monetary and fiscal policies. Perhaps most important, other economists point out, was that all this seminal research was tied to Bach’s long-standing connection with the Federal Reserve Board in Washington. The relationship between research and policy has always been close.

All of this notwithstanding, Bach’s original decision to become a teacher — and to teach economics — was not reached in a thunderclap of revelation.

Graduating from high school in Grinnell, Iowa, in 1932, his thoughts about career were relatively simple. “I just wanted to get a part-time job to assure my going on to college,” he says. He did: painting dormitory walls at 35 cents an hour. Jobs were scarce then.

Bach was born in Victor, Iowa, the son of a one-time railroad clerk who later became a banker. “Dad hoped I’d go into banking after college, but it didn’t work out that way.”

At first, he saw his undergraduate major in economics at Grinnell College as preparation for law school. He made a start in that direction at the University of Texas Law School. It lasted all of one academic quarter. “I didn’t like it. I didn’t like the method — the adversary system of determining who is right and who is wrong. And I didn’t like Texas in 1936. It was the middle of the Great Depression, and there were people coming to class wearing mink coats in autumn.” So, rejecting both Texas and the law, “I moved to the graduate economics program at the University of Chicago.”

Bach has a grounded, applied, practical view of economics. An early anecdote tells why. He was sitting in a Grinnell College economics class in 1936, where “the professor was explaining that theoretically there couldn’t be a lasting depression in a competitive, capitalist-type economy. I looked out the window at a long line of unemployed men, waiting to apply for two WPA jobs the town government had managed to get. There must be a better way for either the economists or the ‘practical’ men who ran the system, I thought.” Bach is still working to put them together.

Bach got his first teaching job at Iowa State — the best of three or four job offers. He was there a year when, in 1941, he got a call from the chairman of Chicago’s economics department. There was a new job at the Federal Reserve in Washington as special assistant to one of the senior board members. So began a consulting relationship with the Fed that continues to this day.

“It was a great way to learn the business of monetary policy, and I got a chance to be right in the middle of things.”

Bach was commissioned as an officer in the U.S. Navy during World War II but, he laments, he never got on a ship. “I was made the Navy representative on an interagency commission in Washington charged with keeping track of every dollar of aid, outside of military material and supplies, given to our allies. Some of the conservative senators wanted a clear record for postwar negotiations, especially with the Russians. It was a terrible job.” (For those who might be interested, that cost was a reported 53 billion dollars.)

Happily, Bach was soon detailed as special assistant to the U.S. Minister to the Belgian government in exile in London, where he dodged German buzz bombs and planned how to get Belgium back on its feet, economically, after the war.

When the war ended, he accepted an appointment as head of the economics department at the Carnegie Institute of Technology. There began a 20-year relationship. “There were better universities offering me jobs at that time, but I was intrigued by the chance to run the show. Anyway, I wanted to be at Carnegie,” says Bach. “The main question was: What economics should you teach to engineers and scientists, and how do you teach it — no holds barred? It was really quite a challenge.”

Three years later things were looking up as Bach was making a name for himself in building the new Carnegie economics department; and he had met and got on well with members of the all-powerful Mellon family in Pittsburgh. William Larimer Mellon was especially interested in the educational problems at Carnegie Tech. Mellon in 1949 said to Carnegie administration and trustees, “We at Gulf Oil and many of you other businessmen can hire engineers for a dime a dozen, but they don’t know anything about management. And we can hire business school graduates for a dime a dozen, but they don’t know anything about engineering technology. We need more people who can put the technology and management together. If you can do that, we’ll finance a new school to do it.”

As dean-elect of the nonexistent school, Bach was asked to take a year off to clarify the goals of such a new school and how to accomplish those goals. The Mellon name opened all doors for Bach, and he had “a fascinating year” talking to businessmen, big and little, about what they needed most in potential managers. He visited leading business, law, engineering, and medical schools, and observed other professional activities, including on-the-job training.

What he found in the business schools of the immediate post-World War II period didn’t impress him much. With the exception of Harvard, “which was lively and intrigued with the advantages of the new ‘case method,’” most of the business school programs tended to be either applied general economics or simply a “how-to-do-it” picture of prevailing best practices among leading business firms. There was little in the way of participative learning. The case method was widely distrusted except at Harvard. Little research was being done, and doctoral programs were weak, where there were any at all. What shocked Bach most was the low status of students and faculty members in most of the business schools on the university campuses of the nation. In the academic pecking order, business schools tended to be at the bottom of the list, along with programs in agriculture and, in some cases, schools of education.

Engineering schools, on the other hand, were doing some of the more imaginative work in teaching how to solve relatively unstructured problems, he found. A few of the best schools were coming to see the relationship between the underlying disciplines and the application of the concepts of those disciplines to professional problem-solving.

“At the end of the year,” says Bach, “I had two things: a fairly clear picture of a new curriculum (and a new approach to teaching business management that I thought would be exciting to try) and a calculation that said we could do it on $6 million — $1 million for a building and $5 million for endowment — for a new school that would be very small and elite. A real pilot-plant operation.”

With the money in hand, he set about to establish the school. The different course he was to follow became clear, and with it emerged the prototype of a modern-day business school.

“First, we looked for very smart people with imagination, first-rate minds,” he says.

“Second, we wanted a block of faculty members to provide the disciplinary foundations for the applied fields to business. For this group, we preferred people from the disciplines (economics, political science, the behavioral sciences, operations research) and the quantitative methods (mathematics, computers, statistics, accounting).” Bach argued that the related disciplines were the most fruitful source of faculty members for the business school of tomorrow, although, he says this idea collided with the prejudices of the existing business schools. “To be sure faculty members from these disciplines had to be interested in the managerial use of discipline-based knowledge; only then would they be of real use to the business school.

“Third, other business schools and actual operating businesses were a relevant source of faculty in the applied fields — finance, marketing, manufacturing, and the like but only if they met the general qualifications laid out for all faculty members. In brief, what we wanted was a faculty, including a substantial group of discipline-based but applied teachers and researchers who were interested in developing the disciplines as a foundation for the applied courses in the business school curriculum.

“We were also especially interested in people who were willing to be interdisciplinary where necessary — to solve real, complex problems rather than making each problem fit an existing discipline — to work at the boundaries of the disciplines. And we wanted people who were interested in the real world. Theory has a powerful role to play in education for management, but the real work of an MBA Program is using that theory to help solve business problems. We didn’t want people who just wanted to sit and spin off theory.”

Smart, imaginative people indeed! The first person Bach hired, 30-year-old Herbert Simon, was awarded in 1980 the Nobel Prize in economics, mainly for his work at Carnegie. Another was William Cooper, “extraordinarily imaginative in management accounting and the economics of information.” Later came two who are now members of the Stanford GSB faculty, managerial psychologist Harold J. Leavitt and political scientist James G. March — both are international leaders in their fields.

“The wave of the future, as we saw it, was to dramatically improve students’ and faculty members’ intellectual quality: to revolutionize the pedantic MBA curriculum which prevailed at most business schools then, inserting a ‘discipline’ base, to stress effective problem-solving using those disciplines, and to increase emphasis on basic research and doctoral programs.”

The revolution Bach started at Carnegie was also having an effect at the Ford Foundation, where Bach was a consultant. That foundation, interested in the state of management education, commissioned what became known as the Gordon-Howell report (by Aaron Gordon of the University of California, Berkeley, and James E. Howell, a protégé of Gordon’s, who in 1958 became a member of Stanford GSB faculty and associate dean under Stanford GSB Dean Arbuckle).

In carrying out its $35 million business in the 1960s, the Ford Foundation concluded that Carnegie was an interesting place to watch because of its novel ideas, that Harvard was interesting because it so dominated the field; and that MIT and Chicago also had promise of innovation and leadership. When they looked to the West Coast, Cal-Berkeley was frankly seen as a better business school than Stanford by many experts in those days, but the foundation didn’t want to fund major public university programs. Stanford received a $3 million grant to start the International Center for the Advancement of Management Education (ICAME), a special program to upgrade the teaching of business in developing countries.

The net result was real change in business administration. The quality of faculty and students went up — way up. The revolution differed from institution to institution, but nearly everywhere economics, behavioral science, and quantitative methods were followed by the major applied functional fields of marketing, finance, production, business policy, and business and its environment, to put it all together. That became the core of the program that was adopted by the AACSB in the mid-’60s. In 1962, 10 years after the first graduates of the new school received their diplomas, Bach decided he had done all he wanted to do at Carnegie and announced his resignation as dean. A return to the classroom and research looked good to him, and he accepted an invitation from Stanford to visit for a year as a Ford Research Professor. It was a good year. The sun shone almost everyday through February. By contrast, the weather was miserable in the East that year. Bach got a lot of work done on the subject of inflation. There were some lively moments, such as the time he said, in response to a question from one of the older faculty members, that he didn’t think the Stanford doctoral program in business was very good. But at year’s end, Bach was convinced that “Arbuckle and influential faculty were set on having a really first-rate school and on getting really first-rate people.” From a Stanford recruiting point of view, it was a successful year. Bach agreed to come to Stanford permanently, though not for a couple of years.

Stanford GSB has had a course on business and government since the 1930s, when the late professor Ted Kreps first took up the cudgel to challenge the economic assumptions of conservative-leaning GSB students. But Kreps had retired, without being replaced, when Bach joined the faculty, and the course was refocused on the way major current societal problems reflect the complex interrelationships among business, government, other sociopolitical groups, and the amorphous general public.

“When Ernie Arbuckle first asked me what I wanted to teach, I said macroeconomics — about inflation, depressions, economic growth, and government stabilization policy. He said, ‘Fine, but why don’t you consider a course on business and society too?’ I had written a couple of papers on the subject and how fast those relationships are changing.”

Bach said yes, devising a course now called Business and the Changing Environment, which he introduced into the curriculum as an elective in 1966 and which the school converted to a requirement in the “core” three years later.

In addition to his Stanford GSB courses, Bach for many years taught the big Stanford introductory course in economics for undergraduates, which was a labor of love for him. “That’s where we have our one chance to teach most students some economics,” he says. In that basic course of some 300-400 students, he would typically open the class in an informal manner, with his “question hour.” For 10 minutes, any question on economics — from the text, the TV or the newspaper — was fair game. And he fielded them, sitting on a table edge. “You had to be ready for anything,” he says, “but the students loved it. It loosened things up a bit and helped keep the course in touch with the real world. That elementary course has an analytic core, but I try to relate it to what is in the daily headlines.” Bach’s concern for students in that elementary course, plus his oversubscribed Stanford GSB courses, won for him in 1979 the Walter J. Gores Award, the university’s highest award for excellence in teaching. There are many success stories in Bach’s life. But, he says, one big push of his has fallen well short of success — the cause of economic education, especially for grade-school youngsters, who don’t take any formal economics, and for the “man in the street,” who may never have taken any either. “We’ve made a lot of headway,” Bach says, “but we’ve got a long, long way to go. The best measures we have now suggest that people are somewhat more literate about economics than they were, say, 25 years ago. But there is a long way yet to go. The American Economic Association’s Committee on Economic Education, the Joint Council on Economic Education, and some imaginative special projects all are doing the best they know how with the limited resources they have, and much of it is very good.” But Bach’s eyes light up when talking about limited resources. “We could do a lot more if we had a lot more money,” he says.

One part of Bach’s career that is relatively unknown is his longstanding relationship with the Federal Reserve and monetary Policy, which started during World War II, when he worked with the Fed as a research economist and as special assistant to a member of the board. After he left the Fed to join the Navy, he remained in close contact and has since that time served intermittently as a consultant. In 1963, William McChesney Martin, then chairman of the Federal Reserve Board, asked Bach to take on the responsibility of opening up and keeping open the channels of communication between the board and leading academic monetary economists. He was to see to it that such economists periodically got a chance to present their ideas to the board and, equally, that the academic economists got a chance to learn more about the real problems of monetary policy. The board left it up to him to select the leading economists and decide what channels would be used to keep these exchanges open.

What he produced and continues to produce is a series of all-day sessions, usually three or four times a year. Six to ten of America’s best known economists attend, but since the meetings are off the record, they are not widely known to the public. For the first hour, the board’s senior staff briefs the economists on the Fed’s current monetary policy. For the next four hours, the consultants exchange ideas with board members on major policy issues. Those meetings, which have continued for 20 years under Federal Reserve Board chairmen William McChesney Martin, Arthur Burns, and Paul Volcker, have “been effective in opening up the board members to the views of academic economists which would otherwise seldom reach top policymakers,” says Bach.

Since he also worked directly for Marriner Eccles, the board’s chairman through World War II and the postwar years, Bach feels he is “a lucky person to have had such a close informal working relationship with such a wide range of public servants at the top of the Federal Reserve structure.”

Of his four sons and daughters, his oldest, son Christopher, is a chip off the economics block: a university economics teacher and now chief of the balance-of-payments section of the Department of Commerce. His two daughters are married and living in Northern California, and his second son is a concert pianist in San Francisco.

There is one additional source of satisfaction, says Bach, and that is “the extraordinarily fine group of people I have worked with and under over the years — everywhere, but most especially here at Stanford during the last 17 years. The three deans I have worked under most of the time here Arbuckle, Arjay Miller, and Jaedicke — just can’t be beat. In particular, my years with Arjay taught me a great deal. And it’s easy to look good with the day-to-day stimulus of such bright colleagues as Stanford, Carnegie, and my other ventures have provided. This leaves until last that most extraordinary mind of all and the source of a fair share of all my good ideas, Herbert Simon. And they’ve been not only smart but nice people as well.”

What’s next?

In answer, he pointed to a big pile of books in one corner of his office. “These are some of the books I plan to read, and I’ve got a stack three times that size at home.” He has two colleagues — former Stanford GSB professor David Teece, now at the University of California, Berkeley, and Hayward State University professor Anthony Lima — looking at the prospect of working with him to produce a jointly revised edition of Bach’s text. He plans to continue with his work on economic education and will also continue to consult with the Federal Reserve Board. And, lest anyone think business education is safe from George Leland Bach’s investigatory eyes, Stanford GSB administration has asked him and two colleagues, Professors Ezra Solomon and Harold J. Leavitt, to conduct a series of seminars on the nature of modern management — how it is changing and how the changes will affect management education.

George Leland Bach died September 29, 1994.