Research Policy 49 (2020) 103872

Contents lists available at ScienceDirect

Research Policy
journal homepage: www.elsevier.com/locate/respol

Gordon Tullock meets Phineas Gage: The political economy of lobotomies in T

the United States
Raymond J. Marcha, Vincent Gelosob,
⁎

a
North Dakota State University, Barry Hall Office 402, 811 2nd Ave. N, Fargo, ND 58102, United States
b
King's University College at Western University Canada, 266 Epworth Avenue, London, Ontario N6A 2M3, Canada

ARTICLE INFO ABSTRACT

Keywords: Incentives affect the ways in which scientific research is disseminated and translated into practice. From 1936 to
Lobotomies, Science 1972, approximately fifty thousand lobotomies were performed in the US, with the majority occurring during
Political economy the late 1940s and early 1950s. Curiously, the lobotomy's popularity coincided with a consensus within the
Mental health medical community that the procedure was ineffective. To explain this paradox, we follow the framework de-
Health economics
veloped by Tullock (2005) to examine how financial incentives within the scientific community affected how
scientific research is used in practice. We argue that government funding for public mental hospitals and asylums
JEL:
expanded and prolonged the use of the lobotomy, despite mounting scientific evidence. We demonstrate that the
I18
I11 lobotomy was used less in private mental hospitals and asylums. This paper provides an explanation for the use
H44 of scientifically discredited procedures due to the lack of responsiveness of government funding agencies. The
H4 results have implications for the dissemination and translation of scientific knowledge in practice.
H42

1. Introduction
There are numerous well-documented gaps between the academic
and the practical communities in fields such as nursing (Maben et al.,
2006; Huston et al., 2018), nutrition (Ciarli and Raflos (2017)), man-
agement practices (Rynes et al., 2018) and public health (Pierce and
Gilpin, 2001; McAteer et al., 2018). These gaps are challenges that af-
fect not only on the ability to bring scientific findings to professional
practices but also the ability of the latter to inform the scientific com-
munity of the needs that it faces so as to more efficiently guide research
(Bartunek and Rynes, 2014; Kealey and Ricketts, 2014). The under-
standing of the sources of the gaps (and its persistence) is crucial to
avoid the prolonged use of erroneous or less effective practices
(March, 2017). This is especially true for medical discoveries, where
misaligned institutional factors can result in misuse of resources and
negatively impact the health of patients. These factors also contribute
to a public mistrust of scientists and expert opinion, which hinders the
application of science to address medical issues (Rynes et al., 2018).
A well-known example of such a gap is the prolonged use of the
lobotomy to treat mental illness in the US. Beginning with the case of
Phineas Gage, whose personality was dramatically changed after a con-
struction accident left him without his frontal lobe, medical professionals
hypothesized altering or removing portions of the brain could alleviate
mentally illness (Pressman, 2002). From 1936 to 1972, approximately
fifty thousand lobotomies were performed in the US. The majority of
them occurred during the late 1940s and 1950s during a period fre-
quently called the “lobotomy boom” (Holden, 1973, p.1109). Although
the last lobotomy in the US was performed nearly fifty years ago, it still
serves as a prominent example of the potential for widespread ineffective
medicine to permeate the medical community (Holden, 1973). Some
have called it one of the most spectacular failures in the history of
medicine (Johnson, 2009, p.367) and more lunatic than the patients it
was supposed to help (Havens, 2004, p.352). In addition to being
medically ineffective, lobotomies were also psychologically devastating
for patients. Its side effects such as include severely impaired in-
telligence, impulsivity, childlike dependency, mood fluctuations, incon-
tinence, paranoia (Robinson, 1946; El-Hai, 2005). Many lobotomized
patients also died due to surgical complications (Freeman, 1957). 1

Corresponding author.
⁎

E-mail addresses: raymond.j.march@ndsu.edu (R.J. March), vgeloso@uwo.ca (V. Geloso).

1
Families and loved ones of lobotomized patients also faced considerable hardships. In many cases, patients were unable to care for themselves and required
constant caretaking. The procedure's effect on patient's personalities often left them unable to maintain close relationships (El-Hai, 2005). In rare cases in which
lobotomized patients were able to leave the asylum, many were unable to care for themselves and eventually returned (Pressman, 2002). Patients who returned or did
not demonstrate improvement often underwent additional lobotomies (El-Hai, 2005).

https://doi.org/10.1016/j.respol.2019.103872
Received 13 August 2018; Received in revised form 9 October 2019; Accepted 12 October 2019
Available online 21 October 2019
0048-7333/ © 2019 Elsevier B.V. All rights reserved.
R.J. March and V. Geloso
Curiously, a noteworthy gap emerged early on between medical
research and medical practice. While lobotomies swiftly fell out of favor
when the Food and Drug Administration approved the first anti-
psychotic drug in 1954 (even if it did continue on smaller but non-
negligible numbers in public hospitals after that point), the procedure
was reviled and scorned during the time it was used. Five years after the
first US procedure, a consensus formed among medical professionals
across multiple specialties that there was little evidence the procedure
helped patients (Holden, 1973). The lobotomy was denounced by the
American Medical Association in 1941, several years before the “boom”
period. Indeed, the procedure faced criticism from physicians of various
medical backgrounds for the entire duration of its use
(Valenstein, 1986). Given the magnitude of the harm caused and the
length of time that elapsed before the practice-academic gap began to
close, lobotomies are a prime example of the need to understand the
source and persistence of gaps between the scientific discovery and
adoption of these findings. Previous literature attempting to explain the
lobotomy's longevity and popularity despite the persistent criticism
from the medical community largely emphasizes the absence of
knowledge of how ineffective the procedure was or explains its popu-
larity by noting that few alternative treatment methods were present
(Pressman, 2002; El-Hai, 2005). However, these explanations have
limited value without referring to the role of economic incentives.2
In this paper, we propose that the lobotomy's popularity and long-
evity in the US was the result of the incentives generated by the in-
stitutional structure of mental healthcare provision. Primarily, we note
that funding for public mental hospitals and asylums was provided by
state and federal governments at a very low level per capita by the time
the practice was introduced. This served to constrain revenues; and the
lobotomy was cheaper than other treatment methods (El-Hai, 2005).
Further, lobotomized patients were easier to manage (their brain da-
mage often made them docile). These factors, in conjunction with the
fact that bureaucratic oversight provided little incentive to effectively
treat patients, motivated physicians to perform cost- and conflict-
minimizing treatment. In contrast, physicians operating in private
mental hospitals and asylums were funded by the patients, by their
caregivers, or through philanthropic donations. These funds could be
reduced if physicians did not provide adequate care or used an in-
effective practice. The different institutional settings generated dra-
matically different outcomes.
Analyzing how the incentives produced within different institu-
tional environments where medical professionals performed lobotomies
created a gap between medical research and practice also provides
important implications for the health economics literature and litera-
ture examining scientific research policy (Lyall and Tait, 2019). Recent
health economics literature finds that even small changes in incentives
will affect the quality, amount, and type of care (Price and
Simon, 2009; Clemens and Gottlieb, 2014; Godager et al., 2016;
Huck et al., 2016; Brekke et al., 2017) as well as technology adoption
(Freedman et al., 2015). Institutional structure also impacts the quan-
tity and quality of scientific research (Walsh and Lee, 2015;
Demircioglu and Audertsch, 2017). More importantly, as it is relevant
to our case, these institutional structures also alter the tendency to
engage in scientific misconduct (Berggren and Karabag, 2019). Ex-
amining the prolonged use of the lobotomy in US medical history
contributes to these literatures by providing a case study of how det-
rimental poorly constructed incentives can impact medical practices in
ways that are equally detrimental to patients.
Our analysis also provides important implications for the role of
institutions in effectively advancing scientific inquiry and discovery.
2
The role of incentives, as we argue later, helps explain why widespread and
persistent warnings from many physicians against using the lobotomy had little
impact on preventing its use. Incentives also help explain why the lobotomy
outlasted other ineffective treatment methods.
2
Research Policy 49 (2020) 103872
Because physicians frequently occupy a position requiring them to
practice and contribute to medical science (Bartunek and Rynes, 2014),
understanding which institutional incentives weakened the relationship
between medical practice and medical science has critical insights for
science and broader research policy. As the lobotomy boom took place
during the larger public health movement in US medical history
(Hamowy, 2008; Troesken, 2015), our case study also sheds light on the
impact of increased bureaucratization of science.
To perform our analysis, we utilize the framework developed by
Tullock (2005) in The Organization of Inquiry. In this book, Tullock uses
economic insight to examine the role of scientists within their peer
network (termed the scientific community) to advance the body of
scientific knowledge. Tullock's discussion of the various institutional
factors that inhibit scientists’ ability to advance correct discoveries or
stop false discoveries from gaining acceptance provides us a fruitful
framework to understand the incentive structure of physicians electing
to use lobotomies. To inform our analysis, we use historical government
documents containing data on mental hospital and asylum enrollment
over the relevant period. When historical documents are unable to
provide data, we rely on the work of Valenstein (1986),
Pressman (2002), and El-Hai (2005) and findings from medical jour-
nals.
This paper proceeds as follows. In Section 2, we briefly review the
history of the lobotomy in the US and further develop the puzzle of why
the practice persisted for so long. In Section 3, we adapt Tullock's fra-
mework to the incentive structures physicians faced when deciding to
use or not use the lobotomy. Section 4 applies the framework through
an institutional comparison of the two systems. Section 5 concludes and
provides implications for the current relationship between government
funding and scientific discovery as well as proposals for future research.
2. History of lobotomies in the United States
In the late 1890s and early 1900s, the psychiatry and neurology
disciplines underwent a large-scale lobbying effort calling for an in-
creased government role in promoting mental health and providing
care for mentally disturbed patients (Rothman, 1971, 2002;
Pressman, 2002; Burnham, 2015). The leader of the movement was
Adolf Meyer, who worked to unify the fields of psychiatry, psychology,
and neurology under the banner of psychobiology (Pressman, 2002).
Meyer's hope was to secure a larger role for these disciplines in the
broader medical community by obtaining more political clout. As part
of his vision, Meyer sought to redefine the role of providing mental
healthcare as caring for patients and simultaneously engaging in public
health efforts to prevent insanity (Rothman, 1971, 2002;
Pressman, 2002).
A consequence of this lobbying effort was to redirect physicians’
efforts into political rather than scientific or medical avenues. Through
professional contacts within government, Meyer and his political sup-
porters secured financial support to establish a large network of state
hospitals (with psychiatric wards) and increased funding for state asy-
lums.3 Whereas most federal funds for scientific research in the United
States after the Civil War had been for agricultural purposes
(Kealey, 1996, p.148), the 1930s witnessed greater federal involvement
in public health research. (Burnham, 2015). The result was a swift in-
crease in public hospitals and publicly funded asylums
3
Organizing medical professionals to gain political clout was not unique to
psychiatry and mental healthcare providers. Over the same period, medical
professionals organized to reduce tuberculosis related deaths. Although the
movement did little to reduce to reduce morality, it was able to help pass nu-
merous regulations and state-funded sanitoriums through political influence
(Anderson et al., 2019). Similarly, Leeson et al. (2019) find medical profes-
sionals in 19th century England were able to gain political influence under the
banner of regulating unproven medical treatments (what was referred to as
quack medicine).
R.J. March and V. Geloso
(Pressman, 2002; Burnham, 2015).4
Meyer's vision also inspired efforts at the state level to reform public
health policy. Rothman (2002) notes that many states reformed their
commitment laws while federal financial support increased. These re-
forms decreased the difficulty (in rigor and number of steps) of having
patients involuntarily committed. New York, which consistently com-
mitted the most patients, was a prime example (Pressman, 2002). In-
voluntarily committed patients typically resided in state hospitals.
However, to relieve the hospital staff of the overcrowding burden,
many patients were sent to state asylums for observation
(Pressman, 2002). Increased numbers of committed patients, stemming
from increased government funding for mental healthcare and easier
commitment laws, promoted a sharp increase in demand for the ser-
vices of mental institutions (Rothman, 1971). As two reports from the
Census Bureau (cited in Noll, 1995, p.5) make clear, the number of
institutionalized individuals relative to the general population in-
creased substantially between 1904 and 1923 (from 17.3 per 100,000
to 46.7 in 1923). From 1920 to 1940, the population of patients in
public mental hospitals and asylums committed because of retardation
increased nearly 167%, from 50,000 to 113,000 (Nelson and
Crocker, 1978, p.1039). However, when we include other patients, the
population increases to 481,000 (an over 850% increase) in 1940
(NIMH, 1952, p.14). Overall, from 1900 to 1950, the inpatient popu-
lation increased nearly fourfold (Bassuk and Gerson, 1978).5
Mental hospitals and asylums were ill equipped to handle the rapid
influx of patients (Valenstein, 1986; El-Hai, 2005). In some cases,
hospital directors and physician staff had no experience treating mental
illnesses (Rothman, 2002). Overcrowding in mental healthcare facilities
was commonplace as the national patient overpopulation rate increased
from 7.1% above capacity in 1926, to 9.4% in 1938 (NIHM, 1941,
p.75), to 12.5% in 1945 (NIMH, 1948, p.26), to 18.1% in 1949
(NIMH, 1952, p.68). Despite widespread complaints of a lack of public
funds, public expenditures for mental healthcare were increasing sub-
stantially. From 1946 to 1960, average expenditures per patient (ad-
justed for inflation) increased 153.5%. Between 1946 and 1950 (during
the lobotomy boom), expenditures per patient increased 43.4%
(Grob, 2014, p.164).
It is also necessary to mention the political impetus for devoting
greater resources to dealing with mental illnesses. As historian Steven
Noll points out, this increase did not result from a greater concern for
the mentally ill. Rather, the actors involved, including legislators and
governors, considered “protection for society from retarded people, and
not the reverse, as their major priority” (Noll, 1995, p.5). Accordingly,
the political environment was one in which elected officials were in-
centivized to increase the institutionalized population to isolate it from
society. This did not mean that public funding matched the cost of the
increased level of institutionalization. As this occurred during the
Progressive and New Deal eras, when governments at all levels were
growing, public-funding requests for mental institutions competed with
public-funding requests for social welfare programs such as workers’
compensation and old-age pensions. Accordingly, the institutional su-
perintendents were “beset with political pressures” that were accom-
panied by “monetary constraints” (Noll, 1995, p.9).
It is within this context that lobotomies entered the stage. The first
lobotomies performed on humans consisted of injecting alcohol into the
prefrontal cortex to destroy tissues (Pool, 1954; Gross and
Schäfer, 2011). The procedure was later adapted to treat mental illness
(mental illnesses were also called such terms as mania, mental dis-
turbance, feeblemindedness, retardation, moronism, and insanity). The
genesis of this movement was in Portugal, where physician Egas Moniz
hypothesized that removing brain tissue in humans could alleviate
4 9
Although, historically, public asylums were common (Rothman, 1971), they
became significantly more common after the 1900s (Pressman, 2002).
5
Over the same period, the US population increased by less than 30 percent.
3
Research Policy 49 (2020) 103872
mental illness.6 His hypothesis formed from his review of psychiatric
literature that had found that intentionally damaging brain tissues
provoked behavioral changes in chimpanzees (Pressman, 2002). Moniz
performed several lobotomies in Portugal but largely abandoned the
practice early in his career (Pressman, 2002).
In the 1930s, Moniz's procedure was adopted by Walter Freeman
and James Watts, who championed its use in the US. Ten years after
Moniz conducted his first lobotomy, Freeman reported having con-
ducted 400 lobotomies (Freeman and Watts, 1946, p.293). To cut down
on procedure time and avoid some surgical risks, Freeman developed
the transorbital lobotomy procedure in 1945. This version of the lo-
botomy involved inserting an icepick into the patient's nostril or eyelid
to destroy brain tissue rather than opening the skull to remove tissue.7
By 1957, Freeman claimed to have performed some 3000 lobotomies
with 600 being pre-frontal and 2400 transorbital (Freeman, 1957). The
procedure's comparative ease of use combined with overcrowding in
mental hospitals and asylums likely contributed to the rapid adoption
and use of the lobotomy during the boom period of the late 1940s and
early 1950s.
However, there was a strong reaction against lobotomies by medical
professionals throughout this period. In 1941, the American Medical
Association published an editorial addressing five important criticisms
of the procedure, concluding no one could assert the lobotomy was a
worthwhile procedure (Anonymous, 1941).8 In 1949, Charles Burlin-
game noted that worldwide scrutiny had developed over the effec-
tiveness of the procedure (as cited in Pressman, 2002, p.141). Ac-
cording to the available data, the lobotomy's use grew exponentially
despite widespread criticism (Valenstein, 1986). The procedure's use
also continued well after it fell out of favor with the medical profession
at large (Valenstein, 1986; Pressman, 2002).
Most explanations for why the lobotomy became popular despite
the criticism emphasize that the mental health community did not
know it was ineffective or that alternatives to treat mental illness were
not available (Worthing et al., 1949; Valenstein, 1986;
Pressman, 2002). However, these explanations have noteworthy lim-
itations. The lack-of-knowledge hypothesis seems unlikely given the
widespread criticism the lobotomy faced through its use in the US
(Pressman, 2002, El-Hai, 2005). Further, before the results of the first
lobotomies were conclusive, the procedure was heavily criticized for its
theoretical foundations (Valenstein, 1986). In fact, even Moniz and
Freeman both acknowledged the procedure was theoretically unsound
(Pressman, 2002) even though the latter proceeded with the practice.
The explanation pointing to lack of alternative treatments is best
illustrated by Worthing et al. (1949, p.647), who, although critical of
the procedure's effectiveness after evaluating some 350 case reports,
still concluded, “[i]n spite of its limitations, the operation seems to be
therapeutically active and fills a real need while we await a better
treatment.” Although many of the treatment methods for mental illness
at the time were unsound, psychoanalysis and electroshock therapy
were available. Both methods are still used today (Valenstein, 1986).
Further, in 1890, Swiss physician and asylum director Gottlieb
Burkhardt had lobotomized six of his patients.9 Burkhardt's efforts were
severely criticized, and he was eventually ostracized from the medical
community. These efforts occurred when fewer treatment options for
mental illness were available (El-Hai, 2005). The Swiss medical
6
In the medical literature, mental illness is also called mania, mental dis-
turbance, and insanity.
7
Other devices were used in different hospitals. However, Freeman typically
used an icepick (El-Hai, 2005).
8
Freeman and Watts also faced considerable criticism before the 1940s as
well. Although the procedure faced considerable ethical criticism (El-Hai 2005),
we focus on the scientific criticism in this paper.
Although the term did not exist at the time, Burkhardt attempted to remove
parts of the brain to alleviate mental illness, effectively serving the same pur-
pose as a lobotomy.
R.J. March and V. Geloso
community was unwilling to condone suspect medical practice despite
the absence of treatment for asylum patients (El-Hai, 2005). Thus, a
lack of accepted treatment seems insufficient to explain why the lo-
botomy enjoyed widespread popularity in the US over forty years later.
We now turn to an alternative framework emphasizing physician
incentives within the institutional structure of US mental healthcare
(from the early 1900s to the mid-1950s). By adopting Tullock's (2005)
framework, we are better able to explain the divergence of medical
consensus from medical practice than previous hypotheses.
3. Incentives and scientific inquiry
Incentives matter in scientific research, discovery, and the dis-
tribution of research findings (Tullock 2005). In The Organization of
Inquiry, Tullock (2005) considers scientists’ primary objective to be to
utilize scientific discovery for personal gain. While Tullock develops
two ideal-type scientists—the pure scientist and the applied scientist
(terms which are reminiscent of those used to refer to the academic-
practice gap). It is the applied scientist's role that interests us because
the lobotomy primarily concerns that role. The personal gains include
influencing peers in the broader scientific community (Tullock, 2005,
p.24) and earning financial rewards for pursuing research of interest to
those outside the scientific community. By seeking the latter kind of
gain and attempting to assess the value of a scientific discovery for the
public, scientists serve an entrepreneurial role.
Although scientists’ broad research objectives differ, the scientists
serve complementary roles in advancing the application and theoretical
foundations of their disciplines (Tullock, 2005, p.33). As Tullock de-
scribes it, “The scientist's curiosity is subject to social guidance. The
information inputs from other scientists are important in shaping the
problems which he will investigate. Similarly, he is normally interested
in the approval of his peers and hence will usually consciously shape his
research into a project which will pique other scientists’ curiosity as
well as his own” (2005, p.25).
In this regard, Tullock likens the process of scientific research and
inquiry to the unhampered market process in economics. In his own
words, “The most effective way of ‘organizing’ science seems to be the
most perfect laissez faire” (Tullock, 2005, p.5). The market process
allows consumers and producers to exchange with each other in a
manner that coordinates effective (socially desirable) uses of resources
(Kirzner, 1974).
Although scientists pursue separate goals and lines of research and
differ on a variety of other margins, their efforts are coordinated toward
advancing the broader scientific body of knowledge. Similarly, the
market process channels the actions of different actors pursuing their
self-interest toward cooperative efforts to extend the nexus of exchange.
Tullock is not the only one to notice these similarities. Polanyi (1951,
1962), Kealey (1996), Butos and Boettke (2002), and
March et al. (2016) also compare the coordinating mechanisms of the
market process to the institutional structure of scientific research. Si-
milarly, Morlacchi and Nelson (2011), find medical practice advances
through the interdependent workings of scientific understanding, the
applied practice of medicine, and the introduction of new medical
technology.10 As such, we can categorize successful coordination as
reducing the gap between academic knowledge and application of this
knowledge into professional practice. Contrarily, institutions which
hinder coordination can widen such a gap.
As Tullock notes, the success of coordination within the scientific
community does not have access to a price system to coordinate dis-
parate actions, and so they do not coordinate as successfully as the
10
It is important to note societal demands and scientific research often, but
do not necessarily always overlap. For example, Cairli and Rafols (2019) find
when examining rice research, find scientific discovery and societal demands
overlap, “to a limited extent” (p. 949).
4
Research Policy 49 (2020) 103872
market economy (see also Hayek, 1945). Scientists rely on different
institutional mechanisms to distinguish productive from unproductive
uses of research resources and guide research efforts toward more-
fruitful research projects. The key mechanism Tullock specifically em-
phasizes is the ability of the scientific community to verify discoveries.
The verification process is largely performed by scientists who are
considered experts in their fields of study. These experts earn their
reputation from their peers and perform their verification role by ser-
ving in leadership positions for academic journals and research orga-
nizations and serving in other professional capacities. If a scientist's
discovery is verified by his or her peers, it gains acceptance from the
broader scientific community. Similar to how the market process pun-
ishes transactional misconduct (see also Mises, 2007), when a scientist
is caught engaging in fraudulent research activity, they suffer reputa-
tional damage within their peer network (Azoulay, Bonatti, and
Kreiger, 2017). Even co-researchers have strong incentives to police
each other to avoid the reputational costs of scientific misconduct as
prior collaborators tend to suffer from a researcher's misconduct
(Hussinger and Pellens, 2019). Others examine the dynamics of the
scientific community outside of the market-process framework but
which remain complementary to it. Merton (1938) maintains that the
relationship between a scientist's work and the impact other scientists
have in evaluating his work depends on the social structure of the
broader scientific community. Kitcher (1990) contends mismatches
between the group rationality of accepted scientific theories and the
individual rationality of scientists working to change them ultimately
advance the body of scientific knowledge. Although the scientific
community must channel various research efforts to fruitful ends, di-
versity of scientific opinion promotes change of prevailing theories.11
D'Agostino (2009) notes that the interconnectedness of various scien-
tific disciplines, in addition to the broader scientific division of labor,
also affects whether the body of scientific knowledge advances.
The sociological underpinnings of the scientific community may
also influence how theories are accepted or discredited. Bloor (1976)
and other scholars within the research program of science and tech-
nological studies hold that scientifically accepted theories exist within
particular social contexts that affect the influence they have on the
broader scientific community. Individual interest guided within scien-
tific social structures influences what positions scientists take on new
theories and existing scientific knowledge (Mackenzie, 1981;
Sismondo, 2008). Fuller (1993) notes that these social influences also
impact scientists’ activism outside of their community. Even when
scientific consensus is reached, public perceptions and social structure
also impact how science is utilized (Turner, 2001). Further, as
Foucault (1965) points out, some social structures may allow for mis-
treatment of marginalized groups, including the insane. Foucault ar-
gued (see Dillon and Foucault, 1980) that his work explained the ra-
tionalization that emerged for the type of treatment reserved for the
insane (i.e., confinement) after the eighteenth century. For the purposes
of this paper, this argument of Foucault can be interpreted as an ex-
pression of how institutions shape incentives of actors and how, in turn,
the actors rationalize the incentivized practices.
Another institutional mechanism occurs when scientific discoveries
are applied by other scientists in their research. This dissemination
process serves to bolster current research lines and to uncover short-
comings or limitations of discoveries in applied research. For example,
Subramanian, Lim, and Soh (2013) find that even when scientists’ re-
search draws contradictory conclusions, their findings can still be co-
ordinated to advance R&D practices within the bio-technology industry.
To Tullock (2005), the verification and the dissemination mechanisms
11
Kitcher (1990) refers to the organization of the scientific community as the
“cognitive division of labor.”
R.J. March and V. Geloso
imperfectly perform in the scientific community the role prices perform
in the market.12
Much like the mechanisms of the market process, the scientific
community's mechanisms are less effective if they become distorted.
Primarily, when the institutional structure changes the mechanisms
that reward or punish scientific research, scientists’ incentives change.
These institutional changes can result in promoting avenues of scientific
research before they are validated by scientific peers (Taubes, 2007).
They can also limit the corrective ability of knowledge producers to
weed-out (or retract) incorrect statements (Berggren and
Karabag, 2019). Consequently, the verification mechanism's role of
preventing the advancement of erroneous scientific discoveries be-
comes less effective (Kealey, 1996). Also, erroneous discoveries are
more likely to permeate other research areas, which distorts the dis-
semination mechanism (Tullock, 2005). 13
This is not to say that less effective institutions allow less effective
science to continue indefinitely. Scientific errors will be found
(Tullock, 2005) and cumulative research (and costs from foregoing the
use of the resulting knowledge) may eventually force a correction
(Furman and Stern, 2011). However, when new theories are distanced
from the institutional mechanisms within the scientific community, it
delays the verification of and prolongs the dissemination of erroneous
discoveries.
Previous literature examining distortions in scientific research and
their impact on the advancement of science bolsters Tullock's frame-
work. Iaria, Schwarz, and Waldinger (2018) find policies limiting
communication between scientists within different nations after World
War I significantly curtailed, “the production of basic science and its
application in new technology” (p. 927). Biasi and Moser (2018) find
that copyright laws worked in the same manner by limiting access to
cutting-edge research and curtailing the number of newly-minted PhDs.
Taubes (2007) finds financial incentives tied to researching dietary
advice advanced by the US Department of Agriculture likely prolonged
incorrect nutritional hypotheses associating fat consumption with heart
disease. Similarly, Scheall et al. (2018) find external influences af-
fecting the publication-citation-reputation process in dietary and nu-
tritional science that resulted in erroneous and unhealthy dietary
guidelines provided by government agencies. Kealey (1996) notes
universities and scientists can serve in a powerful lobbying capacity,
working to steer resources away from scientific inquiry and into se-
curing state favors and funding. These are the same distortions that
affect scientists in the private sector when they are trying to secure
public research funds. As a result, Kealey found faster-decreasing re-
turns to public research funding and less research diversity, which
hinders discovery. More closely related to this paper, Szasz (1963,
2008, 2009) notes that unquestioned underlying assumptions in psy-
chiatry persist because they financially benefit mental healthcare pro-
fessionals (despite uncertainty regarding the benefits to patients).14
Extending Tullock's (2005) framework to examine the lobotomy is
fruitful for several reasons. First, the fact that the lobotomy was used
12
Tullock (2005) is not the only one who emphasizes this flawed process.
Mantere and Ketokivi (2013) as well as Kapeller and Steinberger (2016) also
note the dissemination of discoveries process is limited and can be inefficient.
13
In fact, scientists may have an incentive to distort the process if it protects
their reputation. Once established, a scientist may try to erect barriers to entry
in the field or use political influence to redirect research funding so as to pre-
vent competition against his research. This would generate the process of cu-
mulative advantage in science, which Robert Merton (1968) bemoaned. Be-
cause distorting the process limits competition, it cumulates the advantage of
“well established” scholars.
14
In Coercion as Cure (Szasz, 2009, pp.96–97), Szasz also tried tying the use of
coercion in psychiatry to government funding. However, he did not phrase this
explicitly in terms of incentives. He merely noted that government financial
involvement would unavoidably increase the desire to rely on coercion on the
part of psychiatrists. He also did not elaborate on this point.
5
Research Policy 49 (2020) 103872
beyond the point when medical professionals (scientists) deemed it
ineffective indicates there were distortions in the verification and dis-
semination mechanisms. As noted below, dissemination-mechanism
breakdowns include favorable and misleading coverage from popular
press outlets as well as numerous adaptations of the procedure
(Diefenbach et al., 1999; El-Hai, 2005). Further, when examining his-
torical documents provided by the National Institute for Mental Hy-
giene (NIMH), there is a clear difference in popularity and longevity
regarding the lobotomy's use in private mental hospitals and asylums
compared to public ones. This provides further reason to suspect that
institutions played a prominent role structuring incentives to loboto-
mize patients.
4. The institutional structure of mental hospitals and asylums
Pressman (2002) notes that the kinds of evaluations made as to
whether psychosurgery (i.e., lobotomies) worked were very different in
the public institutional context than they were in the private-practice
context (p.145). Primarily, the way public mental hospitals and asylums
were funded provided stronger incentives to use the lobotomy in
comparison to private establishments. We now review the institutional
framework for public and private medical establishments deciding
whether to use the lobotomy.
4.1. Public institutional structures
In the United States, starting in the late nineteenth century, asylums
and special institutions for the feebleminded began to house larger and
larger numbers (relative to population) of inmates (Sutton, 1991). This
increase coincided with an increased desire of state governments to get
involved because of the unease that insanity and feeblemindedness
generated within the electorate (Noll, 1995), so these asylums were
largely state funded and were complemented with numerous manda-
tory-sterilization laws, which were meant to dent the perceived increase
in insanity during the era (Ladd-Taylor, 2017).
According to the NIMH, the staff-to-patient ratio increased from
16:1 in 1938 (National Institute of Mental Health, 1941, pp.5, 77) to
21:1 in 1949 (National Institute of Mental Health, 1952, pp.14, 66).
Because funding formulas for state hospitals and asylums were, for the
most part, fixed at the state level on a per diem basis, low-cost methods
of treatment were preferable from a financial standpoint. Further, be-
cause state budget allocations were insufficient to cover expenses in the
postwar era (Grob, 2014, pp.66, 78), low-cost procedures were highly
desired to keep hospitals and asylums solvent. With limited resources
and state-based funding tied to occupancy, physicians within public
hospitals and asylums faced strong incentives to minimize treatment
costs and time spent with patients comparatively more difficult to treat
(or manage).
The lobotomy helped advance these objectives. First, it was a
cheaper alternative to many other available treatment methods. This is
especially true of the transorbital lobotomy, introduced by Freeman in
1946 as a quicker and less difficult way to lobotomize patients (El-
Hai, 2005). Unlike forms of treatment that were administered over
multiple rounds, the lobotomy was, in theory, a onetime procedure. It
was also common for lobotomized patients to become more docile and
easier to manage (Freeman, 1957). Freeman (1957) also notes that
patients were more likely to be discharged after a lobotomy, which
could ease the burden of an overcrowded facility.
Physicians in public asylums and hospitals faced few repercussions
for their actions because their funding was largely based on the number
of patients rather than whether the patients received adequate medical
care. Further, public asylums and hospitals in some states held the right
to perform lobotomies without obtaining the consent of patients (or
legal caretakers) and could also refuse visitation rights (Rothman, 1971;
Pressman, 2002). As Pressman notes, professionals working within the
state hospital system were conflicted in their roles as medical
R.J. March and V. Geloso
professionals and as hospital administrators (Pressman, 2002, p.209).
In short, there was a conflict between the scientific standards set by
their medical peers and their financial support.
Minimum-cost treatment techniques were also desired by super-
intendents and government officials. Both parties monitored distribu-
tion of treatment and were much less concerned with the effectiveness
of treatment (Rothman, 1980, 293–97). In some instances, public hos-
pitals would document the number of lobotomies performed to indicate
that patients received treatment (Pressman, 2002). Further, because
federal funding financially rewarded physicians in public hospitals and
asylums to use less costly and less effective treatments, criticisms from
the medical community became less important for professional re-
cognition. As physicians within public medical establishments acted as
applied scientists implementing potentially erroneous methods of
treatment, their source of funding likely clouded the way they de-
termined scientific use and validity (Tullock, 2005, p.29). Publicly
owned asylums, whose patients are involuntarily admitted, were simi-
larly less receptive to scientific scrutiny of their treatment methods
because their profits were also obtained through minimizing costs ra-
ther than finding effective treatments.
4.2. Private institutional structures
In contrast to physicians in public medical establishments, physi-
cians in private settings faced strong incentives to utilize treatment
methods that demonstrated success and to inquire into the treatments’
soundness or limitations. As physicians financially benefited by deci-
phering which methods were likely to help their patients, engaging
with their medical peers was advantageous. Similarly, physicians risked
financial losses and reputational damage for using ineffective treatment
methods. These institutional mechanisms served to motivate physicians
to exercise caution when selecting a treatment method they felt was
unproven or potentially harmful.
Although physicians either directing or working for private mental
asylums faced slightly different incentives from those in private prac-
tice, they too faced steep financial and reputational costs by taking
excessive risks when treating patients. Reputational damage to the
asylum could result in donors’ withdrawing their financial support,
decreases in voluntary enrollment (typically a large percentage of pa-
tients), or caregivers’ removing committed patients. Second, many of
those physicians were disciplined by participating in medical societies
in which their own research was discussed.
This is not to say physicians in the private sector never made errors.
Erroneous treatment methods were used by physicians in all settings
(Pressman, 2002). However, incentives faced by physicians in private
settings were aligned to exercise more caution than physicians in public
asylums.
5. The lobotomy in practice
The tying of federal funds to patient populations combined with
incentives to minimize treatment expenditures per patient motivated
the use of the lobotomy. Physician Mesrop Tarumianz, a superintendent
of Delaware State Hospital, provides evidence that public hospitals
responded to these incentives when, during a 1941 panel discussion at
the American Medical Association, he notes:
From an Economic point of view, I should like to give some figures
as to what this may mean to the public. We have to the following
conclusions with regard to our own cases: In our hospital there are 1250
cases and of these about 18 could be operated on for $250 per case.
That will constitute a sum of 5000 for 180 patients. Of these we will
consider that 10%, or 18, will die, and a minimum of 50% of the re-
maining, or 81 patients will become well enough to go home or be
discharged. The remaining 81 will be much better and more easily
cared for in hospital. Thus the hospital will be relieved of the care of 99
patients. That will mean a savings $351,000 in ten years
6
Research Policy 49 (2020) 103872
(Pressman, 2002, p.162).
Further, an article in the Stanford Law Review in Anonymous (1949)
insisted that if public hospitals and asylums did not face legal action,
their conflict of interest would result in the procedure's being used for
physicians’ best interests and not their patients’. For instance, the op-
eration could be a satisfactory means of controlling obstreperous in-
mates even when unsuccessful at rehabilitating the patient.
Overcrowding of facilities in conjunction with a lack of funds to
administer care and treatment, as is characteristic of many state in-
stitutions, supplies a strong incentive for providing minimal care (1949,
p.471). Physicians facing these limitations had incentives to use the
lobotomy, even if inappropriately, to save on costs. Indeed, Steven Noll
notes that the institutionalization of large numbers of individuals re-
sulted from political pressures but was not matched by adequate
funding: “Beset by political pressures and monetary constraints, in-
stitutional superintendents also struggled to control diverse populations
of individuals labelled as feeble-minded” (Noll, 1995, p.9). Noll (1995,
p.125) also notes that state legislatures and governors did not specify
clear objectives, so there was a “poorly delineated sense of purpose” for
mental institutions, which made it hard to consistently prioritize certain
objectives. In the 1950s, several prominent physicians, some of whom
previously supported the limited use of the lobotomy, would come to
agree the procedure was overused (Pressman, 2002).
There was a disconnect between the verification and dissemination
mechanisms during and after the lobotomy boom. Freeman's work to
promote and use the lobotomy exemplifies this institutional failure.
Freeman was opposed by medical professionals from numerous dis-
ciplines who were skeptical at first (advocating limited use) and later
openly hostile during the boom (Valenstein, 1986; El-Hai, 2005). Many
of his earliest detractors criticized the anatomical soundness of the lo-
botomy (El-Hai, 2005). Freeman's original presentation of his lobotomy
research, at the Southern Medical Association in 1936, was met with
severe criticism. He was on more than one occasion shouted down
during other presentations (El-Hai, 2005 pp.114–19). His book Psy-
chosurgery was rejected by two academic publishers before being pub-
lished by a minor editing house. The publisher also received letters
from medical professionals urging it not to publish the book
(Pressman, 2002). When it was published, few medical journals re-
viewed the book (El-Hai, 2005). In one rare review, prominent neuro-
surgeon Loyal Davis harshly remarked that the offhand way the surgical
procedure is described and discussed is no credit to the essayist as a
surgeon, a pathologist, or one who is searching for scientific truth
(Pressman, 2002, p.81). In 1949, Psychiatric Quarterly depicted the use
of psychosurgery as little more than a shot in the dark (Pressman, 2002,
p.319). Freeman's other academic publications made little impact
(ibid.).15
However, because Freeman was serving the purpose of controlling
bureaucratic expenditures, he was shielded in part from the costs of
continuing with lobotomies. The superintendents of hospitals and other
hospital administrators still spoke highly of him and hired him to per-
form lobotomies. Although the larger medical profession was highly
critical of the lobotomy procedure on theoretical grounds, the longevity
and popularity of its use can be explained by institutional changes in
the market for caring for the mentally disturbed. Where the incentives
of those applying the lobotomy are misaligned, techniques change and
are less bound by the critical feedback of the scientific community.
In contrast, private-practice physicians faced incentives to exercise
greater caution when administering treatment. Several medical histor-
ians note physicians in private practices were often hesitant to accept,
and were even critical of, new mental-illness treatment methods.
Valenstein (1986) notes the quick dismissal of infection theory in the
1920s. Infection theory, developed by Henry Cotton, medical director
15
Others expressed similar skepticism towards the practice of the lobotomy at
the beginning of the boom (Goldstein, 1950).
R.J. March and V. Geloso
for a state hospital with a psychiatric ward, held that mental illness was
caused by infected body parts including teeth, tonsils, pituitary glands,
and several sexual organs. Cotton's theory faced severe criticism from
numerous physicians who challenged the theory on its biological
soundness as well as the results he reported. Consequently, the theory
was quickly discredited. Freeman struggled to develop a successful
private practice early in his career (El-Hai, 2005, p.72). Shortly after
developing the transorbital lobotomy, Watts (his business partner) re-
fused on moral and scientific grounds to work with Freeman
(Valenstein, 1986, pp.227–28; El-Hai, 2005, pp.189–92). Freeman
would spend the rest of his medical career traveling the country giving
lectures and performing lobotomies outside his practice. His largest
supporters in these endeavors were leading figures in public mental
health establishments (Pressman, 2002).
Pressman (2002, pp.236–42) provides further evidence of great
caution in private hospitals and asylums and evidence for the merits of
their incentive structure when he examines the use of the lobotomy at
McLane Hospital, a private mental hospital in Massachusetts. He finds
the medical staff engaged in a rigorous selection method and decision-
making process whenever the procedure was considered. Physicians
organized committees to discuss whether the patients’ condition war-
ranted undergoing surgery and whether all other treatment methods
had been truly exhausted. The committee also sought approval from the
patients’ families and the patients if possible. If the committee agreed,
and it often did not, that the lobotomy was worth the risk, the proce-
dure took place in a separate hospital with a handpicked surgeon. Ex-
tensive procedures such as these were rarely observed in public asy-
lums, where treatment discretion was in the hands of the
superintendent (Rothman, 1971, p.136). Although Pressman provides
one example, his findings can be applied to private hospitals and asy-
lums generally. In 1950 (the height of the lobotomy boom), only 6% of
all lobotomies were performed in private settings (Valenstein, 1986,
p.173).
6. Conclusion
The advancement of scientific inquiry and discovery, like the ad-
vancement of the market, relies heavily on an institutional structure.
When effective, institutional mechanisms in science guide efforts to-
ward productive lines of research and away from erroneous ones. When
these mechanisms are distorted, they are less able to perform these
roles. As a result, important gaps between practice and research may
emerge (and persist) in ways that are detrimental to the general public.
The lobotomy (and the “lobotomy boom” period) in the United
States provides such an example. Using the framework Tullock (2005)
developed to understand the institutional structure of the scientific
community, we argue that the prolonged use and popularity of the
lobotomy stemmed from the incentives created by perverse institutions
created by government financing of mental healthcare. This contrasts
with previous explanations, which largely held that the use of the lo-
botomy in the United States was due to a lack of knowledge and al-
ternative treatment methods. By emphasizing incentives stemming
from institutional constraints in public and private mental healthcare,
our hypothesis is better able to explain this puzzling episode in medical
history.
We bolster our hypothesis by noting the historical trend for public
hospitals and asylums to use the lobotomy despite widespread agree-
ment by the medical community that the procedure was ineffective.
Physician incentives within public settings were closely aligned to
minimize treatment costs resulting from the financial incentives set up
by public funding. In contrast, physicians in private settings were less
likely to use the lobotomy because they faced greater financial and
professional costs when adopting ineffective treatment options. Using
historical records and the findings of medical historians, we find evi-
dence supporting our institutions- and incentives-based explanation for
the use of the lobotomy in the United States.
7
Research Policy 49 (2020) 103872
While this paper speaks to an extreme case of a delay in the dis-
semination of knowledge between medical discovery and medical
practice, it speaks to wider audiences – especially those interested in
health economics and management. The institutional incentives de-
scribed in this paper are observed in similar forms with regards to the
quantity, quality and type of other medical services (Price and Simon
2009; Clemens and Gottlieb, 2014; Godager et al., 2016; Huck et al.,
2016; Brekke et al., 2017). Our contribution compliments these findings
and the research policy literature in that it examines how state-based
funding alters the institutional structures to provide medical care.
Given our findings, the advancement of scientific inquiry and discovery
(including falsifying erroneous discoveries) may be better attained with
less state-led funding. In the case of the lobotomy, the manner in which
state financing was provided created distortions in the ability of med-
ical professionals, acting as scientists, to dismiss the lobotomy as an
ineffective treatment and deter its frequent use in mental healthcare.
Our analysis also contributes to the emerging literature on the bu-
reaucratization of science (Walsh and Lee, 2015; Demircioglu and
Audertsch, 2017). Because institutional environments which fund re-
search can make scientific research comparatively more bureaucratic,
bureaucratic structures can affect the quantity and the quality of sci-
entific output by changing researcher's incentives. Tullock also pub-
lished a prominent work on the economics of the bureaucracy
(Tullock, 1965). To our knowledge, the literature examining the impact
of bureaucracy in utilizing and generating medical knowledge largely
emphasizes a managerial framework rather than economics
(Battilana 2011; Kellogg 2019).
Future research may find Tullock's work on bureaucracy to be
fruitful in understanding how the incentives of a bureaucracy affect the
scientific.
Declaration of Competing Interest
None.
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