Stephan - 1996 - The Economics of Science

The Economics of Science
Author(s): Paula E. Stephan

Source: Journal of Economic Literature , Sep., 1996, Vol. 34, No. 3 (Sep., 1996), pp. 1199-
1235
Published by: American Economic Association
Stable URL: https://www.jstor.org/stable/2729500
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Journal of Economic Literature
Vol. XXXIV (September 1996), pp. 1199-1235
The Economics of Science
PAULA E. STEPHAN
Department of Economics and Policy Research Center
Georgia State University
The author would like to thank William Amis, David Audretsch, Dave Boykin, Eileen Collins
Paul David, Ronald Ehrenberg, Alan Fechter, Julie Hotchkiss, Mary Frank Fox, Vincent
Mangematin, Edwin Mansfield, Rubin Saposnik, F. M. Scherer, Frank Stafford, Mary Beth
Walker, Harriet Zuckerman, and two anonymous referees for helpful comments. Some of the
ideas expressed in this essay have evolvedfrom extensive conversations and collaboration with
Sharon G. Levin. The author, however, bears sole responsibility for the opinions and conclu-
sions expressed here. Stephen Everhart and Janet Keene provided research assistance. This
essay was begun when the author was a visiting scholar at the Wissenschaftszentrum Berlin
fur Sozialforschung. Financial support was received from the Andrew W. Mellon Foundation
and the College of Business Administration, Georgia State University.
1. Introduction 13 billion dollars, applied research bud-

gets about 17 billion.1
SCIENCE COMMANDS the attention of Early work in the economics of sci-
economists for at least three reasons. ence focused almost exclusively on the
First and most important, science is a relationship between science and tech-
source of growth. The lags between basic nology and the ways technology affects
research and its economic consequences growth and responds to economic forces.
may be long, but the economic impact of This work led to the realization not only
science is indisputable. Second, scien- that science makes technological innova-
tific labor markets-and the human capi- tions possible, but that science itself is
tal embodied in scientists-offer fertile affected by technology. For example,
ground for study. Third, a reward struc- technology provides apparatus to under-
ture has evolved in science that goes a stand physical phenomena better. This
long way toward solving the appropri- work also led to an appreciation that to a
ability problem associated with the pro- considerable extent the scientific en-
duction of a public good. Another reason terprise evolves in disciplines that from
to study science relates to the large their beginnings have been closely tied
amount of resources employed in the en- to fields of technology.
terprise. In 1991, for example, more than The enhanced respect with which sci-
85,000 Ph.D. scientists were engaged in ence emerged from World War II under-
research in the physical, environmental, scored the need to understand better the
and life sciences in the United States workings of scientific labor markets. The
(National Science Foundation 1994, ta- advent of human capital models in the
ble 10, p. 18). An undetermined but sub- early 1960s created a framework for
stantial number of physicians were also
1 Research expenditures for these broad fields
engaged in research. Basic research bud- are estimated from data found in National Science
gets in these fields were approximately Board (1993).
1199

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1200 Journal of Economic Literature, Vol. XXXIV (September 1996)
their study and a second line of inquiry derlying the production of scientific
concerning science-related issues was knowledge. The importance that re-
firmly launched. A third line of inquiry sources play in this process leads to a
had its genesis in the work of sociolo- consideration of attributes of different
gists, who, at a slightly earlier time, had funding regimes. The essay ends with a
begun to study the reward structure in discussion of empirical studies relating
science and the behavior that it engen- scientific research to economic growth.
ders. This work has provided economists We also argue that a case can be made
with a basis for understanding how a re- that science, by having endogenous as-
ward structure has evolved in science pects, figures prominently in the new
that encourages the production of the growth economics. We conclude by sug-
public good "knowledge." Other useful gesting topics for further study.
concepts and ideas have also been im-
ported to economics from the sociology 2. The Public Nature of Knowledge and
of science, such as the observation that the Reward Structure of Science
processes of cumulative advantage oper-
In his 1962 article concerning the eco-
ate in science.
nomics of information, Kenneth Arrow
This essay attempts to bring together
discussed properties of knowledge that
these (and other) lines of inquiry con-
make it a public good. Others (for exam-
cerning science and to incorporate into
ple, Partha Dasgupta and David 1987,
the discussion salient facts about science
1994; Harry Johnson 1972; Richard Nel-
and scientists that have been observed
son 1959) have also commented on the
by colleagues working in other disci-
public nature of knowledge: it is not de-
plines. We begin by discussing the public
pleted when shared, and once it is made
nature of knowledge and characteristics
public others cannot easily be excluded
of the reward structure. Special attention
from its use.2 Moreover, the incremental
is given to the recognition that priority
cost of an additional user is virtually
of discovery is a form of property right.
zero3 and, unlike the case with other
We then explore the winner-take-all na-
public goods, not only is the stock of
ture of scientific contests and the in-
knowledge not diminished by extensive
equality that characterizes such contests.
use, it is often enlarged.
Efficiency considerations follow. This
Economists were not the first to note
leads to a discussion of how the incen-
the public nature of knowledge. More
tives to disclose information in a timely
than 180 years ago Thomas Jefferson
fashion relate to the type of property
right sought. We demonstrate that, con- 2 Research findings only become a public good
trary to popular belief, it is not uncom- when they are codified in a manner that others
can understand. The distinction, therefore, is
mon for scientists in industry to publish, often drawn between knowledge, which is the
nor is it unknown for scientists working product of research, and information, which is the
in the nonprofit sector to "privatize" in- codification of knowledge (Dasgupta and David
1994, p. 493).
formation. 3 In reality, the marginal cost of use is greater
The second half of the essay begins than zero because users must incur the opportu-
with a discussion of scientific labor mar- nity cost of time as well as the direct cost of access
to journals or attendance at meetings. Informa-
kets. This includes an examination of tion, of course, is only of use to those who possess
life-cycle models of the labor supply of the requisite intellectual framework. Michel Cal-
scientists and empirical tests of life-cycle lon (1994) argues that the public nature of science
is greatly overstated. Tacit knowledge (discussion
models. A portion of the essay is devoted to follow) can be more costly to learn than knowl-
to a discussion of the complexities un- edge that is codified.

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Stephan: The Economics of Science 1201
(1967 edition, p. 433, section 4045) knowledge and that the rewards to prior-
wrote: ity are the recognition awarded by the
scientific community for being first.
If nature has made any one thing less suscep-
Merton further argues that the in-
tible than all others of exclusive property, it
is the action of the thinking power called an
terest in priority and the intellectual
idea, which an individual may exclusively property rights awarded to the scientist
possess as long as he keeps it to himself; but who is first are not a new phenomenon
the moment it is divulged, it forces itself into but have been an overriding charac-
the possession of every one, and the receiver
teristic of science for at least three cen-
cannot dispossess himself of it. Its peculiar
character, too, is that no one possesses the
turies.
less, because every other possesses the whole The recognition awarded priority has
of it. He who receives an idea from me, varied forms, depending upon the impor-
receives instruction himself without les- tance the scientific community attaches
sening mine; as he who lights his taper
to the discovery. Heading the list is
at mine, receives light without darkening
mine.
eponymy, the practice of attaching the
name of the scientist to the discovery.
A cornerstone of economic theory is Haley's comet, Planck's constant,
that competitive markets provide poor Hodgkin's disease, the Copernican sys-
incentives for the production of a public tem are all examples. Recognition also
good, because providers cannot appro- comes in the form of prizes. Of these,
priate the benefits derived from use. the Nobel is the best known, carrying
This observation, however, relates to re- the most prestige and the largest purse
wards that are market-based. An impor- (approximately $1 million in the early
tant contribution of the sociologists of 1990s), but hundreds of others exist, a
science and the economists who have ex- handful of which have purses in excess of
tended their work is the demonstration $300,000.5 Many countries also have so-
that a non-market reward system has cieties to which the luminaries are
evolved in science that provides incen- elected: the National Academies of Sci-
tives for scientists to behave in socially ence, Engineering, and Medicine in the
responsible ways. In the sections that United States, the Royal Society in En-
follow, we analyze the components of gland, the Academie des Sciences in
that reward system as well as the behav- France.
ior it encourages. Publication is a lesser form of recogni-
tion, but a necessary step in establishing
A. The Reward Structure of Science: priority. A common way to measure the
The Importance of Priority4 importance of a scientist's contribution is
to count the number of citations to an
As economists we owe a substantial article or the number of citations to the
debt to Robert Merton for establishing entire body of work of an investigator.
the importance of priority in scientific And while eponymy or a prestigious
discovery. In a series of articles and es- prize are perceived by most to be beyond
says begun in the late 1950s, Merton their reach, the reward of publication is
(1957, 1961, 1968, 1969) argues convinc- within the reach of most.
ingly that the goal of scientists is to es- It is important to stress that recogni-
tablish priority of discovery by being
first to communicate an advance in 5 Zuckerman (1992) estimates that approxi-
mately 3,000 prizes in the sciences were available
4 Parts of Sections A and B draw on joint work in North America alone in- the early 1990s. This is
with Levin (Stephan and Levin 1992). five times the number awarded 20 years earlier.

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tion in science depends on being first.6 Two characteristics of science account

There are no awards for being second or for the winner-take-all nature of scien-
third. The behavior such an incentive tific contests. The first is the diffi-
structure elicits is one of the themes of culty that arises in monitoring scienti-
this essay. One consequence is the per- fic effort (Dasgupta and David 1987;
ceived need to rush work to a journal. It Dasgupta 1989). This class of problem is
is not unknown for scientists to write and not unique to science. Edward Lazear
submit an article in the same day. Nei- and Sherwin Rosen (1981) have investi-
ther is it unknown to negotiate with the gated incentive-compatible compensa-
editor of a prestigious journal the timing tion schemes where monitoring is
of publication or the addition of a "note costly. A second characteristic of sci-
added" so that work completed between ence that fosters a winner-take-all re-
the time of submission and publication ward structure is the low social value of
can be reported, thus making the claim the contribution made by the runners-
to priority all the more convincing up:
(Stephan and Levin 1992). Another con-

there is no value added when the same dis-
sequence of a priority-based reward sys-
covery is made a second, third, or fourth
tem is the energy scientists devote to es- time. To put it sharply (and thus somewhat
tablishing priority over rival claims. inaccurately), the winning research unit is the
Moreover, such practices are not new. sole contributor to social surplus. (Dasgupta
Merton (1969, p. 8) describes the ex- and Eric Maskin 1987, p. 583)
treme measures Newton took to estab-

lish that he, not Leibniz, was the inven- B. The Reward Structure of Science:
tor of the calculus. Financial Remuneration and the
The importance accorded priority and Satisfaction Derivedfrom Puzzle
the response priority elicits bear a strik- Solving
ing similarity to the practice of offering
an award to the first firm to complete Financial remuneration is another
successfully a well-defined project component of the reward structure of
(Brian Wright 1983). More generally, the science. Because the winner-take-all na-
race for priority can be compared to pat- ture of the race places much of the risk
ent races, the essence of which is de- on the shoulders of the scientist, it is not
scribed in work by Morton Kamien and surprising that compensation in science
Nancy Schwartz (1975). Both are ex- is generally composed of two parts: one
treme forms of winner-take-all contests portion is paid regardless of the individ-
(Robert Frank and Philip Cook 1992) in ual's success in races, the other is prior-
which the winner is determined solely on ity-based and reflects the value of the
the grounds of being first.7 winner's contribution to science. While
this clearly oversimplifies the compensa-
6 There are, of course, different levels of con-
tion structure, the role played by counts
tests and repeated contests to enter. Many scien-
tists choose to play in the minor leagues, working of publications and citations in determin-
in the backwaters of science, or, as some woui ing raises and promotions at universities
say, functioning as ditchdiggers. See discussion
is evident from the work of Arthur Dia-
page 1204.
7 Substantial differences also exist between pat- mond (1986a) and Howard Tuckman and
ent races and priority races. For example, there is
no reward for reverse engineering in science and
consequently no incentive to play the type of wait- 8 The inaccuracy of the quote relates to the fact
ing game discussed by William Baldwin and Ger- that replication and verification have social value
ald Childs (1969). and are common in science.

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Jack Leahy (1975). The Diamond esti- would be to investigate what happens to
mates, for example, suggest that the the earnings profile when the definition
present value of publishing another arti- of income is broadened to include these
cle for a 35-year-old mathematician is extra-institutional forms of compensa-
(in 1994 dollars) about $6,750; the pres- tion.
ent value of an additional citation to a The other reward often attributed to
35-year-old physicist's work is about science is the satisfaction derived from
$2,225.9 Unfortunately, we know little solving the puzzle. To quote Warren
about the reward structure for scientists Hagstrom (1965, p. 16), "Research is in
in industry or in government labs, par- many ways a kind of game, a puzzle-
ticularly as that reward structure relates solving operation in which the solution
to priority. of the puzzle is its own reward." The
The flat profile of earnings in science philosopher of science David Hull (1988,
(at least for those employed in academe) p. 305) describes scientists as being
is frequently noted. Ehrenberg (1992), innately curious and suggests that
for example, calculates that the average science is "play behavior carried to
full professor in the physical and life sci- adulthood." This suggests that time
ences earns only about 70 percent more spent in discovery is an argument in the
than the average new assistant professor. utility function of scientists. Robert
This arguably relates to monitoring prob- Pollak and Michael Wachter (1975)
lems and the need to compensate scien- demonstrate that maximization problems
tists for the risky nature of their work. of this type are generally intractable,
On the other hand, if earnings are ex- because implicit prices depend upon
panded to include compensation outside the preferences of the producer. While
the institution, the profiles are in all like- this provides a rationale for excluding
lihood not nearly as flat as is often as- the process of discovery from models
sumed. A variety of extra-institutional re- of scientific behavior, the failure of
wards awaits the successful scientist in economists to acknowledge the puzzle as
the form of prize money and speaking a motivating force makes economic
and consulting fees. Successful patents models of scientific behavior lack credi-
can also generate a significant income bility.
stream for their scientific inventor, and
in recent years it has become standard 3. Inequality in Science
practice for eminent scientists, particu-
larly in the life sciences, to serve as sci- A defining characteristic of winner-
entific advisors and directors of new take-all contests is extreme inequality in
companies. Stephan and Stephen Ever- the allocation of rewards. Science, too,
hart (forthcoming) demonstrate that a has extreme inequality with regard to
handful of scientists realize extraordinary scientific productivity and the awarding
returns from the stock they hold in such of priority. One measure of this is the
companies and that a substantial number highly skewed nature of publications,
have the potential of realizing nontrivial first observed by Alfred Lotka (1926) in
sums of money by exercising stock op- a study of nineteenth century physics
tions. A fruitful area for further research journals. The distribution that Lotka
found showed that approximately six
percent of publishing scientists produce
9 These calculations assume that the rewards
are incorporated into the base salary and that the half of all papers. Lotka's "law" has
real interest rate is three percent. since been found to fit data from sev-

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eral different disciplines and varying pe- past success into research funding as
riods of time (Derek de Solla Price well as the "taste" for recognition that
1986).10 success engenders. While we have yet to
Inequality in scientific productivity understand these processes completely, a
could be explained by differences among strong case can be made that a variety of
scientists in their ability and motivation factors are at work in helping able and
to do creative research. But scientific motivated scientists leverage their early
productivity is not only characterized by successes and that some form of feed-
extreme inequality at a point in time; it back mechanism is at work (David 1994).
is also characterized by increasing in- This observation is consistent with other
equality over the careers of a cohort of work in winner-take-all contests. Frank
scientists, suggesting that at least some and Cook (1992, p. 31) observe that "in
of the processes at work are state depen- all their manifestations, winner-take-all
dent. Yoram Weiss and Lee Lillard effects translate small differences in the
(1982), for example, find that not only underlying distribution of human capital
the mean but also the variance of publi- into much larger differences in the dis-
cation counts increased during the first tribution of economic reward."
ten to 12 years of the career of a group,
of Israeli scientists. 4. The Choice of Scientific Contests
Merton christened his explanation for
The winner-take-all character of scien-
inequality in science the Matthew Ef-
tific contests dictates that scientists
fect, defining it to be
choose the contests they enter with care.
the accruing of greater increments of recog- The probability of being scooped is a
nition for particular scientific contributions constant threat. This is particularly true
to scientists of considerable repute and the in the case of "normal" science where
withholding of such recognition from scien-
the accumulated knowledge and focus
tists who have not yet made their mark.
(1968, p. 58)
necessary for the next scientific break-
through is "in the air."11 Young scien-
He argues that the effect results from tists, in particular, must choose their
the vast volume of scientific material contests with care if they are to success-
published each year, which encourages fully signal their ability or "resource wor-
scientists to screen their reading mate- thiness" and set in motion the processes
rial on the basis of the author's reputa- of cumulative advantage described above
tion. Other sociologists (Paul Allison and (Alan Garner 1979).
John Stewart 1974; and Jonathan Cole Scientists can minimize the threat of
and Stephen Cole 1973, for example) being scooped by seeking ways to mo-
have argued that additional processes of nopolize a line of research. During the
"cumulative advantage" are at work in seventeenth and eighteenth centuries,
science, such as the ability to leverage discoveries in process were sometimes
reported in the form of anagrams for the
10 Lotka's law states that if k is the number of
scientists who publish one paper, then the number 11 Note the distinction between social and indi-
publishing n papers is k/n2. In many disciplines vidual risk. Because accumulated knowledge is an
this works out to some five or six percent of the important input in the process of discovery, nor-
scientists who publish at all producing about half mal science is not especially risky from the social
of all papers in their discipline. Although Lotka's point of view (Dasgupta and David 1987, p. 526;
Law has held up well over time and across disci- Arrow 1962). From the individual investigator's
plines, David (1994) shows that other statistical point of view, however, the risks can be sub stan-
distributions also provide good fits to observed tial: being in the air is entirely different from be-
publications counts. ing in scientist X's air.

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"double purpose of establishing priority cess of trying to solve some very practi-
of conception and of yet not putting ri- cal problems concerning fermentation
vals on to one's original ideas, until they and putrefaction in the French wine in-
had been further worked out" (Merton dustry, Pasteur established the modern
1957, p. 654). It was also not uncommon science of bacteriology (Nathan Rosen-
to deposit a sealed and dated manuscript berg 1990).13
with a learned society to protect both Basic research often provides answers
priority and idea. More recently, the to unposed questions.14 Consequently,
ownership of apparatus or strains has the risk associated with such research
proved to be a convenient way to monop- can be lessened by shifting goals during
olize a line of research. Scientists can the course of research. Nelson (1959) ar-
also minimize the threat of being gues that this strategy is more appropri-
scooped by choosing to work on prob- ate for scientists working in a nonprofit-
lems that fall outside the mainstream of based environment than for scientists
"normal science" or by working in "the working in the profit sector because the
backwaters" of research (Stephan and former can more easily capture the re-
Levin 1992). The downside of such a wards regardless of where the research
strategy is that, while the low number of leads. On the other hand, companies
competitors increases the probability of having a broad technological base can
being first, the contest that is won may benefit from- research that is not di-
be of little interest to the larger scien- rected to a specific goal. At the time
tific community and hence receive mini- General Electric developed synthetic
mal recognition. diamonds, for example, it was the most
Researchers must choose not only a diversified company in the United
line of research. They must also choose a States.
research strategy, because more than A number of institutional arrange-
one method can be used to address the ments have evolved in science to help
same question (Dasgupta and David minimize risk or provide some insurance
1994). Here, too, uncertainty enters the against risk. Some of these, such as the
equation. The use of a novel method, for ability to monopolize a line of research,
example, can prove rewarding, but the have already been noted. Others include
risk of coming up empty-handed can be the adoption of a research portfolio that
quite large when an unorthodox ap- contains projects with varying degrees of
proach is employed.12 The uncertainty uncertainty, the formation of research
associated with the process of discovery teams and networks and the practice of
also can be substantial. The outcome "gift giving" whereby scientists, by
may not have been envisioned, neither acknowledging intellectual debts to their
may the outcome relate to the original colleagues (via citations), pay "protection
objective of the researcher. In the pro- money" to insure that those colleagues
"won't deny their grants, spread slander,
12 A consequence is that rival teams often select
highly correlated research strategies. From a so- 13 Serendipity plays a role in discovery when in
cial point of view, highly correlated research the course of research an unintended outcome is
strategies produce inefficiencies by failing to pro- observed. The following up, of course, is not acci-
vide the kind of portfolio diversification that soci- dental. Chance, according to Pasteur, favors only
ety would choose if it were allocating resources in the prepared mind. Bernard Barber and Renee
a way to maximize the probability of success (Das- Fox (1962) discuss the role played by serendipity
gupta and David 1994). The gains to society from in science.
sponsoring multiple lines of independent research 14 The unpredictable nature of scientific discov-
are examined by Scherer (1966). ery is explored by Michael Polanyi (1962).

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or-worst of all-ignore their work alto- From an economist's point of view, the
gether" (Steve Fuller 1994, p. 13). most appealing attribute of a reward sys-
tem that is rooted in priority is that it
5. Efficiency Considerations offers non-market-based incentives for
A. The Functional Nature producing the public good "knowledge."
Dasgupta and David (1987, p. 531), the
of the Reward System
first to make the observation, say it well:
The socially desirable properties at- "Priority creates a privately-owned as-
tached to a reward system that is prior- set-a form of intellectual property-
ity-based are substantial. Shirking is from the very act of relinquishing exclu-
rarely an issue in science. The knowl- sive possession of the new knowledge."
edge that multiple discoveries are com- Arrow (1987, p. 687), commenting on
monplace makes scientists exert consid- their work, articulates the cleverness of
erable effort.15 A reward structure based such a system:
on priority requires that scientists share
information in a timely fashion if they The incentive compatibility literature needs
to learn the lesson of the priority system; re-
are to establish priority. Such a process
wards to overcome shirking and free-rider
in turn permits peer evaluation, which problems need not be monetary in nature; so-
discourages plagiarism and fraud and ciety is more ingenious than the market.17
builds consensus in science (John Ziman
1968; Dasgupta and David 1987). The A reward system based on reputation
process also provides scientists the reas- also provides a mechanism for capturing
surance that they have the capacity for the externalities associated with discov-
original thought (Merton 1957) and en- ery. The more a scientist's work is used,
courages scientists to acknowledge the the larger is the scientist's reputation
roots of their own ideas, thereby rein- and the larger are the financial rewards.
forcing the social process. Reputation It is not only that the reward structure of
also serves as a signal of "trustworthi- science provides a means for capturing
ness" to scientists wishing to use the re- externalities. The public nature of
sults of another in their own research knowledge encourages use by others,
without incurring the cost of reproduc- which in turn enhances the reputation of
ing and checking the results. It also the researcher (Stephan and Levin 1996).
serves as a signal of trustworthiness to
B. Are There Too Many Contestants
foundations. As such, reputation pro-
in Certain Contests?
vides an answer to the agency problem
(Stephan Turner 1994) posed by Ronald The conventional wisdom holds that
Coase.16 because of problems related to appropri-
15 The prevalence of multiples in science is dis- ability a public good such as knowledge
cussed below. Mary Frank Fox (1983) and Hull will be underproduced if left to the pri-
(1988) discuss the effort and work patterns of suc- vate sector.18 A common rationale for
cessful scientists.
16 This is not to say that the reward structure is government laboratories and government
without problems. Fraud and misconduct occur grants for research rests squarely on this
with some frequency in science (Alexander Kohn
1986). Susan Feigenbaum and David Levy (1993) 17 Merton (1988, p. 620) also makes the connec-
discuss the market for (ir)reproducible results; tion when he speaks of reputation, saying that in
Mary Frank Fox and John Braxton (1994) discuss science "one's private property is established by
other issues related to fraud. There is also the con- giving its substance away."
siderable issue that the reward structure in sci- 18 Uncertainty and indivisibilities provide two
ence appears to have favored white men over other reasons why knowledge will be underpro-
women and members of minority groups. duced (Arrow 1962).

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premise. The production of knowledge or remarkable, the pattern of indepen-

can also be stimulated through the grant- dent multiple discoveries in science is in
ing of property rights to the discoverer. principle the dominant pattern rather
With rare exception, patents have been than a subsidiary one" (1961, p. 356).
the primary form of intellectual property The presence of multiple discoveries is
rights that economists have examined, due in part to the free access scientists
arguing that patents provide for appro- have to knowledge and in part to the fact
priability while placing knowledge (even- that uncertainty associated with who will
tually) in the public domain.19 Moreover, make a discovery leads scientists to
it has been shown (Dasgupta and Joseph choose research portfolios that are corre-
Stiglitz 1980) that under a wide array of lated (Dasgupta and Maskin 1987).20 The
circumstances social inefficiency results knowledge that multiples exist keeps sci-
from patent races among rival groups. entists from shirking and moves the en-
This inefficiency manifests itself in "ex- terprise of science at a rapid pace. Such
cessive duplication of research effort (or) observations invite the question of
. . . too fast a pace of advance of the whether science moves at too rapid a
frontiers of knowledge" (Dasgupta and pace and whether certain contests attract
David 1987, p. 532). too many entrants. Dasgupta and David
The recognition that priority is a form (1987, p. 540) argue that the priority
of property rights leads to the question system can create excesses, just as the
of whether there are "too many" contest- patent system does, provided the "re-
ants in certain scientific contests. Would ward to the discoverer . . . is tempting
the social good be served by having enough."'21 They make no effort to de-
fewer? In a classic speech delivered at a fine the boundary of temptation, but one
conference commemorating the 400th wonders if the general knowledge that
anniversary of the birth of Francis Ba- certain contests deserve the Nobel Prize
con, Merton detailed the prevalence of does not attract an excessive number of
what he called "multiples" in scientific scientists.22
discovery. And Merton was not the first
to note their presence. In what Merton 20 Despite the popularity of patent race models,
calls a "play within a play," he gives 20 multiples are arguably more common in science
than technology. The reason is that science is con-
"lists" of multiples that were compiled cerned with laws and facts, while technology is
between 1828 and 1922. Moreover, Mer- looking for practical ways to solve problems.
ton is quick to point out that the absence Hence, while there is often only one answer to a
scientific question, there usually are a variety of
of a multiple does not mean that a multi- distinct ways of solving the practical problem.
ple was not in the making at the time the 21 Another efficiency concern relates to whether
discovery was made public. This is a clas- scientists direct excessive amounts of time to re-
search as opposed to teaching. The fact that only a
sic case of censored data where scooped handful of scientists contribute the lion's share of
scientists abandon their research after a output suggests that substantial inefficiencies arise
winner is recognized. Indeed, Merton ar- when yeomen scientists devote long hours to re-
search. Other efficiency concerns exist. One is dis-
gues that "far from being odd or curious cussed in footnote 12. Another concerns whether
the process of cumulative advantage excludes tal-
19 While neither goal is perfectly achieved by ented individuals from making contributions. Das-
the patent process, the goal of disclosure arguably gupta and David (1994, pp. 506-07) discuss addi-
suffers the most. "The imperfections we have ex- tional efficiency issues.
amined in the patent as a device for rewarding 22 On the other hand, the common lament of
disclosures of knowledge are not at all surprising; interest groups that there are not enough entrants
a stone flung at two birds really ought not be ex- in certain races of apparent Nobel proportions
pected to make a clean strike on either" (Dasgupta (e.g., a cure for breast cancer) leads one to be
and David 1987, p. 534). cautious in making broad generalizations. It is, of

45.91.20.234 on Tue, 10 May 2022 14:37:23 UTC
C. The Incentive to Share Knowledge technology (Nelson 1982). While loca-
in a Timely Fashion tion does correlate with the incentive to
share knowledge in a timely fashion, the
Despite the similarities between prior-
relationship is far from perfect. Some
ity rights and proprietary rights such as
firms make the results of their research
patents, they differ markedly in the in-
public; some academics engage in prac-
centives they provide to disclose re-
tices that lead to the "privatization" of
search findings in a timely fashion. On
knowledge. In many instances agents can
the one hand, the quest for priority re-
eat their cake and have it too, selectively
quires scientists to share discoveries
publishing research findings while mo-
quickly, because it is only by sharing that
nopolizing other elements with the hope
priority rights can be established. The
of realizing future returns. Rebecca Eis-
quest for proprietary rights, on the other
enberg (1987) argues that such behavior
hand, discourages the rapid sharing of
is more common among academics than
information, because the very purpose of
might initially be presumed because they
proprietary rights is to provide a means
can publish results and at the same time
for capturing the economic rents at-
keep certain aspects of their research
tached to a new product or technology.
private by withholding data or failing to
And, while some forms of proprietary
make strains available upon request.24
rights require the sharing of knowledge
The ability to eat one's cake and have
in recognition of its public nature (e.g.,
it too is not only facilitated by the fact
the patent process), incentives to divulge
that publication is not synonymous with
the knowledge quickly are not present.23
replicability. It is also facilitated by the
The distinction is so crucial that Das-
fact that techniques can often be trans-
gupta and David (1987, p. 528) argue
ferred only at considerable cost, in part
that the two types of property rights, and
because their tacit nature makes it diffi-
the implications they hold for appropri-
cult, if not impossible, to communicate
ability and disclosure, differentiate sci-
in a written form (or codify).25 This pri-
ence from technology.
If one joins the science club, one's discover-
24 Eisenberg (1987) suggests that the patent
ies and inventions must be completely dis-
process may be more congruent with the scientific
closed, whereas in the technology club such norms of disclosure and replication than the pub-
findings must not be fully revealed to the rest lishing process in certain areas of the life sciences.
of the membership. This is Tecause patents in the biological sciences
require that the material in question be placed on
This distinction between science and deposit. This is not a requirement for publication;
technology often leads to the (erroneous) neither are the materials themselves part of the
conclusion that science is done by scien- published text.
25 Some aspects of technical knowledge have a
tists at universities and public labs and strong tacit component, meaning that they cannot
results in published knowledge, while be completed codified and made explicit in the
the focus of scientists working in indus- form of blueprints or instructions, but instead
must be learned through practice. Nelson and Sid-
try is the development of proprietary ney Winter (1982) discuss tacit knowledge, par-
ticularly as it relates to skill. Dasgupta and David
course, possible that such groups are expressing (1944) use the term tacit somewhat differently to
the concern that victory is undervalued by the connote knowledge that, for whatever reason, is
community. It is also possible that a cure is not "in not codified and argue that the boundary between
the air" and applying more resources to the con- what is codified and what is tacit is not simply a
test would be inefficient. question of epistemology. Rather, as suggested
23 Many nations require publication a year or so above, the boundary is "a matter, also, of econom-
after the application or a patent. In most nations ics, for it is determined endogenously by the costs
patents cannot be obtained if publication has oc- and benefits of secrecy in relation to those of codi-
curred prior to application. fication" (p. 502).

45.91.20.234 on Tue, 10 May 2022 14:37:23 UTC
vate aspect of technology is a major rea- basic research is a by-product of the de-
son patents are not a necessary condition velopment of a new product or process
for successful research and development (Rosenberg 1990). In other instances the
and underlies the willingness of industry production of generic knowledge is, it-
to share knowledge through publication. self, the goal and is motivated by the be-
There are other reasons why firms en- lief that a particular new product or pro-
gage in disclosure. Foremost among cess innovation will result from that
these is recruitment of talent. Scientists knowledge. In still other instances basic
and engineers often see the ability to research is needed if the company is to
publish as a condition of employment in stay abreast of developments in relevant
industry, knowing that if they are not scientific fields and more readily absorb
permitted to do so their career path will the findings of other scientists (Wesley
be severely restricted and they may fail Cohen and Daniel Levinthal 1989).
to achieve prestige among their peers. Sometimes firms are motivated by the
The reputation of the lab, which is di- expectation that fundamental research
rectly related to publication activity, also will provide a scientific foundation for
affects the ability of the company to hire the company's technology. Firms have
scientists and engineers (Scherer 1967); even been known to engage in basic re-
it may also affect its ability to attract search because of a concern that the fun-
government contracts (Frank Lichten- damental knowledge required for the in-
berg 1986). Stephan's work on biotech- dustry to advance is lacking and unlikely
nology (1994) suggests that a firm's pub- to be forthcoming from the academic
lications can also play a role in signaling sector. When Charles Stine made his
capital markets. Diana Hicks (1994) ex- presentation to the Executive Commit-
plores a number of other factors leading tee of Du Pont in 1926, for example, he
companies to opt for disclosure through argued that fundamental research was
publication. She points out that a critical necessary because "applied research is
element in this process is the company's facing a shortage of its principal raw ma-
ability to screen the material that is pub- terials" (Hounshell and Smith 1988, p.
lished, thereby insuring that its proprie- 366),27
tary interests are maintained. In the pro- This means that the research of some
cess, however, the firm must be mindful scientists and engineers in companies
that delays can lower morale among re- like IBM, AT&T, and Du Pont is virtu-
search scientists. David Hounshell and ally indistinguishable from that of their
John Smith (1988, p. 369) describe the academic counterparts. Not surprisingly,
loss of morale that occurred at Du Pont a number have received the top honors
when research managers implemented that their field can bestow. Bell Labs,
what turned out to be a de facto morato- Du Pont, IBM, Smith Kline and French,
rium on publishing.
27 YThe payoff to a firm's performance of scien-
tific research often takes the form of first-mover
6. Scientists in Industry advantages (Rosenberg 1990). Thus, even if the
research findings eventually spill over to competi-
tors or cannot be protected through proprietary
Firms engage in basic research for a rights, the firm performing the research has the
variety of reasons.26 In some instances, opportunity of being the first to use the informa-
tion for the basis of decisions, new products, etc.
Despite the evidence concerning the effects of ba-
26 The demand for scientists in industry relates
to the demand for research and development. sic research on productivity (Mansfield 1980), re-
Here we focus on the narrower issue of the de- cent years have seen a notable reduction in the
mand for basic research. amount of basic research supported by industry.

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TABLE 1
U.S. SCIENTIFIC AND TECHNICAL ARTICLES, BY FIELD AND SECTOR: 1991
(% OF ROW)
Coauthor-
Non- Academe-
Field All Academic Industry Federal profit FFRDC Other Industrya
All 142,333 100,275 12,660 12,265 10,242 4,392 2,499 35

(70.4) (8.9) (8.6) (7.2) (3.1) (1.8)
Clinical 50,142 34,794 2,545 4,510 6,678 195 1,419 45
Medicine (69.4) (5.1) (9.0) (13.3) (.4) (2.8)
Biomedical 26,918 20,444 1,524 2,258 1,982 413 298 40
Research (75.9) (5.6) (8.3) (7.4) (1.5) (1.0)
Biology 12,862 9,742 439 1,875 422 59 325 45
(75.7) (3.4) (14.6) (3.3) (.5) (2.5)
Chemistry 13,086 9,446 2,122 699 239 485 95 24
(72.2) (16.2) (5.3) (2.3) (3.7) (.4)
Physics 18,078 11,866 2,889 1,000 249 2,017 57 31
(65.6) (16.0) (5.5) (1.3) (11.1) (.3)
Earth/Space 8,138 5,155 605 1,149 471 569 189 37
Science (63.3) (7.4) (14.1) (5.8) (7.0) (2.3)
Engineering 9,999 5,978 2,441 715 153 608 103 26
/Technology (59.8) (24.4) (7.2) (1.5) (6.0) (1.0)
Mathematics 3,111 2,849 95 60 50 46 12 49
(91.6) (3.0) (1.9) (1.6) (1.5) (A4)
Source: National Science Board (1993, table 5-25, p. 428). Data are based on more than 3,500 U.S. and foreign
journals on the 1981 Science Citation Index Corporate Tapes. Articles written by researchers from more than one
institutional setting are prorated according to the number of author institutions. For example, a paper authored by
two academic scientists and one industrial scientist is counted as two-thirds academic and one-third industry.
aU.S. Academic-industry coauthored scientific and technical articles as a proportion of all industry articles. Source:
National Science Board (1993, table 5-26, p. 429).
Sony, and General Electric have each academics and industry is further indi-
been the research home to scientists who cated by the fact that 35 percent of arti-
have subsequently won the Nobel Prize. cles with an industry address have a
In 1994, 3.8 percent of the 2,088 mem- coauthor from the academic sector (see
bers of the National Academy of Sci- last column). Moreover, this proportion
ences came from industry. Twenty-four grew by more than 50 percent between
of the members were at AT&T Bell 1981 and 1991. This trend undoubtedly
Laboratories. relates to the increasing number of re-
Table 1 gives the institutional origin of search alliances that have been formed
authors of U.S. scientific and technical between industry and academe since
articles published in 1991 for eight fields Monsanto in 1977 gave Harvard $23 mil-
of science and engineering. While the lion in research funds. Such alliances are
vast majority of articles are authored by particularly prevalent in biotechnology
scientists working in the academic sec- (David Blumenthal et al. 1986).28
tor, industry produces a sixth of the lit-
28 Table 1 also points out the important re-
erature in chemistry and physics and a
search role that the nonprofit sector plays in clini-
fourth of it in "engineering and technol- cal medicine and that the federal sector plays in
ogy." The blurred boundary between biology and earth and space sciences. The Na-

45.91.20.234 on Tue, 10 May 2022 14:37:23 UTC
The reasons for industry to publish re- from the Labs' purpose. Recipients knew
search findings, as well as the economic that they had the choice of either modi-
incentives for adopting a basic research fying their research or being ostracized.
agenda, have been noted above. This Finally, given the collaborative nature of
should not, however, be taken as an indi- science, there is a need to study the
cation that economists (or others, for laboratory as a unit of analysis, instead of
that matter) have adequately studied sci- focusing exclusively on individual scien-
entists in industry doing "science." Many tists.
questions remain unanswered and, per-
haps even more fundamental, unposed.29 7. The Market for Scientists
For example, why do companies adopt
compensation strategies that impair the Science emerged from World War II
productivity of scientists by tying salary with enhanced respect. Its successes had
increases to the assumption of manage- shortened the war and led to reduced fa-
rial responsibilities? Does the strategy talities of American troops. There was
adopted by IBM and DuPont of creating also a growing appreciation for the im-
well paid research fellow positions help portant rQle science could play in stimu-
alleviate the problem? What role do pub- lating economic growth and employment
lications play in facilitating movement in peacetime. In a report prepared at the
between the industrial and the nonprofit invitation of the White House, Vannevar
sector? There is also the question con- Bush (1945) argued that science pro-
cerning how basic research in industry is vided an endless frontier and should be
monitored. The unpredictable nature of more heavily supported by the govern-
research, as well as the belief that cre- ment. One response to Bush's report was
ativity requires freedom of choice, sug- the formation of the National Science
gests that success is hampered if man- Foundation in 1950.
aged too closely. Yet firms can ill afford This groundswell of support for sci-
to fund research that has little promise ence, heightened in the 1950s by the
of (eventually) relating to the company's threat of Soviet scientific and technologi-
objectives. Scherer (interview) reports cal superiority, underscored the need to
that Bell Labs solved this problem by understand the workings of scientific la-
giving "the glassy-eyed stare" to scien- bor markets. Stellar talent was drawn to
tists who were seen as straying too far this question. First, David Blank and
George Stigler (1957) published a book
tional Institutes of Health and NASA are impor-
on the demand and supply of scientific
tant government research sites for these fields, re- personnel; then Arrow and William
spectively. The importance of Federally Funded Capron (1959) wrote an article concern-
Research and Development Centers (FFRDCs) in
physics is also clearly demonstrated. These include
ing dynamic shortages in scientific labor
Fermi National Accelerator Laboratory in Chi- markets. Both studies set the stage for
cago, Brookhaven National Laboratory on Long Is- work to come.
land, and the Stanford Linear Accelerator in Palo
Alto. A. A Description of Scientific Labor
29 Our knowledge of scientists working in indus-
try comes largely from a number of excellent case Markets
studies. These include Alfonso Gambardella's
(1995) study of the pharmaceutical industry, The majority of doctoral scientists in
Hounshell and Smith's (11988) study of Du Pont, the United States are employed in insti-
Willard Mueller's discussion of Du Pont (1962),
tutions of higher education and in busi-
Nelson's study of the development of the transis-
tor (1962), and Robert Sobel's study of RCA ness and industry. A distinct minority
(1986). work at FFRDCs, the government, and

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TABLE 2
SECTOR OF EMPLOYMENT OF DOCTORAL
SCIENTISTS IN U.S. 1973-1991
Business Federal
Year Total /Industry Academe Government Other
1973 130,355 30,887 77,289 12,522 9,657

23.7 59.3 9.6 7.4
1975 147,215 36,175 87,611 12,638 10,791
24.6 59.5 8.6 7.3
1977 161,445 40,213 94,619 13,589 13,024
24.9 58.6 8.4 8.1
1979 175,588 45,518 100,073 15,634 14,363
25.9 57.0 8.9 8.2
1981 188,564 52,081 106,457 15,849 14,177
27.6 56.5 8.4 7.5
1983 201,798 59,192 110,794 15,460 16,352
29.3 54.9 7.7 8.1
1985 218,328 64,962 119,365 16,860 17,141
29.8 54.7 7.7 7.9
1987 229,106 69,585 123,440 18,039 18,042
30.4 53.9 7.9 7.9
1989 243,230 75,468 129,609 18,604 19,549
31.0 53.3 7.6 8.0
1991 233,303 82,166a 114,417a 17,616 19,104
35.2 49.0 7.5 8.2
Source: National Science

2,3,4, 5, pp. 7-14); National Science Foundation (1991a, Table 17, p. 23). National Science Foundation (1994, Table
17, p. 32). Data are for employed scientists. "Other" includes individuals for whom no response was received. Fields
included in the definition of science are: physical, mathematical, computer, environmental, and life.
a The dramatic changes in 1991 may in part be due to a change in survey methodology. The National Science
Foundation is currently examining this possibility.
nonprofit institutions. Over time, the and the importance of science to eco-
sectoral composition has shifted substan- nomic growth. Business and industry's
tially as industry has employed propor- rationale relates to the desire to inno-
tionately more scientists and academe vate. In addition to R&D considerations,
proportionately fewer. This is shown in the demand for scientists is influenced by
Table 2. the demand for post-secondary education.
Funding for research and development The elements underlying the demand
in the United States comes primarily for scientists are far from stable, as indi-
from the federal government and busi- cated by Table 3, which gives R&D ex-
ness and industry. The government's ra- penditure data and undergraduate en-
tionale for supporting scientific research rollment data for the past 30 years. We
rests on several principles: the impor- see that the proportion of GDP spent on
tance of research and development to R&D (Column 1) grew in the early 1960s
defense; the need to subsidize the pro- and then declined continuously until
duction of the public good knowledge; 1978. It then began a steady increase, al-
the desire to win what Harry Johnson most reaching 1960s proportions in the
(1972) calls the "Scientific Olympics"; mid-1980s. Since that time, the propor-

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TABLE 3
MARKET INDICATORS FOR SCIENTISTS
(1) (2) (3) (4) (5) (6) (7) (8)

1960 2.63 1.70 0.88 121 84 64 NA NA
1963 2.83 1.86 0.90
1965 2.85 1.85 0.93 165 140 100 NA NA
1968 2.77 1.68 1.01
1970 2.59 1.47 1.03 264 200 160 68.60 60.00
1973 2.28 1.22 0.98
1975 2.22 1.14 1.00 295 132 140 61.50 52.60
1978 2.16 1.07 1.01
1980 2.31 1.09 1.14 292 92 128 64.00 45.70
1983 2.62 1.20 1.33
1985 2.82 1.29 1.44 322 82 116 59.30 44.80
1988 2.73 1.25 1.37
1990 2.64 1.15 1.37 318 89 117 53.30 37.10
1993 2.53 1.07 1.32
(1) Total expenditures on research and development as a percent of Gross Domestic Product.
Source: National Science Board (1985, table 2-3, p. 218); National Science Board (1993, table 4-4, p. 333).
(2) Total federal expenditures on research and development as a percent of Gross Domestic Product.
(3) Total industrial expenditures on research and development as a percent of Gross Domestic Product.
(4) Science and engineering bachelor degrees awarded in U.S., in thousands.
The 1990 figure comes from unpublished sources at the National Science Foundation.
(5) Ratio of Ph.D.s in physical sciences granted to U.S. citizens and permanent residents to U.S. Population aged
25-34 expressed as 10-6.
Source: D. H. Thurgood and J. M. Weinman (1991, table 3, p. 10). Age data taken from U.S. Bureau of Census
(1977, table 3, p. 6); U.S. Bureau of Census (1994, table 13, p. 14).
(6) Ratio of Ph.D.s in life sciences granted to U.S. citizens and permanent residents to U.S. population aged 25-34
expressed as 10-6.
Source: Thurgood and Weinman (1991, table 3, p. 10). Age data taken from U.S. Bureau of Census (1977,
table 3, p. 6); U.S. Bureau of Census (1994, table 13, p. 14).
(7) Percent of new Ph.D.s in physical sciences with firm plans who have a definite employment commitment.
Source: Thurgood and Weinman (1991, table 7, p. 16).
(8) Percent of new Ph.D.s in life sciences with firm plans who have a definite employment commitment.
Source: Thurgood and Weinman (1991, table 7, p. 16).
tion has again declined. These changes lowed by no growth in the late 1970s,
are driven in large part by decisions and minimum to no growth in the 1980s.
made at the federal level (Column 2). The supply of new doctorates in science
The growing importance of industry as a is also summarized in Table 3 and is ex-
source of R&D funding (Column 3), pressed as the ratio of Ph.D.s granted to
however, has softened the impact of the U.S. citizens and permanent residents to
government swings in recent years. The the U.S. population aged 25-34. We see
table also indicates the enormous growth that the proportion in the 25-34 age
that occurred in the number of bachelor category receiving a Ph.D. in both the
degrees conferred in science and engi- physical (Column 5) and life sciences
neering in the 1960s (Column 4), fol- (Column 6) increased throughout the

45.91.20.234 on Tue, 10 May 2022 14:37:23 UTC
1960s, declined in the 1970s, and was (or the number of graduates) in field j
fairly stable in the 1980s. We also see are salary in field j, salary in an alterna-
that growth was slightly higher in the life tive occupation such as law or business,
sciences and the decline more extreme and (for men) the draft deferment pol-
in the physical sciences. icy. These variables almost always have the
One other labor market indicator is expected signs and are highly significant.
given in Table 3: the percentage of new The magnitude of the implied elastici-
Ph.D.s who have definite commitments ties, however, varies considerably across
for employment or for postdoctoral posi- studies, even when field is held constant
tions whose commitment is for employ- (Ehrenberg 1992). Another market vari-
ment. Note that in recent years the able often included in predicting supply
proportion with an employment commit- is some measure of concurrent, past, or
ment has declined by about 25 percent future supply. Other things being equal,
in the physical sciences (Column 7) and enrollments are positively associated
by over 35 percent in the life sciences with present cohort size. Various lag
(Column 8). Stated differently, for ap- structures are used in estimating these
proximately 50 percent of new Ph.D.s in models and it is common to assume some
the physical sciences a definite commit- form of adaptive (or rational) expecta-
ment now means taking a postdoctoral tions. Supply variables generally ignored
appointment upon receipt of the Ph.D., by these studies (primarily because of a
while for almost two-thirds of those in reliance on aggregated data) include
the life sciences the first position is as a type of support available while in school,
postdoctorate. Although the postdoc pro- debt level upon graduation from college,
cess provides the recipient time to accu- and average time to degree.
mulate publications that signal future Demand equations prove more diffi-
"grant worthiness," the dramatic increase cult to specify, partly because we know
in the number of persons with these po- so little about the behavior of universi-
sitions (as well as the increase in the ties and governments (David Stapleton
number of persons holding more than 1989). There is, however, convincing evi-
one postdoctoral position) is generally dence that demand relates to R&D ex-
seen as an indication of the softness of penditures and that these expenditures
the market. in turn affect supply decisions. In a se-
ries of equations, for example, Richard
B. Studies of the Supply and Demand Freeman (1975) finds degrees at the
for New Entrants to Science B.S., M.S., and Ph.D. level in physics for
the period 1950 to 1972 to be signifi-
A number of studies have examined
cantly related to R&D expenditures. The
the market for new entrants to science.
propensity of recent doctorates to work
Larry Leslie and Ronald Oaxaca (1993)
increasingly for industry is in part a re-
do an excellent job of surveying this lit-
sponse to higher relative salaries in in-
erature and summarizing the major find-
dustry (Ehrenberg 1991). It also un-
ings, as does Ehrenberg (1991, 1992).30
doubtedly relates to the type of
The market variables that are usually
academic jobs available. Most students
found to affect the supply of enrollees
enter graduate school with the expecta-
30 Most studies focus on long-run adjustments. tion of eventually working in the aca-
A few, however, examine the short-run responsive-
demic sector and these preferences are
ness of the market by also focusing on the move-
ments of trained personnel between fields and reinforced while in school. The academic
sectors (Blank and Stigler 1957). jobs they want, however, are not at four-

45.91.20.234 on Tue, 10 May 2022 14:37:23 UTC
year institutions, but at research institu- ful thinking on the part of science advo-
tions where they can have their own lab. cates in the United States, it also
When jobs are scarce in this top sector stemmed from the assumption that sci-
(as they have been for a number of entists would retire and be replaced on a
years), industry becomes substantially one-to-one basis. Such has not been the
more appealing. case, in part because changes in the law
permitted retirements to be deferred; in
C. Forecasting Scientific Labor Markets part because tight budgets have limited
the number of replacements hired at
Although models of scientific labor
universities.
markets have been somewhat successful
in providing insight into factors affecting
8. Life-cycle Models
demand and supply, reliable forecasts of
scientific labor markets do not exist, Ever since the path-breaking work of
partly because of the unavailability of re- Gary Becker (1962) and Theodore
liable predictions of exogenous variables. Schultz (1963), economists have focused
While this problem is endemic to fore- attention on the question of how behav-
casting in general, the ups and downs of ior varies over the life cycle in occupa-
federal funding make forecasts of scien- tions where human capital plays an im-
tific labor markets particularly unreliable. portant role. The models developed
The failure of researchers to success- predict that, due to the finiteness of life,
fully forecast labor market conditions in investment behavior declines (eventu-
science (for anything except the very ally) over time.32 This decline may be
near future) has been well documented hastened if the production of human
by Leslie and Oaxaca (1993). Their work capital is non-neutral, meaning that time
should be required reading for anyone is more productive in the market than in
who is tempted to enter this arena. Sta- the production of human capital. These
pleton (1989) also chronicles the issues models typically incorporate a deprecia-
involved, which, in addition to the prob- tion rate for human capital that produces
lem of forecasting federal R&D, include a peaked profile. In the presence of de-
inadequate data, a poor understanding of preciation, earnings also peak, although at
the behavior of educational institutions, a later time than the human capital profile.
and poor estimates of undergraduate en- Several authors have adapted the hu-
rollments and degrees conferred. To this man capital framework to develop life-
list must be added the failure to come up cycle models of scientists or academics.
with consistent estimates of elasticities Like their first cousins, these models are
(Ehrenberg 1991). Despite these prob- driven by the finiteness of life and inves-
lems, forecasts of scientific labor mar- tigate the implications this has for the al-
kets are somewhat common, in part be- location of time to research over the life
cause they are mandated by Congress, cycle. The models differ in the assump-
supposedly in an effort to keep the U.S. tions they make concerning the objective
competitive. In the recent past, forecast- function of the scientist but reach some-
ers predicted an impending "shortage" of what similar conclusions. In its simplest
scientists.31 While some of this was wish- form the objective is the maximization of
32 Sociologists generally use age as a proxy for

31 This was not the first time that a shortage was
experience (Zuckerman and Merton 1973) while
discussed. Talk of shortages in the early 1950s led
Blank and Stigler to examine alternative meaningseconomists, though interested in experience, focus
of the term (1957, pp. 22-24). At other times theon the idea that age is a measure of time left in
concern has been that an "oversupply" exists. the career, or more generally, in life.

45.91.20.234 on Tue, 10 May 2022 14:37:23 UTC
income, itself a function of prestige capi- A. Empirical Studies of Research
tal (Diamond 1984). In a more complex Activity35
form, the objective is the maximization
of a utility function that includes income The research productivity of scientists
as well as research output (Levin and over the life cycle has received minimal
Stephan 1991).33 The latter is included attention from economists, although
given the strong anecdotal evidence that there have been numerous studies by
puzzle solving is part of the reward to psychologists and sociologists (e.g., Alan
science.34 The implications of these Bayer and Jeffrey Dutton 1977; Stephen
models are that the stock of prestige Cole 1979; Harvey Lehman 1953; and
capital peaks during the career and then Zuckerman 1977). The only studies by
declines and that the publishing profile economists that examine the publishing
declines over the life cycle. The addition activity of scientists in a life-cycle con-
of puzzle solving to the objective func- text are those by Diamond (1986b),
tion produces the result that research ac- Weiss and Lillard (1982), and Levin and
tivity is greater at any time, the greater is Stephan (1991).
the satisfaction derived from puzzle solv- Several classes of problems present
ing; it also produces the strong sugges- themselves in studying research produc-
tion that the research profile is flatter, tivity in a life-cycle context. These in-
the larger is the satisfaction derived from clude measurement, the confounding of
puzzle solving. aging effects with cohort effects, and the
The implications of the human capital availability of an appropriate database.
models for science have been investi- Publication counts are generally used
gated in a number of empirical studies. as a proxy for research activity. This is
The dependent variable is generally justified on the grounds of the high ac-
earnings or publishing activity. In a few ceptance rates-often in excess of 70
instances researchers have adapted the percent (Lowell Hargens 1988)-that
human capital model to study the accep- exist among scientific journals. The
tance of new ideas. The rationale behind question of attribution in the case of
the latter studies is that scientists as they joint authorship is sometimes addressed
age become increasingly vested in their by prorating article counts among co-
own ideas and hence more and more re- authors, despite the work by Raymond
sistant to alternative theories. In the dis- Sauer (1988) that indicates that co-
cussion that follows we summarize these authors receive more credit for work
empirical studies, organizing our discus- than such a device would suggest. Article
sion around the three variables most fre- quality is often proxied by weighting arti-
quently studied. cle counts by some type of citation mea-
sure.
33 The objective function can also include fame Because scientists of different ages
as an end in itself, not only as a means for generat- come from different cohorts, aging ef-
ing income. Levy (1988) uses such a model to in-
vestigate what happens when the rewards to a fects are confounded with cohort effects
field change and fame becomes rewarded more in cross-sectional studies. One type of
handsomely in the market. He does not, however,
cohort effect is associated with change in
draw implications for life-cycle behavior.
34This way of dealing with the puzzle issue is the knowledge base of the scientist's
not completely satisfactory because it assumes that field. If, for example, there is a secular
it is the product of discovery that enters the utility
function, not the input of time in discovery. Yet, it 35 Parts A and B of the discussion draw on joint
is the process of discovery that is often reported as work with Levin (Levin and Stephan 1991;
giving enjoyment to scientists. Stephan and Levin 1992).

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progression of knowledge (to paraphrase the career. The absence of life-cycle ef-
Jacob Mincer 1974, p. 21), the latest fects for particle physicists at Ph.D.-
educated should be the best educated granting institutions is not totally unex-
and hence the most productive, other pected. Abstract theorists working on
things being equal. Another factor that unification are often depicted as in-
affects research productivity and varies volved in a "religious quest," handed
by cohort is access to the resources that them by Albert Einstein, or, as is com-
affect research. Finally, in addition to monly stated in the literature, the
differences in the rate that knowledge "search for the Holy Grail."
becomes obsolete and differences in op- Diamond finds that the publishing ac-
portunities that greet different cohorts tivity of Berkeley mathematicians de-
over time, cohorts may vary in the level clines slightly with age. Weiss and Lil-
of ability or motivation they bring to the lard use a pooled model to estimate the
fields or specialty areas they enter. growth rate of publications for 1,000 Is-
The presence of cohort effects dictates raeli scientists. They find that the aver-
a research design that uses a pooled age annual number of publications tends
cross section time series data base. Such to increase in the early phase of the aca-
databases are not only costly to create; demic career and then decline. They also
issues of confidentiality can limit access find that, along with the mean, the vari-
to the ones that do exist. Diamond uses a ance of publications increases markedly
database he assembled for mathemati- over the first ten to 12 years of the aca-
cians at Berkeley; Levin and Stephan de- demic career.
velop a database by matching records The results of these (as well as other)
from the National Research Council's bi- studies should not, however, be used to
ennial 1973-1979 Survey of Doctorate conclude that the human capital model
Recipients (SDR) with publishing infor- provides a satisfactory explanation of
mation from the Science Citation Index. life-cycle research activity. Despite the
Weiss and Lillard use a sample of Israeli fact that some indication of an age-pub-
scientists. lishing relationship is found, the amount
Levin and Stephan analyze six areas of of variation explained is usually small.
science. They find that, with the excep- Diamond, for example, reports R-
tion of particle physicists employed in squares of .09 or less for his research
Ph.D.-granting departments, life-cycle productivity equations; Aloysius Siow
effects are present in the fully specified (1994) reports R-squares between .05
model that controls for fixed effects such and .08. The low explanatory power of
as motivation and ability.36 For the fields these models suggests, at a minimum,
of solid-state physics, atomic and mo- that other important factors, often ig-
lecular physics, and geophysics the evi- nored by economists, are at play in af-
dence suggests that publishing activity fecting productivity.
initially increases but declines some-
B. Empirical Studies of the Acceptance
where in mid-career. For particle physi-
of New Ideas
cists at FFRDCs, as well as for geolo-
gists, the profile decreases throughout The notion that older scientists are
slow to adopt new ideas and may actually
36 Vintage variables cannot be included inimpede a the progress of science by block-
fixed-effects model because the vintage variable is
ing innovative work of younger scientists
invariant over time for an individual. Equations
were also estimated that included vintage variables has been articulated by several scientists
but excluded the fixed effects. and is consistent with a human capital

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model that age determines how vested a sue of the role of gender in the reward
scientist is in a particular idea. The con- structure. In an effort to further focus
cept is often referred to as Planck's Prin- discussion, here we examine only earn-
ciple, because Max Planck stated in his ings equations that use pooled databases
autobiography that and hence make an effort to disentangle
experience effects from cohort (or time-
a new scientific truth does not triumph by
convincing its opponents and making them period) effects.
see the light, but rather because its oppo- Five studies nicely fit this bill. Four
nents eventually die, and a new generation focus on scientists in the United States
grows up that is familiar with it. (1949, pp.
(Diamond 1986b; John Laitner and Staf-
33-34)
ford 1995; Lillard and Weiss 1979; and
Planck's Principle has been tested by Weiss and Lillard 1978). One studies sci-
several researchers. The focus of two of entists in England and Australia (John
these studies is the plate-tectonic revolu- Creedy 1988). The five all find that the
tion that occurred in the mid-to-late earnings profile is concave from below,
1960s (Stewart 1986; Peter Messeri peaking (at the very earliest) in late ca-
1988). Two others look at the acceptance reer.37 This finding is fairly robust with
of Darwin's ideas on evolution in the regard to specification, estimation tech-
nineteenth century (Hull, Peter Tessner, nique, and database. Of particular inter-
and Diamond 1978; Hull 1988). The re- est is the finding by Laitner and Stafford
sults of these studies suggest that the ef- (1995) that the profile remains concave
fect of an additional year lowers the from below even when the earnings mea-
probability of acceptance by only a tiny sure is expanded to include "other earn-
percentage. The general conclusion is ings." The parameter estimates of experi-
that "Age matters, but it does not matter ence (when the dependent variable is the
much" (Diamond 1980, p. 841). A recent natural log of real earnings) are generally
study by Levin, Stephan, and Walker between .05 and .06; those for experi-
(1995) commenced with the goal of see- ence squared somewhere between -.0008
ing whether this outcome was caused by and -.0005. The R-squares (when the sta-
the failure of previous researchers to tistical techniques employed permit their
control for censoring. Their results con- computation) are quite respectable, be-
cerning the acceptance of Darwin's ideas ing in the neighborhood of .50.
indicate that the age effects obtained af- Clearly the earnings of scientists are
ter controlling for censoring are statisti- related to experience or age. It would be
cally insignificant at conventional levels. imprudent, however, to suggest that
They conclude that, at least for the the- these robust results with regard to
ory of evolution, age is a poor predictor age/experience confer infallibility on the
of acceptance. human capital model in terms of an ex-
planation of earnings. First, a number of
C. Empirical Studies
other theories (e.g., principal agent/
of Earnings Functions
bonding/antishirking models; efficiency
Estimates of earnings functions consti- wage models; and rank-order tourna-
tute the bread and butter of labor eco- ment models) predict a positive relation-
nomics; thus an essay of this length can
hope to scratch only the surface of this 37 A related question not addressed here is why
literature, even when we restrict the in cross-sectional data Michael Ransom (1993)
finds a negative seniority wage premium for fac-
analysis to estimates of the earnings
ulty members but not for the population in gen-
functions of scientists and ignore the is- eral or for other highly skilled occupations.

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ship between age/experience and earn- discussion that follows, we focus on the
ings. Second, the driving force of the hu- complexities of the production function
man capital model is the finiteness of and discuss what they mean for the mod-
life. Yet early in the career the present eling process.
value of an investment declines only
modestly with age, unless the discount 9. The Production of Scientific
factor is quite large. It is only toward Knowledge
middle age that the finiteness of life
Any new idea-a new conceptualization of an
takes on substantial economic signifi- existing problem, a new methodology, or the
cance.38 investigation of a new area-cannot be fully
mastered, developed into the stage of a tenta-
D. Does the Human Capital Model tively acceptable hypothesis, and possibly ex-
Come Up Short? posed to some empirical tests without a large
expenditure of time, intelligence, and re-
While it is an overstatement to say that search resources.
across the board the human capital So Stigler described the "production
model comes up short when applied to function" for knowledge in his 1982
scientists, it is fair to say that it does not Nobel lecture (1983, p. 536). Here we
come up king. Especially with regard to explore these components in more de-
publishing activity and the acceptance of tail, arguing that as economists we
new ideas, the empirical results (even have focused most of our attention on
when sophisticated estimating strategies the attributes that the individual con-
are employed) fail to convince, at least tributes directly to the process, ignor-
this observer, that the human capital ap- ing the importance of research re-
proach provides the cornerstone on sources.
which we should model the behavior of
scientists. Neither does the human capi- A. Time and Cognitive Inputs
tal model provide a ready explanation Although it is popular to characterize
of why the publishing activity of a co- scientists as having instant insight, stud-
hort becomes increasingly unequal over ies suggest that science takes time. In-
time. vestigators often portray productive
The failure of the human capital scientists-and eminent scientists espe-
model to deliver is undoubtedly related cially-as strongly motivated, with the
to the fact that the production of scien- "'stamina' or the capacity to work hard
tific knowledge is far more complex than and persist in the pursuit of long-range
the human capital model assumes and goals" (Mary Frank Fox 1983, p. 287). A
that these complexities have a great deal strength of the human capital models de-
to say about patterns that evolve over the scribed above is their explicit recognition
life cycle. Human capital models also of the role time plays in discovery. These
come up short in their failure to recog- models also recognize the importance of
nize the importance that priority plays in intelligence or, more broadly speaking,
the objective function of scientists, or to cognitive inputs.
fully incorporate puzzle solving as an ar- Several dimensions of cognitive re-
gument in the objective function. In the sources are associated with discovery.
38 It is interesting to note that studies by psy- One aspect of this is ability. It is gener-
chologists suggest that it is only in the late forties ally believed that a high level of intelli-
that individuals begin to measure time in terms of
years left to live instead of years since birth 39Section A draws on joint work with Levin
(Bernice Neugarten 1968). (Stephan and Levin 1992).

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gence is required to do science, and sev- 1992). Vintage may matter in science,
eral studies have documented that, as a but not always in the way that Mincer's
group, scientists have above average "secular progression of knowledge"
JQ's.40 There is also a general consensus would lead us to believe (Mincer 1974,
that certain people are particularly good p. 21).
at doing science and that a handful are Fourth, there is anecdotal evidence
superb. Another dimension of cognitive that "too" much knowledge can be a bad
inputs is the knowledge base the scien- thing in discovery in the sense that it
tist(s) working on a project possess. This "encumbers" the researcher. There is the
knowledge is used not only to solve a suggestion, for example, that exceptional
problem but to choose the problem and research may at times be done by the
the sequence in which the problem is ad- young because the young "know" less
dressed. than their elders and hence are less en-
The importance knowledge plays in cumbered in their choice of problems
discovery leads to several observations. and in the way they approach a ques-
First, it intensifies the race, because the tion.41
public nature of knowledge means that Finally, the cognitive resources
multiple investigators have access to the brought to bear on a problem can be en-
knowledge needed to solve a problem. hanced by assembling a research team,
Second, knowledge can either be embod- or at a minimum engaging in a collabora-
ied in the scientist(s) working on the re- tive arrangement with another investiga-
search or disembodied, but available in tor.42 Because of spiraling specialization
the literature. Different types of re- and an increased emphasis on equipment
search rely more heavily on one than the that requires unique skills, teams have
other. The nuclear physicist Leo Szilard, become increasingly important in sci-
who left physics to work in biology, once ence. Andy Barnett, Richard Ault, and
told the biologist Sydney Brenner that David Kaserman (1988) suggest two
he could never have a comfortable bath other factors leading persons to seek
after he left physics. "When he was a coauthors. One is the desire to minimize
physicist he could lie in the bath and risk by diversifying one's research portfo-
think for hours, but in biology he was al- lio through collaboration; the other is
ways having to get up to look up another the increased opportunity cost of time.
fact" (Lewis Wolpert and Allison Rich- An additional factor is quality. The lit-
ards 1988, p. 107). erature on scientific productivity sug-
Third, the knowledge base of a scien- gests that scientists who collaborate with
tist can become obsolete if the scientist each other are more productive, often-
fails to keep up with changes occurring
41 There is a literature suggesting that individu-
in the discipline. On the other hand, the als coming from the margin-"outsiders" if you
presence of fads in science (particularly will-make greater contributions to science than
in areas such as particle physics) means those firmly entrenched in the system (Thomas
Gieryn and Richard Hirsch 1983). Stephan and
that the latest educated are not always Levin (1992) argue that this is one reason why ex-
the best educated (Stephan and Levin ceptional contributions are more likely to be made
by younger persons. In studying Nobel laureates,
40Lindsey Harmon (1961, p. 169) reports that they conclude that although it does not take ex-
Ph.D. physicists have an average IQ in the neigh- traordinary youth to do prize-winning work, the
borhood of 140. Catherine Cox, using biographical odds decrease markedly by mid-career.
techniques to estimate the intelligence of eminent 42 Although teamwork and collaboration are
scientists, reports IQ guesstimates of 205 for Leib- used interchangeably here, Donald Beaver (1984)
nitz, 185 for Galileo, and 175 for Kepler. Anne suggests that teamwork is a step beyond collabora-
Roe (1953, p. 155) summarizes Cox's findings. tion.

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TABLE 4
INDICATIONS OF TEAMS IN SCIENCE
Panel A
Mean Number of Authors per Authored Source Item
in Science Citation Index
Year
1979 2.52
1980 2.56
1981 2.62
1982 2.69
1983 2.76
1984 2.92
1985 2.86
1986 2.96
1987 3.02
1988 3.08
1989 3.12
1990 3.18
1991 3.19
1992 3.36
1993 3.50
Source: Institute f
59-61).
Panel B
Mean Number of Authors of Papers written
by Respondents to the Survey of Doctorate Recipients: 1974-1981
Sector Physics Earth Science Biochemistry Physiology
Academic
Ranked Departments 3.61 2.38 2.91 2.64
Non-ranked Departments 2.94 2.24 2.95 2.85
Business/Industry 2.88 2.43 3.63 3.33
FFRDCs 3.55 2.85 3.12 3.66
Government 2.94 2.63 2.96 2.99
Source: Stephen and Levin (1987, table 3C, VI-28).
times producing "better" science, than in Table 4. Panel A reports the mean
are individual investigators.43 number of authors per authored source
One indication of the trend toward item in the Science Citation Index. We
collaboration in modern science is given see that in the short span of 15 years the
mean number has increased by one, a
43 Frank Andrews (1979) and S. M. Lawani
(1986) discuss the relationship among quantity,
factor of almost 40 percent. Not surpris-
quality, and collaboration in science. Other con- ingly, coauthorship patterns vary by field
siderations are that collaborative work is more and organizational setting. This can be
likely to be based upon funded research and more
likely to be experimental rather than theoretical
seen from Panel B of Table 4, which
(Mary Frank Fox 1991). gives the average number of collabora-

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tors on articles written by respondents to schools. It estimates that the aggregate

the Survey of Doctorate Recipients in purchase price of the equipment was
four broad fields over the period 1972- about $3.25 billion dollars, expended in
1981. The large number of coauthors on the majority of instances during the pre-
articles written by physicists working at vious five years. The results of this sur-
FFRDCs reflects the fact that time on vey are summarized in Table 5. The ta-
the large particle accelerators must be ble provides information on incidence of
shared and the setting up of experiments equipment as well as mean price. We
at accelerators involves more specialized see, for example, that the mean price of
skills than any single individual can pos- an electron microscope was $119,600;
sibly command. Indeed, there are stories the mean price of an NMR was
in physics that it is possible, on an ex- $146,000. And these averages may be bi-
perimental article, for the author list to ased toward teaching equipment. Sophis-
be longer than the article! ticated NMRs and mass spectrometers
can easily cost in excess of one million
B. Research Resources
dollars and hence are excluded from the
The production of knowledge also re- study. Other types of equipment are also
quires research resources. In the social excluded because of cost. Accelerators
sciences this generally translates into a and telescopes, for example, often easily
personal computer, access to a database cost in excess of $10 million and are usu-
and one or two graduate research assis- ally shared across institutions.44
tants. For physical scientists the resource The importance of graduate students
requirements are considerably more ex- and postdocs to the research process is
tensive, involving access to substantial harder to document, but case studies of
equipment, and the assistance of numer- productive scientists lead to the conclu-
ous graduate students and postdocs. In sion that, in most fields, they are a nec-
the life sciences research also requires essary component of research. It is com-
access to subjects (both of the human mon practice, for example, for a chemist to
and nonhuman variety) as well as access have three to four graduate students and
to certain strains. It is common practice one to two postdocs working in the lab.
in these disciplines to reward with The overwhelming importance of re-
coauthorship colleagues who share such sources to the research process in sci-
access. Thus the authorship counts of ence means that in many fields access to
Table 4 do not necessarily reflect the ac- resources is a necessary condition for do-
tual size of the team involved in any one
undertaking. 44It is important to note that technology is a
source of much of the instrumentation used in sci-
An appreciation of the magnitude of
ence, a fact often ignored by those who argue that
equipment employed in academic re- science is the engine of technology and thus a nec-
search can be obtained by studying the essary condition for technologica change. This is a
common theme of Rosenberg (1982, 1994) and
triennial reports issued by NSF on char-
was masterfully articulated by Price (1986, p. 247)
acteristics of science/engineering equip- in one of his iast public lectures: "If you did not
ment in academic settings. The most know about the technological opportunities that
created the new science, you would under-
recent survey (National Science Founda-
standably think that it all happened by people put-
tion 1991b) describes the 1988-89 stock ting on some sort of new thinking cap . . . The
of movable science/engineering equip- changes of paradigm that accompany great and
revolutionary changes may sometimes be caused
ment in the $10,000 to $999,999 price
by inspired thought, but much more commonly
range at the nation's research-perform- they seem due to the application of technology to
ing colleges, universities and medical science."

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TABLE 5
THE IMPORTANCE OF EQUIPMENTa
1988-1989 STOCK OF MOVABLE SCIENTIFIC AND ENGINEERING EQUIPMENT AT U.S.
RESEARCH PERFORMING COLLEGES, UNIVERSITIES AND MEDICAL SCHOOLS
Number of Mean Aggregate

Instrumental Purchase Purchase
systems Price (B) Price (A X B)
Type of equipment (A) (in thousands) (in thousands)
Total 81,753 $ 39.8 $3,253,840
Computers and data handling equipment 18,363 44.3 813,821

Graphics/CAD/Image analysis 2,659 39.5 104,929
Other systems ? $200,000 506 355.7 179,978
Other systems < $200,000 15,198 34.8 528,915
Spectroscopy and light measurement equipment 12,762 55.5 707,753

Electron/auger/ion scattering 963 100.2 96,487
Infrared/FTIR/laser Raman 1,162 55.3 64,235
Mass/GC-MS 922 132.6 122,283
NMR/magnets 1,118 146.0 163,184
Ultraviolet/UV-VIS 2,920 21.8 61,746
X-ray(diffractometers, etc.) 1,232 74.3 91,509
Other 4,446 24.4 108,309
Microscopes and accessories 5,490 46.4 254,875

Electron microscopes 1,238 119.6 148,090
Other microscopy equipment 4,251 25.1 106,784
Bioanalytical instruments 20,107 28.5 572,380

Cell sorters/counters, cytometers 330 72.3 23,860
Centrifuges and accessories 6,783 29.0 196,548
Chromatographs and elemental analyzers 5,353 21.8 116,831
DNA/protein synthesizers/sequencers/
analyzers 1,439 70.2 101,060
Growth/environmental chambers 1,893 25.4 48,113
Scintillation/gamma counters 4,309 20.0 85,970
Other 25,032 36.2 905,011

Electronics/cameras/recorders 5,124 25.6 131,091
Temperature/pressure control/
measurement equipment 3,969 24.0 95,274
Lasers and optical/motion analysis
equipment 4,318 46.4 200,151
Major prototype systems ? $100,00 633 240.2 152,052
Other systems < $100,000 10,987 29.7 326,433
Source: National Science Foundation (1991b, table 1, p. 4).

aData refer to instrument systems costing $10,000 to $999,999 at time of purchase that were used for research or
instruction in academic settings in 1988 in engineering, the physical sciences, and computer science or in 1989 in the
agricultural, biological, or environmental sciences. Microcomputers are, therefore, excluded. Academic departments
and research centers in engineering, chemistry, physics/astronomy, and agricultural, biological, computer, and
environmental sciences are included. The sample data are statistically weighted to represent a universe of institutions
that collectively account for over 90 percent of academic R&D expenditures in the United States.

45.91.20.234 on Tue, 10 May 2022 14:37:23 UTC
ing research. It is not enough just to de- field of industrial organization that ex-
cide to do research, as human capital amines the entrance of new firms and
models assume. At universities, equip- their survival over time.45 A common
ment is provided by the dean only in the finding of this work is that, while entry
first years of the career and usually only may be fairly easy, survival is not and de-
for equipment at the low end of the cost pends upon reaching a critical size
scale. Thereafter, it, and the stipends within a certain time frame. An analogy
that graduate students and postdocs re- exists in science, particularly if we think
ceive, become the responsibility of the of entry as occurring in graduate school.
scientist. Scientists whose work requires The majority of entrants survive this
access to "big" machines off campus phase and a large number continue to
must also submit grants to procure time the postdoctoral phase. Getting "startup"
(e.g., beam time) at the research facility. capital from a dean (or other nonprofit
This means that for a variety of fields entity) is far harder, and a significant
funding becomes a necessary condition number of scientists never become inde-
for doing research, at least research that pendent researchers. For those who do,
is initiated and conceived of by the sci- the crucial issue then becomes whether
entist. Scientists working in these fields this capital can be used to attain (in a
take on many of the characteristics of en- specified period of time) the reputation
trepreneurs. As graduate students and required to attract resources in the form
postdocs they must work hard to estab- of grants. The process is made more dif-
lish their "credit-worthiness" through ficult because funding constraints and
the research they do in other people's priorities, which are exogenous to the
labs. If successful in this endeavor, and if scientist, change over time. Such a
a position exists, they will subsequently model, we suspect, does a far better job
be provided with a lab at a research uni- of fitting the data than the human capital
versity. They then have several years to models, which treat current effort (and
leverage this capital into funding. If they hence outcome) as a function of years re-
succeed, they face the onerous job of maining in the career, not as a function
continually seeking support for their lab; of past success and the attainment of a
if they fail, the probability is low that critical mass. This approach, we might
they will be offered "startup" capital by add, is consistent with an increased vari-
another university. ance in the research productivity of a co-
hort over time, at least in the early years
C. An Alternative Approach
when scientists fail to get permanent
to the Study of Scientists
jobs in the research sector. Obviously the
This leads one to wonder if we should approach draws heavily on the concept
not use our talents as economists to de- of cumulative advantage or more gener-
velop a different approach to the study
of scientists that stresses the importance 45 E studies linked firm size positively to the
likelihood of survival. Later studies explicitly
of resources in the process of discovery linked the startup of new firms and their survival
rather than the importance of the finite- and growth to underlying technological regimes.
ness of life. A key component of such an Audretsch (1995) summarizes this literature. The
analogy between scientists and firms is not limited
approach would be the recognition that to the concept of critical mass. It also relates to
past success is extremely important in learning. As entrepreneurs gain experience in the
determining funding and hence future market they discover whether they have "the right
stuff." They also learn whether they can adapt to
success. These models could draw inspi- market conditions and strategies employed by rival
ration from empirical work done in the firms. Scientists, too, learn as their careers unfold.

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ally the concept of path dependence ar- funding agencies. This raises the ques-
ticulated by Brian Arthur (1990). tion of whether knowledge advances
To sum up, a reasonable case can be more rapidly under the peer-review
made that economists need to rethink grants system or under the "institute" ap-
the way we study the careers of scien- proach. The issue, to the best of our
tists. A parsimonious model, with strong knowledge, has been ignored by the eco-
explanatory power, would portray scien- nomics profession. It is, therefore, hoped
tists as having the objective of directing that the ad hoc discussion that follows will
their own labs or research agendas. stimulate research on this important topic.
Given the importance of resources to re- The benefits of the institute approach
search and the role past success plays in are several: it insures that scientists can
getting these resources, this means that follow a research agenda (with an uncer-
scientists must continue to do research if tain outcome) over a substantial period
they want to keep their place in the of time, it exempts scientists from devot-
funding queue. ing long hours to seeking resources and
it minimizes administrative expenditures.
10. Funding Regimes These benefits are not trivial.
The costs of the institute approach are
The conventional wisdom holds that also substantial. Foremost is the ques-
because of problems related to appropri- tion of the research agenda. In many in-
ability, public goods are underproduced stitutes the agenda is set by the director,
if left to the private sector. Although pri- and younger scientists are constrained
ority goes a long way toward solving the from following leads they consider prom-
appropriability problem in science, this ising. The guarantee of resources also
ingenious form of compensation does not encourages shirking; consequently, alter-
insure that efficient outcomes will be native methods of monitoring must be
forthcoming. In addition to problems found. The institute approach also en-
caused by uncertainty and indivisibilities, hances stratification in science and
as well as other efficiency concerns hence the possible waste of human re-
raised in Section 5, there is the problem sources. Most appointments are made
that scientific research requires access to early in the career. If the scientist does
substantial resources. Unless priority can not succeed in getting an institute ap-
be translated into resources, it cannot pointment (and tenure in the job), the
come close to generating a socially opti- scientist will have minimal access to re-
mal amount of research. Research must sources in that country for the rest of the
still be subsidized, by either the govern- career. One effect of this is that it en-
ment or philanthropic institutions.46 courages migration.
Many European countries fund scien- The grants system also has its benefits.
tists indirectly by supporting the re- At the top of the list is peer review,
search institutes where they work. This which promotes quality and the sharing
practice is less common in the United of information. The system also encour-
States, especially for scientists working ages scientists to remain productive
in academe. Instead, U.S. scientists are throughout the life cycle, because scien-
responsible for raising their own funds tists who wish to have a lab must remain
through the submission of proposals to productive. To the extent that success in
the grants system is not completely de-
46 Callon (1994) proposes that public support of
science is needed to ensure that multiple lines of termined by past success, the system
inquiry remain open. provides some opportunity for last year's

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losers to become this year's winners. The science and economic growth. That such
system also encourages entrepreneurship a relationship exists has long been part of
among scientists and makes them some- the conventional wisdom, articulated
what disposed to explore the possibility first by Adam Smith ([1776] 1982, p.
of technology transfer (Stephan and 113). Technology, an intermediate step
Levin 1996). It also provides younger between science and growth, has been
persons the opportunity to establish in- the subject of extensive study by econo-
dependent research agendas. mists. More generally, the whole issue of
Just as some of the benefits of the the research and development strategies
grants system are costs of the institute of companies has occupied a significant
system, so, too, some of the benefits of proportion of the profession during the
the institute approach are costs of the past 50 or so years.
grants system. Grant applications divert It is one thing to argue that science
scientists from spending time doing sci- affects economic growth or to establish
ence. A funded chemist in the U.S. can that a relationship exists between R&D
easily spend 300 hours per year writing activity and profitability. It is another to
proposals. While some of this effort un- establish the extent that scientific knowl-
doubtedly generates knowledge, much of edge spills over within and between sec-
it is of a "bean counting" nature and adds tors of the economy and the lags that are
little of social value. The grants system involved in the spillover process. To
also encourages scientists to choose date, three distinct lines of inquiry have
sure(r) bet short term projects that in been followed to examine these relation-
the longer run may have lower social ships. One inquires into the relationship
value. The system also implicitly encour- between published knowledge and
ages scientists to misrepresent their growth. Another samples innovations
work or the effort required to generate with the goal of determining the scien-
certain outcomes. It is typical, for exam- tific antecedents of the innovation and
ple, for scientists to apply for work that the time lags involved. A third examines
is almost completed (yet not acknowl- how the innovative activity of firms re-
edge that it has been performed) and to lates to research activities of universities
use some of the proceeds of funding to (and other firms). The studies suggest
support "unfundable" work that is dearer that spillover effects are present and that
to their hearts.47 the lags between scientific research and
its market impact are not inconsequen-
11. Science, Productivity, and the New tial.
Growth Economics James Adams (1990) uses the pub-
The foremost reason economists have lished-knowledge line of inquiry to ex-
for studying science is the link between amine the relationship between research
and growth in 18 manufacturing indus-
47It is not accidental that the two systems are tries between the years 1953 and 1980.
found in countries which have different attitudes
toward education and social mobility. The institute The study is ambitious; for example,
approach is a logical outcome of a culture that Adams measures the stock of knowledge
places heavy emphasis on screening. The grants
available in a field at a particular date by
system, on the other hand, is a logical extension of
a culture that values (at least publicl ) the oppor- counting publications in the field over a
tunity of a second chance and places iess emphasis long period of time, usually beginning
on screening. Ultimately, of course, the results of before 1930. He creates industry "knowl-
research in both systems are judged by the inter-
national scientific community, irrespective of how edge stocks" by weighting these counts
the research was funded. by the number of scientists employed by

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field in each of the industries being stud- not have been developed (without sub-
ied. He then relates productivity growth stantial delay) in the absence of aca-
in 18 industries over a 28-year period to demic research carried out within 15
stocks of "own knowledge" and stocks of years of the first introduction of the in-
knowledge that have flowed from other novation. He finds that 11 percent of the
industries. Adams finds both knowledge new products and 9 percent of the new
stocks to be major contributors to the processes introduced in these industries
growth of productivity. He also finds that could not have been developed (without
the lags are long: in the case of own substantial delay) in the absence of re-
knowledge, on the order of 20 years; in cent academic research. Using sales data
the case of knowledge coming from for these products and processes, he esti-
other industries, on the order of 30 mates a mean time lag of about seven
years. years. He also uses these data to esti-
A different way to study the relation- mate "social" rates of return of the mag-
ship between research and innovation is nitude of 28 percent. In a follow-up
to seek the scientific and technological study, Mansfield (1995) finds that aca-
roots of certain innovations. A 1968 demic researchers with ties to the firms
study prepared for the National Science report that their academic research
Foundation by the IIT Research Insti- problems frequently or predominantly
tute does precisely this, tracing the key are developed out of their industrial con-
scientific events that led to five major in- sulting and that this consulting also in-
novations (magnetic ferrites, video tape fluences the nature of work they propose
recorders, the oral contraceptive pill, for government-funded research.
electron microscopes, and matrix isola- Knowledge spillovers can also be stud-
tion). Of particular significance is the ied by examining the relationship be-
finding that in all five cases non-mission tween some measure of innovative activ-
scientific research48 played a key role ity of firms and the research
and that the number of non-mission expenditures of universities. This line of
events peaked significantly between the inquiry ignores the lag structure, but fo-
20th and 30th year prior to an innova- cuses instead on the extent that such
tion. The study also finds that a dispro- spillovers exist and are geographically
portionate amount of the non-mission re- bounded. The rationale for expecting
search (76 percent, to be precise) was them to be bounded is that tacit knowl-
performed at universities and colleges. edge is difficult to communicate in writ-
A somewhat related approach to the ing, but instead is facilitated though face
question focuses on firms, instead of spe- to face communication. The approach is
cific products, in an effort to ascertain not restricted to examining the relation-
the role that university research plays in ship between innovation and university
product development. Mansfield (1991) research, but often includes a measure of
uses such a technique. He surveys 76 private R&D expenditure in the geo-
firms in seven manufacturing industries graphic area to determine the extent that
to ascertain the proportion of the firm's spillovers occur within the private sector.
new products and processes commer- Sometimes the measure of innovative ac-
cialized in the period 1975-85 that could tivity used is counts of patents (Adam
Jaffe 1989); sometimes it is counts of in-
48 The study defined non-mission research to be novations (Zoltan Acs, Audretsch, . and
research "motivated by the search for knowledge
and scientific understanding without special re- Maryann Feldman 1992). In either case,
gard for its application" (p. ix). measured at the geographic-industry

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level, innovative activity is found to re- (1966) and Scherer (1982), which dem-
late to the expenditure variables of uni- onstrates the responsiveness of R&D to
versity units in the geographic area doing demand factors, is consistent with this
research in scientific disciplines that re- concept of endogenous growth. So is the
late to the industry as well as to the work of Jaffe (1989) and Acs, Audretsch,
R&D expenditures of other firms in the and Feldman (1992), which suggests that
same geographic area. There is some in- firms appropriate the R&D of other
dication that these spillovers, particularly firms. Empirical work summarized above
those coming from universities, are more also implies that scientific research con-
important for small firms than for large ducted in the academic sector of the
firms (Acs, Audretsch, and Feldman economy spills over to firms.
1994).49 Does this mean that research in the
Despite the crudeness of the measures academic sector is an important compo-
and the problems inherent in the various nent of the new growth economics? The
approaches,50 these studies go a long way answer depends upon the extent that sci-
toward demonstrating that the spillovers entific research in the academic sector is
between scientific research and innova- endogenous.51 If it is not, spillovers from
tion are substantial, as are the lags. We universities to firms are important, but
cannot, however, leave the growth story not as a component of the new growth
here. Recent work suggests that knowl- economics. Five aspects of science that
edge spillovers are a major source of we have developed in this essay lead us
long-term growth and that these spill- to argue that an endogenous element of
overs are set in motion by endogenous academic research exists. First, profit-
forces. The story goes something like seeking companies support academic
this: In an effort to seek rents, firms en- research, and this support is growing.
gage in R&D. Public aspects of this Second, the problems that academic sci-
R&D then spill over to other firms, entists address often come from ideas
thereby creating increasing returns to developed through consulting relation-
scale and long-term growth (Paul Romer ships with industry. Third, markets di-
1994). The work of Jacob Schmookler rect, if not completely drive, technology,
and technology affects science (Rosen-
49 The actual mechanism by which spillovers oc- berg 1982 and Price 1986).52 For exam-
cur has not been studied. Without a trail linking ple, instrumentation, which often comes
the knowledge-producing center with the firm us- from technology, has proved to be ex-
ing the knowledge, it is difficult to know if this
tye of knowledge transfer is indeed geographi- tremely important in ushering in new
cally bounded. The Mansfield (1995) and scientific discoveries. Fourth, govern-
Audretsch and Ste phan (1996) studies represent
ment supports much of university re-
first steps in this direction. Future work should
also focus on the role mobility within the indus- search, and the level of support available
trial sector plays in facilitating spillovers. Scien- clearly relates to the overall well-being
tists sometimes become mobile, joining other of the economy. Finally, there is evi-
firms or starting their own firms in order to appro-
priate the value of their human capital. 51 It goes without saying that the science performed in
50 David, David Mowery, any Edward Stein- companies is endogenous and spills over to other com-
mueller (1992) offer a good critique. They empha- panies. A good portion of this essay has been devoted to
size the limitations inoerent in cost-benefit ap-
demonstrating that profit-seeking companies hire scien-
proaches for evaluating the contribution of basic tists, direct them to do basic research, and often allow
research and propose an alternative information- (encourage) them to share their research findings with
theoretic approach for identifying the economic others.
benefits. They also note the importance of non- 52The counter thesis of "technology push" is
findings as well as findings in guiding applied re- also important. That is, in many cases the inven-
search and development. tion of a new technology leads to new demands.

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dence that relative salaries and vacancy 12. Conclusion

rates affect the quantity and quality of
those choosing careers in a field. "Hot This essay suggests several areas of in-
fields" like biotechnology have attracted quiry in which economists have added
a disproportionate number of people in significantly to an understanding of sci-
recent years when the rewards (at least ence and the role that science plays in
for a few) have been extraordinary. The the economy. Some of these draw heav-
impact on academic research has been ily on observations made by sociologists
substantial.53 of science and demonstrate the contin-
One could even argue that university ued need to approach the study of sci-
researchers have become too responsive ence from an interdisciplinary perspec-
to economic incentives for the good of tive.
science, or for the long-term good of the First, we have begun to quantify the
economy (Stephan and Levin 1996). A relationship between science and eco-
common theme is that a host of factors nomic growth, both in terms of payoff
are leading university-based scientists in and lag structure. We have also achieved
certain fields increasingly to "privatize" a better understanding of how science
knowledge, trading what could be relates to growth, as a result of two
thought of as reputational rights for pro- threads of research coming together.
prietary rights and the financial rewards One demonstrates that firms benefit
attached to these rights. Among the fac- from knowledge spillovers. The other
tors encouraging increased secrecy is a suggests that knowledge spillovers are
change in the law that enables universi- the source of growth and that these spill-
ties, nonprofit institutions, and small overs are endogenous. Although the
firms to own patents resulting from authors of the new growth economics fo-
sponsored research, an entrepreneurship cus on the role that the R&D activities
spirit that grantsmanship fosters, and a of firms play in this spillover process
time collapse in fields such as the life (both as creator of spillovers and recipi-
sciences that dramatically shortens the ent of spillovers), a good case can be
lag between basic discovery and applica- made that research in the nonprofit sec-
tion (Gambardella 1995). While the tor spills over and has endogenous ele-
move to "privatize" can do much to fos- ments that are set in motion by profit-
ter knowledge spillovers, basic science is seeking behavior.
also affected by the process. Privatiza- Second, economists have examined
tion keeps knowledge from being avail- how a priority-based reward system pro-
able in a codified form (Dasgupta and vides incentives for scientists to behave
David 1994) and by-passes the peer-rein socially beneficial ways. In particular,
view system that helps to monitor quality it can be demonstrated that the reward
and produce consensus in science. of priority encourages the production
and sharing of knowledge and thus goes
a long way toward solving the appropri-
53This is not to argue that outcome X is en-
dogenous, but merely that the growth of knowl- ability dilemma inherent in the creation
edge has an endogenous component. At any point of the public good knowledge. While this
in time constraints clearly exist to discovery, either
line of inquiry was established by the so-
through the technology that is available to address
the problem or because of lack of fundamental ciologist Merton, Dasgupta and David,
knowledge in an area necessary to the inquiry. as well as several other economists, have
Many of these constraints must be viewed as being
done much to extend Merton's observa-
exogenously determined, at least over a specific
period of time (Rosenberg 1974). tion that priority is a special form of

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property rights. Surely this is interdisci- provide a ready explanation of why the
plinary fertilization at its very best! productivity of a cohort of scientists
Third, science is not only about fame; becomes increasingly unequal over
it is also about fortune. Another contri- time. The failure of the model is un-
bution of economists is the demonstra- doubtedly related to the fact that the
tion that many of the financial rewards in production of scientific knowledge is far
science are a consequence of priority: sal- more complex than the human capital
ary, for example, is positively related to model assumes, and that these complexi-
both article and citation counts. Because ties have a great deal to say about pat-
the financial rewards often come in the terns that evolve over the life cycle. This
form of consulting and royalty income, leads us to conclude that economists
we will never know the full extent of the need to rethink the way we study the ca-
relationship until we have reliable data reers of scientists. A parsimonious
on nonsalary dimensions of the income model, with strong explanatory power,
of scientists. There is also the suggestion would portray scientists as having the ob-
that reputation matters to industry. We jective of directing their own lab or re-
know, for example, that some firms en- search agenda.
courage scientists to publish. We also There are other ways economists could
know that startup companies use highly contribute to a better understanding of
cited scientists as a signal of quality to the workings of science. Eight are men-
financial markets. tioned here. First, economists have a
Fourth, economists have a reasonably comparative advantage in understanding
good understanding of the way scientific and analyzing the role,that risk and un-
labor markets function, although the certainty play in science. We can, for ex-
estimates of elasticity are not as robust ample, explain why risk aversion on the
as one would like. Neither can we fore- part of funding agencies dissuades scien-
cast market conditions with much accu- tists who are by disposition willing to
racy. We should not accept responsibil- take risk from engaging in this kind of
ity for this failure, however, because research. We have the tool kit required
much of the problem rests on the impos- to understand choices as outcomes of
sibility of predicting the whims of Con- games and the possibility of using experi-
gress. mental economics to better understand
Economists have also contributed to how outcomes depend on rewards and
an appreciation of how the finiteness of funding.
life affects behavior of an investment na- Second, economists can continue to
ture. Human capital models have led to contribute to a discussion of efficiency
the prediction that earnings, research questions: Are there too many entrants
productivity and receptivity to new ideas in certain scientific contests or, more
of scientists will decline in late career. generally, too many scientists? A related
Much effort has been allocated to testing question concerns whether science is or-
these models. The empirical results, es- ganized in the most efficient way, par-
pecially with regard to publishing activity ticularly in the nonprofit sector. Is the
and the acceptance of new ideas, lead demand for graduate students as re-
this observer of science to conclude that search assistants and subsequently as
the human capital approach does not postdocs so strong that it masks market
provide the cornerstone on which we signals concerning the long-run availabil-
should model the behavior of scientists. ity of research positions and encourages
Neither does the human capital model inefficient investments in human capi-

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tal?54 Could other kinds of personnel new approaches for planning research
(e.g., individuals with terminal masters support, evaluating program perfor-
degrees) substitute for graduate students mance, and using the results of evalu-
and postdocs in the lab?55 ation in subsequent decisions. Research
Third, economists can contribute to an concerning the effectiveness of different
understanding of science by extending to approaches is clearly needed.
the study of science approaches that Sixth, as a discipline we need to pay
have proved fruitful in the study of considerably more attention to under-
firms. We have already suggested, for ex- standing the way scientific effort is or-
ample, that work in industrial organiza- ganized, monitored, and rewarded in in-
tion that examines the entrance and sur- dustry. We also need to study how
vival of new firms could provide a knowledge spillovers are transmitted to
framework for studying the careers of industry.
scientists. Another possibility is to view Seventh, the question of how in-
the production of scientists through the creased opportunities for entrepre-
lens of an evolutionary model (Nelson neurial behavior affect the practice of
and Winter 1982). Diversity and selec- science bears further exploration. When
tion-the heart of evolutionary econom- millions of dollars are at stake, for exam-
ics-are clearly present in the way in ple, are journal editors less inclined to
which scientists are trained, promoted declare a winner and more inclined to
and rewarded. declare a tie, as anecdotal evidence
Fourth, economists can contribute to a would suggest?
better understanding of how the reward Eighth, we need to understand more
structure of science leads some scientists fully how science relates to patterns of
to behave in socially irresponsible ways. international trade. Although knowledge
Issues here concern the fragmentation of is a public good, it has exclusive aspects
knowledge that a focus on article counts once it is embedded in traded goods.
encourages and the temptation to engage Work by Ralph Gomory and William
in fraudulent behavior. Baumol (1995) and George Johnson and
Fifth, given the role that resources Stafford (1993) suggests that the lessons
play in scientific discovery, it is impor- of David Ricardo concerning the gains to
tant to understand more fully how scien- trade may fail to be realized in a world
tific outcomes relate to the way govern- where developing countries appropriate
ments and philanthropic organizations the technological advances made by oth-
provide resources. Several governments ers.
abroad are currently experimenting with In short, economists have accom-
plished a reasonable amount in our study
54 In its most extreme form this question asks if
of science; but other issues await investi-
the current system of graduate education is funda-
mentally a pyramid scheme in which graduates re- gation. It is hoped that this essay will en-
cruit new talent in order to keep the system going.
courage that process.
55 The need to restructure graduate education
and postdoctoral training in math and the physical
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Stephan - 1996 - The Economics of Science

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The Economics of Science

Author(s): Paula E. Stephan

Stable URL: https://www.jstor.org/stable/2729500

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The Economics of Science

1. Introduction 13 billion dollars, applied research bud-

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tion in science depends on being first.6 Two characteristics of science account

(Stephan and Levin 1992). Another con-

treme measures Newton took to estab-

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premise. The production of knowledge or remarkable, the pattern of indepen-

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All 142,333 100,275 12,660 12,265 10,242 4,392 2,499 35

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1973 130,355 30,887 77,289 12,522 9,657

Source: National Science

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(1) (2) (3) (4) (5) (6) (7) (8)

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32 Sociologists generally use age as a proxy for

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Sector Physics Earth Science Biochemistry Physiology

Source: Stephen and Levin (1987, table 3C, VI-28).

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tors on articles written by respondents to schools. It estimates that the aggregate

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Number of Mean Aggregate

Total 81,753 $ 39.8 $3,253,840

Computers and data handling equipment 18,363 44.3 813,821

Spectroscopy and light measurement equipment 12,762 55.5 707,753

Microscopes and accessories 5,490 46.4 254,875

Bioanalytical instruments 20,107 28.5 572,380

Other 25,032 36.2 905,011

Source: National Science Foundation (1991b, table 1, p. 4).

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dence that relative salaries and vacancy 12. Conclusion

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Mathematicians and Scientists," J. Gerontology, grounds of Science Doctorates," Science, Mar.

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