Economics of science

Science as a Public Good[edit]

Economists consider “science” as the search and production of knowledge using known starting conditions.^[2] Knowledge can be considered a public good, due to the fact that its utility to society is not diminished with additional consumption (non-rivalry), and once the knowledge is shared with the public it becomes very hard to restrict access to it or use of it (non-excludable). Traditional public economic theory asserts that competitive markets provide poor incentives for production of a public good because the producers cannot reap the benefits of use of their product, and thus costs will be higher than benefits. Economists have identified several possible reasons as to why producers of science might determine that the private costs they incur in the production process are larger than the benefits that they intend to reap, even though the benefits to society are greater than these costs.^[3] Firstly, the technological barriers to production are extremely high, which makes the market very risky. Technological barriers refer to the cost of research and development of new scientific knowledge, which becomes increasingly expensive as technology continues to play a more prominent role in this type of development.^[4] Secondly, due to the non-excludable nature of scientific knowledge, producers worry that they will be unable to enforce property rights on their produced goods. This will result in others being able to benefit from the scientific knowledge without having to bear the cost of the research and development, which would in turn make the potential return on investment too small to incentivize participation in the market.^[2] Therefore, science can be understood as the production of a public good, and can be studied within the framework of public economics.^[2]


However, certain economists argue that a non-market mechanism has developed to correct the problem of indefinable property rights, such that scientists are incentivized to produce knowledge in a socially responsible way. Economist Paula Stephen refers to this mechanism as a reward system based primarily on a concept that she calls “priority of discovery.”^[5] Robert Merton argues that the goal of scientists is to establish “priority of discovery” by being the first to report a new discovery, which then results in the reward of recognition. The scientific community only bestows this reward on the person who discovers the new piece of knowledge first, and thus this sets up a winner-takes-all type of system that incentivizes producers to participate in the market of scientific knowledge.^[6] Stephen particularly notes that “Compensation in science is generally composed of two parts: one portion is paid regardless of the individual's success in races, the other is priority-based and reflects the value of the winner's contribution to science.”^[5] The first part that Stephens identifies corresponds to the salary that a professor in academia would expect to make over the course of his or her career; these salaries are notoriously flat, with one study noting that a full professor can expect to make only 70% more than a newly hired assistant professor.^[7] However, Stephen argues that the second part of compensation, that which is reaped when a scientist establishes priority of discovery, then the earnings profile becomes much less flat as the scientist gains prestige, journalistic citations, paid speaking invitations, and other such rewards. However, she notes that this theory had yet to be empirically tested at the time of writing.^[5] Furthermore, her analysis only applies to the world of academia, whereas industry is also a major source of scientific knowledge production.