This is a book about how economics shapes science as practiced at public research organizations. In the United States these are primarily universities and medical schools. But in Europe and Asia a considerable amount of public research is conducted at research institutes. The book’s focus reflects the strong role that public research organizations play in creating knowledge. In the United States, for example, approximately 75 percent of all articles published in scientific journals are written by scientists and engineers working at universities and medical schools.¹ Of equal importance, almost 60 percent of basic research is conducted at universities and medical...

Ask almost any scientist what led him or her to become a scientist and the answer will be an interest in solving puzzles. The interest in puzzles persists throughout their career. It is not only the “hook” that attracts people to science, but it is also a key intrinsic reward for doing science. “The prize,” to quote the Nobel-Prize winning physicist Richard Feynman, “is the pleasure of finding the thing out, the kick in the discovery.”¹

Scientists are not only motivated to do science by an interest in solving puzzles; they also are motivated by the recognition awarded to being...

Puzzle solving and the recognition awarded to priority are not the only rewards to doing science. Money is also a reward, and scientists are, indeed, interested in money. They want, to quote Stephen Jay Gould, “status, wealth and power, like everyone else.”¹ An eminent Harvard scientist said it well when asked by newly appointed Dean Henry Rosovsky the source of scientific inspiration. The reply (which “came without the slightest hesitation”) was “money and flattery.”²

What is remarkable about the two quotes is that they are now more than twenty-five years old and came during a time when opportunities for university...

The lab of kathy giacomini, professor and co-chair of the Department of Bioengineering and Therapeutic Sciences at the University of California–San Francisco (USCF), studies how genes affect the response to medication. The particular focus of the group is how genetic variation in transporter genes across ethnically diverse groups is associated with variation in therapeutic and adverse drug response. The lab also studies novel anticancer platinum agents. In addition to herself, the Giacomini group includes a medical doctor (who directs the clinical studies), a laboratory manager, four postdoctoral fellows (postdocs), five graduate students, and a visiting scientist from Japan.¹ The...

Biophysicist lila gierasch was “wooed by an NMR machine” to the University of Texas Southwestern Medical Center after she repeatedly had difficulty obtaining funds to purchase a high-field nuclear magnetic resonance (NMR) machine in an environment where her lab would be the only major user.¹ It’s no wonder: high-field NMRs are not cheap. Depending on strength, they currently run anywhere from $2 million to $16 million. The McLaughlin Research Institute in Great Falls, Montana, successfully recruited a researcher when they offered him a mouse package with a mouse per diem that was more than 50 percent less than what he...

Stanford university receives approximately $759 million a year in support of research, the University of Virginia about $306 million, and Northwestern University about $428 million. In the case of Stanford, this represents 23 percent of university revenues; it represents 25 percent for Virginia and 27 percent for Northwestern.¹ Where does the money come from? What criteria are used for allocating it? More generally, why support research at universities?

Recall that scientific research has properties of what economists call a public good. Once made public, others cannot easily be excluded from using it. Neither is knowledge depleted once it is shared....

When the price of gas began to increase in the mid-2000s, the demand for hybrid cars increased. The result was waiting lists of two to three months, and customers who paid more than the sticker price for the car. The same thing occurred in 2008 when gas prices went above $4 a gallon: a shortage of hybrids existed. In both instances, it was relatively short lived. Within a matter of months, the number of hybrids produced increased, the shortage ameliorated, and the premium that people were willing to pay fell.¹ The market responded quickly. Within a relatively short period of...

Fully a third of the faculty in electrical engineering at the Georgia Institute of Technology received their undergraduate degree outside the United States. A third of Stanford’s physics department received their doctorate training abroad. Forty-four percent of the PhDs awarded by U.S. institutions in science and engineering (S&E) are to foreign students on temporary visas. The percentage awarded to foreign students is approximately 48 percent when students with green cards are included. The presence of the foreign born is even higher among postdocs, almost 60 percent of whom are temporary residents.¹ In terms of country of origin, 7.5 percent of...

It is estimated that per capita income, as measured by gross domestic product (GDP), grew by approximately 8 percent during the fifteenth century, 2 percent during the sixteenth century, about 15 percent during the seventeenth century, and 20 percent during the eighteenth century.¹ Not until the Industrial Revolution, which commenced toward the end of the eighteenth century, did a period of significant economic growth occur. In a short span of time, the steam engine was introduced, textile mills were mechanized and traveling by rail became a possibility. Despite its accomplishments, the industrial revolution did little to substantially alter daily life...

I have made the case in the preceding chapters that economics plays a role in shaping science as practiced at universities and research institutes. Incentives and cost matter in science. But economics is also about the allocation of scarce resources across competing wants and needs, or to use the jargon of the profession, economics is also about whether resources are allocated efficiently. In this final chapter, I revisit the issue of efficiency. I begin by describing the research landscape that has emerged in the public sector in recent years. I then discuss issues of efficiency and, where the evidence is...