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How Economics Shapes Science
At a time when science is seen as an engine of economic growth, Paula Stephan brings a keen understanding of the cost-benefit calculations made by individuals and institutions as they compete for resources and reputation in scientific fields. She highlights especially the growing gap between the biomedical sciences and physics/engineering.
384 pages, Kindle Edition
First published January 15, 2011
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April 15, 2018
Full review and highlights at https://books.max-nova.com/how-economics-shapes-science
My relentless cynicism drives me to always "follow the money." So for my 2017 theme on "The Integrity of Western Science", my dark, jaded little heart leapt with joy when I discovered "How Economics Shapes Science". Stephan hands us a heavy, dry bucket of facts - but the story that emerges is central to understanding the current dysfunctions of American science. By tracing the evolution of funding streams for science, Stephan reveals how the resulting incentives have made American science risk averse and turned our universities into lobbying superpowers and employment pyramid schemes.
Universities and medical schools receive over $55 billion a year for research (that's over $500 per full time employee in the US). Some powerhouse universities, like Stanford, get over 20% of their revenue from research funding (over $750 million a year). Because almost all of this money comes from the government, many universities now have full-time lobbyists in DC to advocate for more research funding. The cynic in me notes that the university administration takes an enormous chunk as "overhead" (Yale, for example, takes up 70%!!!) and this is a contributor to the explosion of administrative headcount in the modern university. But simultaneously, the universities have reduced their funding of research, shifting risk off of the university and on to the individual investigator. This means that researchers are more dependent than ever on government grants to sustain their research (and even to pay their salaries). Indeed, some medical school professors now get tenure "packages" that include no salary payments at all from the university! Because granting agencies like to give relatively short-term grants and to see visible progress, researchers often choose to pursue incremental, less-risky research to ensure that they don't end up without funding. Furthermore, the grant process rewards past performance in a way that makes it difficult for new researchers to establish a foothold of their own. Although Stephan paints a grim picture, she also points out rays of hope like the Howard Hughes Medical Investigators program that are addressing some of these challenges at a small scale.
As the husband of a current Ph.D. student, I was particularly interested in what Stephan had to say about the employment dynamics for post-grads and new professors. Unfortunately, she doesn't have great news:
My relentless cynicism drives me to always "follow the money." So for my 2017 theme on "The Integrity of Western Science", my dark, jaded little heart leapt with joy when I discovered "How Economics Shapes Science". Stephan hands us a heavy, dry bucket of facts - but the story that emerges is central to understanding the current dysfunctions of American science. By tracing the evolution of funding streams for science, Stephan reveals how the resulting incentives have made American science risk averse and turned our universities into lobbying superpowers and employment pyramid schemes.
Universities and medical schools receive over $55 billion a year for research (that's over $500 per full time employee in the US). Some powerhouse universities, like Stanford, get over 20% of their revenue from research funding (over $750 million a year). Because almost all of this money comes from the government, many universities now have full-time lobbyists in DC to advocate for more research funding. The cynic in me notes that the university administration takes an enormous chunk as "overhead" (Yale, for example, takes up 70%!!!) and this is a contributor to the explosion of administrative headcount in the modern university. But simultaneously, the universities have reduced their funding of research, shifting risk off of the university and on to the individual investigator. This means that researchers are more dependent than ever on government grants to sustain their research (and even to pay their salaries). Indeed, some medical school professors now get tenure "packages" that include no salary payments at all from the university! Because granting agencies like to give relatively short-term grants and to see visible progress, researchers often choose to pursue incremental, less-risky research to ensure that they don't end up without funding. Furthermore, the grant process rewards past performance in a way that makes it difficult for new researchers to establish a foothold of their own. Although Stephan paints a grim picture, she also points out rays of hope like the Howard Hughes Medical Investigators program that are addressing some of these challenges at a small scale.
As the husband of a current Ph.D. student, I was particularly interested in what Stephan had to say about the employment dynamics for post-grads and new professors. Unfortunately, she doesn't have great news:
In certain ways, the research enterprise itself at U.S. universities resembles a pyramid scheme. In order to staff their labs, faculty recruit PhD students into their graduate programs with funding and the implicit assurance of interesting research careers... the number of tenure-track positions has failed to keep pace with the large number of newly minted PhDs. It is not uncommon for recent graduates to feel that the system has not delivered what it promised.This extreme competition for tenure-track positions is another factor that contributes to the risk-aversion of modern academic scientists. It also drives the salaries of post-docs down and results in a surprising dynamic. White men are abandoning academic career paths for more secure and profitable employment in industry. Their spots are being filled by women and by foreign grad students (especially from China) for whom these "low" salaries are quite reasonable compared to what is available in their home countries. Surveying the research dynamics in Europe and Asia, Stephan does touch briefly on the world of research in China, noting that:
"To obtain major grants in China, it is an open secret that doing good research is not as important as schmoozing with powerful bureaucrats and their favorite experts."Of course, this corruption isn't limited to China. Old Moldbug has plenty to say about the government-academia "Cathedral" complex and Stephan has a brief section on fraud and undisclosed funding sources for biomedical research (usually by pharma). But Stephan shrugs off outright fraud as a pretty minimal part of the modern research system. Instead, the major axe she grinds in this book is risk aversion and how it slows down scientific progress:
The current university research system in the US also discourages research that could disprove theories. To quote an official with a disease foundation, who asked not to be identified, "The way science careers are structured, big labs get established based on a theory or a target or a mechanism, and the last thing they want to do is disprove it and give up what they're working on. That's why we have so many targets in studying this disease. We'd like people to work on moving them from a 'maybe' to a 'no,' but it's bad for careers to rule things out: that kind of study tends not to get published, so doing that doesn't advance people's careers.Stephan's book gave me a clear framework for thinking about how money influences modern research. But it's dry as a bone and likely only of interest to specialists. If you are looking to learn more about some of the problems with modern science, "Rigor Mortis" covers similar topics for a popular audience.
April 30, 2012
"Scientists are motivated to do science by an interest in puzzles and by the recognition awarded success -- the ribbon. But it is not all about puzzles and riboon; gold is also involved." (34)
"The United States' reliance on staffing labs with postdocs and graduate students has contributed to itse eminence as a training center for foreign-born students." (70)
"Industry has the financial resources to stay on the cutting edge; the public sector increasingly does not. As one scientisit wrote, 'I have worked in some of the best-funded [academic] laboratories in the world, and even these laboratories do not have access to fancy next-generation machines in a way that large biopharmaceutical companies do. I strongly believe that this is changing the nature of the public/private divide and the extent to which academic science manages to stay at the technological frontier." (108)
"Most of the assertions [of shortages of scientists] come from four groups: universities and professional associations, government agencies, firms that hire scientists and engineers, and immigration lawyers. All have a considerable amount to gain by an increase in supply." (165)
"Universities and public research institutes are not organized or governed to excel in bringing new products and processes to market. Firms are." (209)
"The United States' reliance on staffing labs with postdocs and graduate students has contributed to itse eminence as a training center for foreign-born students." (70)
"Industry has the financial resources to stay on the cutting edge; the public sector increasingly does not. As one scientisit wrote, 'I have worked in some of the best-funded [academic] laboratories in the world, and even these laboratories do not have access to fancy next-generation machines in a way that large biopharmaceutical companies do. I strongly believe that this is changing the nature of the public/private divide and the extent to which academic science manages to stay at the technological frontier." (108)
"Most of the assertions [of shortages of scientists] come from four groups: universities and professional associations, government agencies, firms that hire scientists and engineers, and immigration lawyers. All have a considerable amount to gain by an increase in supply." (165)
"Universities and public research institutes are not organized or governed to excel in bringing new products and processes to market. Firms are." (209)
Read
June 21, 2013This is a good overview of how the economic circumstances of science---funding models, research costs, career advancement, etc.---affect its outcomes. Stephan is much less polemical than Mirowski Science-Mart: Privatizing American Science or Greenberg Science, Money, and Politics: Political Triumph and Ethical Erosion and thus is also more dry. There are a ton of useful facts here, but it is hard to describe the book as entertaining.
One potential issue with Stephan's very empirical approach to the subject is the privileging of economic measures such as GDP over harder to quantify impacts of science (human well-being, or the joy of discovery).
Some of Stephan's policy recommendations, such as awarding Nobel prizes to groups and decoupling research from training are quite worthy of further consideration.
One potential issue with Stephan's very empirical approach to the subject is the privileging of economic measures such as GDP over harder to quantify impacts of science (human well-being, or the joy of discovery).
Some of Stephan's policy recommendations, such as awarding Nobel prizes to groups and decoupling research from training are quite worthy of further consideration.
April 2, 2025
Science ….
January 2, 2019
an important topic. (the title should be "how money shapes science", not how the academic field of economics shapes things)
Most scientists or people who want to become scientists should read this. It contains appropriate warnings and facts---for example that being born at the right time is important to being a productive scientist, and getting a first job at the right institution with great colleagues creates productivity momentum that lasts for the entire career.
Even non-scientists who don't want to become scientists but read and admire the work of scientists, benefit from knowing these facts: that ted talker from Stanford or MIT has a wealth of *benefits* that help them out-perform people who work at Florida State. (She doesn't cover mathematics as much; you can watch Simons Foundation _Science Lives_ series for that.)
However, the points are poorly argued and supported. Typical economist stuff.
Most scientists or people who want to become scientists should read this. It contains appropriate warnings and facts---for example that being born at the right time is important to being a productive scientist, and getting a first job at the right institution with great colleagues creates productivity momentum that lasts for the entire career.
Even non-scientists who don't want to become scientists but read and admire the work of scientists, benefit from knowing these facts: that ted talker from Stanford or MIT has a wealth of *benefits* that help them out-perform people who work at Florida State. (She doesn't cover mathematics as much; you can watch Simons Foundation _Science Lives_ series for that.)
However, the points are poorly argued and supported. Typical economist stuff.
October 20, 2016
Pros: really thorough research into the state of science re: economy. Plenty of background, compares many studies and frames the questions differently so you know how the askers were approaching it. Really great break-down of biases and who stands to benefit from current system or a re-framed system. For all that she says she specialises mostly in American science, there's still a decent coverage of international models.
Cons: Information is already kind of dated, though I know updated stats are definitely out there. The first two or three chapters didn't have much direction, though upon reading they were sort of necessary to get the terms and general concepts across. Though it's nice the book is concise, a lot of the topics are quite heady and hard to digest in mass consumption.
Read if you're a scientist, but probably just find the updated info online. I think Stephan herself still writes a lot of this kind of information, and I'd definitely trust her as a source.
Cons: Information is already kind of dated, though I know updated stats are definitely out there. The first two or three chapters didn't have much direction, though upon reading they were sort of necessary to get the terms and general concepts across. Though it's nice the book is concise, a lot of the topics are quite heady and hard to digest in mass consumption.
Read if you're a scientist, but probably just find the updated info online. I think Stephan herself still writes a lot of this kind of information, and I'd definitely trust her as a source.
February 10, 2025
It is not written in an engaging manner. But I learned some things from this book: biomedical research gets by far the most public funds which leads to an overproduction of phds; lab mice are expensive; even tenured faculty in the US rely on grants; apparently scientists are motivated by three things: money, status and solving problems; since 1950 between 60 and 70% of r&d expenditures have been funded by the public (see figure 6.1); Life science really is the key field when interpreting aggregate trends about science.
The bottom line is more or less: there are ever more phds, researchers grants, prices but why are there signs that marginal return on doing science is decreasing.
The bottom line is more or less: there are ever more phds, researchers grants, prices but why are there signs that marginal return on doing science is decreasing.
July 10, 2019
Great read with an abundance of economic information (primarily regarding science in the U.S., although Europe and China sometimes are discussed as well). What I missed at times is a more philosophical debate of where to go with the lessons learned from mentioned economic insights. Nevertheless, you get a fairly good picture of the more 'practical' sides of scientific research, both from a policy-making and budgeting perspective as well as for what this means for the individual researcher in their respective field.
September 3, 2020
Highly recommended to the scientific researchers. Particularly those in academia and in the early stages of their career.
July 15, 2013
How Economics Shapes Science (2012) by Paula Stephan is a comprehensive study of how economics influences US Science. The book is specific in that it does not look at the European, English or Australian systems although the European and Asian Universities get some mention.
The book catalogues in considerable detail how money is spent on US science and how there has been substantial growth in the funding of life sciences in recent decades.
Stephan describes how economics can be used to look at how science works and how scientists respond to incentives. The drive to solve puzzles, to improve life and to understand things is given due as is the financial incentives that clearly also deeply affect what science is done.
The typical US setup of Principal Investigators, postdoc students and PhD students is examined and what these people do, where they come from and where they go and how they have changed over the past 50 years is described. The equipment and even the space that science is performed in are also looked at. Stephan looks at how strongly the US pulls scientists from around the world to work in US labs.
The penultimate chapter looks at how science is one of the engines of economic growth. Stephan also acknowledges how practical knowledge drove much technological improvement prior to C20 and even today how substantial practical knowledge is used to generate growth. Stephan also points out that the exact effect is unknown. Unfortunately the book doesn’t look at why the US is so much better at making money out of certain types of science. The dominance of the US in computing technology is not mentioned.
In the final Chapter whether the US can do better with science funding is looked at. Stephan describes current US universities as setting up something akin to high end shopping malls for science, facilities are built with the expectation that professors can then create labs that draw other academics and students. Stephan ponders the efficiency of the system and asks whether 0.3% or 0.4% of GDP is the right amount of funding, if the current allocation of 2/3s of the budget to life sciences makes sense and whether fewer larger grants or more small grants makes sense. Wisely Stephan concludes that the answers to these questions are not known and that they should be studied more. However, the book does make a small suggestion, namely that physical sciences and materials science may warrant more effort. It’s also pointed out that the substantial increase in the NIH budget did not produce as much of an increase as expected.
It’s arguable that by looking at the book that science is actually sufficiently funded and that people’s natural drive, enjoyment of the practice of science and the billions of dollars of current funding are highly effective.
The book is a data heavy read that gives a really solid view of how US science is currently run. Trends in the data are brought out clearly in the text and with graphs. The book doesn’t provide a strong recommendation for how things should be altered but instead looks at questions that can be asked about the current system.
The book catalogues in considerable detail how money is spent on US science and how there has been substantial growth in the funding of life sciences in recent decades.
Stephan describes how economics can be used to look at how science works and how scientists respond to incentives. The drive to solve puzzles, to improve life and to understand things is given due as is the financial incentives that clearly also deeply affect what science is done.
The typical US setup of Principal Investigators, postdoc students and PhD students is examined and what these people do, where they come from and where they go and how they have changed over the past 50 years is described. The equipment and even the space that science is performed in are also looked at. Stephan looks at how strongly the US pulls scientists from around the world to work in US labs.
The penultimate chapter looks at how science is one of the engines of economic growth. Stephan also acknowledges how practical knowledge drove much technological improvement prior to C20 and even today how substantial practical knowledge is used to generate growth. Stephan also points out that the exact effect is unknown. Unfortunately the book doesn’t look at why the US is so much better at making money out of certain types of science. The dominance of the US in computing technology is not mentioned.
In the final Chapter whether the US can do better with science funding is looked at. Stephan describes current US universities as setting up something akin to high end shopping malls for science, facilities are built with the expectation that professors can then create labs that draw other academics and students. Stephan ponders the efficiency of the system and asks whether 0.3% or 0.4% of GDP is the right amount of funding, if the current allocation of 2/3s of the budget to life sciences makes sense and whether fewer larger grants or more small grants makes sense. Wisely Stephan concludes that the answers to these questions are not known and that they should be studied more. However, the book does make a small suggestion, namely that physical sciences and materials science may warrant more effort. It’s also pointed out that the substantial increase in the NIH budget did not produce as much of an increase as expected.
It’s arguable that by looking at the book that science is actually sufficiently funded and that people’s natural drive, enjoyment of the practice of science and the billions of dollars of current funding are highly effective.
The book is a data heavy read that gives a really solid view of how US science is currently run. Trends in the data are brought out clearly in the text and with graphs. The book doesn’t provide a strong recommendation for how things should be altered but instead looks at questions that can be asked about the current system.
February 27, 2016
I was actually given a copy of this book by the author. Dr. Stephan, a wonderful researcher, guided me to this (possibly for reasons more than my own development) as a more holistic survey of modern policy issues in economics of science.
It introduces the topic by giving a brief overview of the recognized incentives considered by scientists and how these have been used by policy and scientific epistemology to strengthen (1) the usefulness of scientific research, (2) the human development of the western world's, particularly the U.S.'s, research community, (3) and to develop effective mechanisms to minimize risk in scientific research.
Further, it goes on to debate issues of scientific research policy in how useful these methods have been in their goal. In some cases it seems apparent that these policies have gone too far and have not welcomed the explosion of useful interdisciplinary work. Dr. Stephan points to geographic concerns, misaligned financial incentives, and red tape that was extraneous to scientific, governmental, or industrial demands for research in the modern social state of the world.
Dr. Stephan describes the issues simply but thoroughly enough that one with a simple background in economics or science could easily understand the problems at hand from the perspective of the research funding institutions and the funded research institutions.
This book will certainly remain on my shelf for future reference.
It introduces the topic by giving a brief overview of the recognized incentives considered by scientists and how these have been used by policy and scientific epistemology to strengthen (1) the usefulness of scientific research, (2) the human development of the western world's, particularly the U.S.'s, research community, (3) and to develop effective mechanisms to minimize risk in scientific research.
Further, it goes on to debate issues of scientific research policy in how useful these methods have been in their goal. In some cases it seems apparent that these policies have gone too far and have not welcomed the explosion of useful interdisciplinary work. Dr. Stephan points to geographic concerns, misaligned financial incentives, and red tape that was extraneous to scientific, governmental, or industrial demands for research in the modern social state of the world.
Dr. Stephan describes the issues simply but thoroughly enough that one with a simple background in economics or science could easily understand the problems at hand from the perspective of the research funding institutions and the funded research institutions.
This book will certainly remain on my shelf for future reference.
January 29, 2013
Stephan offers a compelling treatment of incentive structures for academic research with thought-provoking questions about opportunities to address inefficiencies. However, her analysis is simplistic in that it fails to account sufficiently for macro trends, broader policy implications, corporate R&D, and especially the role of venture capital in funding innovation. Her selection of industries under discussion is also rather narrow (and seemingly random).
April 21, 2015
An interesting topic, if rather dull in presentation. Anyone familiar with the workings of academic research, even those who don't work within STEM/Health themselves, will not find too many surprises in here. Although, it is interesting to be able to put some numbers and budgetary figures to well-known trends. If you're not familiar with the workings of academic research, there's more to learn from the book, but I'm not sure who of that group would actually be interested in reading it!
September 20, 2015
This book discusses the topic of research on research. Almost every aspect regarding the endeavor of research has been described, which includes motivation, equipment and material, funding, and employment. The book is certainly helping to understand the whole picture. On the other hand, you shouldn’t expect to find in-depth analysis (on almost any topic).
Want to read
February 17, 2013This book was cited in the 25 Jan 2013 issue of SCIENCE (v 339) in the "News Focus" piece, "Shaking Up Science", by Jennifer Couzin-Frankel. {See notes in NOTEBOOKS, SIMPLENOTE or EVERNOTE.}
January 1, 2016
Good overview.
July 4, 2013
ort of a lengthy scientific study, but it covers a lot and gets at the heart of the money that motivates and controls science and what gets studied.
December 26, 2013
Overall, a very interesting book that offers a great perspective on the economic forces that shape, and are shaped by, scientific research and inquiry. A worthwhile read.
Displaying 1 - 18 of 18 reviews