Friday, August 10, 2012

Subsidies for economists?

My colleagues Gary Becker and Jim Heckman have an interesting OpEd in the Wall Street Journal, arguing for Federal funding for economists. I respectfully disagree.

Yes, economic research is a public good. And, yes, they point to some good examples of good research that was supported by the Federal Government. That does not prove the research would not have been produced without Federal support.

We would demand a much higher standard of proof from, say, the Sugar Farmers of America, asking for continuation of their tariffs, on the grounds that saving the American Family-run sugar farm is a crucial public good that will vanish without support. Or any of the other supplicants from the federal government, all of whom make public interest arguments on behalf of their subsidies and tax brakes. 

We need a grand bargain. I give up mine, you give up yours. If economists pushing for the grand bargain are the first to say, "you give up yours, but we're an important public good," we're hardly credible.  At a minimum, we need a uniform standard of proof of just who is a public good that really would not be produced without Federal support.

The largest subsidy for economic research -- other than the tax exempt status of our employers -- is the National Science Foundation. They give grants to economists. But they don't pay for the one thing that would generate more research -- they won't buy out teaching. Instead, we operate under the fiction that the university pays us for 9 months, and the NSF can then pay "summer salary." (The NIH, which supports some of the research cited by the OpEd, will buy out teaching as they do for real scientists.) One might defend this as a prize for good past research, which is how it works out in practice. Might.

Is this producing important research that would not be done otherwise?  I've received a few NSF grants in the past. I can tell you the answer. I enjoyed the money. The institutions that took 60% "overhead" enjoyed the money. But I would have written exactly the same papers exactly as fast without it. (I don't apply for NSF grants any more. Given my views on others taking federal money, even though the institutions I work for would appreciate the overhead, it seems inconsistent to do so.)

Is there really not enough economic research being done? Research is not a good of which there is simply "more" or "less," like, say domestically-produced corn-based ethanol. It's "good" and "bad." There is a tremendous amount of it. And mostly "bad."

An economist, looking at the way economic research is funded, would say this is a system designed to produce lots and lots of not very innovative papers. 

Ask a few scientists, after a few beers, about how much faster human knowledge increased in the "war on cancer," the massive funding for HIV research, or now global warming. More federally directed research, is not necessarily better.

An economist looking at this system would also predict swift capture, and that the result of Federal support of research would be that lots of research comes to conclusions supportive of the Federal Government and its agencies. How many papers supported by the Federal Reserve are critical of the Fed? How many of the huge volume of health - policy studies even consider market-based approaches that don't have a huge role for federally sponsored health policy research? Is it just a coincidence that the kind of research that ends up being most critical of the Federal government is supported by private foundations, think tanks, and universities that don't take of federal money?

There are other mechanisms. Adam Smith did not have a Federal grant. Most of us support research by teaching, an activity that produces at least some externalties towards research. Private foundations support economic research, and would do so a great deal more if the Federal government did not. Yes, many private foundations have political goals. But they recognize that research is more credible if it's a-political, and as long as there is competition, all voices can get supported.  Having to convince a wider audience of the importance of our work might produce a lot better writing.  I want to see fewer papers and more second drafts!

And what's good for the goose is good for the gander. Many economists look down disdainfully at what our social science and humanities colleagues call research. They view it as jargon-ridden, highly politicized, intellectually shoddy waste of good trees  (or, now, bits). Well, nothing in Jim and Gary's column would not apply fairly to everything done in the academy.  Their panels of experts can write reports, hand out money, and plead public goods as well as we do.

I do agree heartily on support for data. For the moment, the Federal Government does have a unique role in creating and supplying economic data. We can't study what we can't measure. This really is a public good, reasonably well created managed, and starved for resources. But most of our data sources are decades old, and have not been adequately re-thought or expanded in that time.  Especially with the internet, there is more and more private collection and supply of data, but for the moment it cannot supplant the Federal government.

Here I think there is a middle ground where we agree. Economics is not, yet, "big science" requiring massive infrastructure to produce research. Economic data collection is "big," and best directed by researchers not government officials. Data can be sold, so it's not a pure public good. But I'm willing to go with the idea that not enough good data is produced. Much of the research Jim describes as success is really massive data collection. But much of the federal research subsidy to economists does not go to creating new, publicly useful data sets. So, I think we can agree on research support for researchers to produce new data, but we don't need support to analyze that data. Fortunately, for now, that just needs an office, a computer, and some free time