Saturday, May 26, 2012

Peter Klein on Public Funding of Science

I had an exchange with Peter Klein the other day on public funding of science. He had a post up criticizing an APSA email for allegedly ignoring social science findings and methods. It's true they have a weak experimental design (it's a mass email - there's no experimental design!) so I guess I have to agree with him on the methods point. But their plea was very much in line with social science findings. The post raises good points, of course, just not entirely valid criticisms of the APSA. And of course if you don't agree with Klein you haven't read Bastiat (I think this cliche - can I call it a cliche at this point? - is strategic... it would be silly to say "you haven't read Friedman" or "you haven't read Hayek" because most social scientists actually have. By saying "you haven't read Bastiat" you're more likely to get a "who is Bastiat?" response and feel vindicated because he's more obscure. It's kind of silly, though. You can get these points about opportunity costs and unintended consequences from Samuelson for God's sake. But an Austrian saying "you clearly haven't read Samuelson" doesn't have quite the same effect!).

I comment on a specific point he made about some oft-cited research by Austan Goolsbee:

"You have quite high expectations of research design in mass emails!

Part of the issue with Goolsbee is that he’s looking at relatively short term impacts. Economists studying this labor market since at least the 50s have noted that one of its most important features is a high short-run inelasticity of supply. So yes, in the short run you have much higher wage effects than quantity effects.

This doesn’t hold true in the long run. It’s a good study of Goolsbee’s, consistent with the rest of the literature, but I think it’s often poorly (and for that reason over-) cited."

He responds, again with the Samuelson... errr... Bastiat point:

"Right, but I’m talking about the within-scientist effect. Take the supply of scientists as fixed in the short run. The issue is whether a grant induces the researcher to work on a project he otherwise wouldn’t have worked on, or simply increases his compensation for working on the projects he was already doing or planning to do (salary supplement, equipment and travel funding that benefits his other activities, etc.). APSA seems to assume that the former effect dominates the latter (or that the latter effect is zero). I have plenty of first-hand evidence that the latter effect is common."

And I clarify:

"But that’s precisely why we use markets for scientific labor that do respond in the long run. Certainly people will shift what they’re working on. That’s largely the point of bidding up wages, right!

If there is something they would have worked on in the absence of the grant that has a lower value than the stuff they would work on on the grant we don’t want them working on it. We want to bid them away. The trouble is, we’d like a sure method of valuing science that has social payoffs.

Unfortunately political allocation can’t give us that. Unfortunately, the market can’t either.

So we’ve gotta do our best. But I don’t see why it’s a bad thing to bid people off other projects.

And again – insofar as their is bidding off other work, it’s a short-term phenomenon. In the long-run, so long as we do our best to approximate the social value of this research, the bidding away that goes on is bidding away that we’d like to see happen.

I think the issue ultimately should be attaching the right social value to publicly funded research, not being concerned about short-run inelasticities that Goolsbee’s work picks up. If we get the valuation right none of the bidding away should bother us.

And I think good social science tells us two things: positive externalities are underfunded by the market and corner solutions are rarely optimal except in some unusual circumstances. So I think good social science is on the APSA’s side here. Of course there’s a lot more legwork to do to determine the right amount of funding."


  1. "But an Austrian saying "you clearly haven't read Samuelson" doesn't have quite the same effect!)."
    I think this is a good place to credit DK for converting me from Austrianism to mainstream economics.

    Thank you DK, for your patience in pointing out many alleged unique features of Austrian economics as in fact standard economic theory. :)

  2. Klein: "We already know that a main effect of government funding of hard science is to increase the wages of scientists, not the quality or quantity of research."

    It's what we know that ain't so. {sigh}

  3. the implied disrespect you have for Klein's entrepreneur is unsurprising

    even less surprising -- your convenient espousal -- "Unfortunately, the market can’t either" -- you promote "unnatural" external market shackle's elsewhere (preventative laws -- gov't regulations -- gov't oversight)-- then you imply underlying inherent innovative limitations -- errrr

    1. re: "implied disrespect"

      I genuinely have no idea what you are talking about, and my suspicion is you don't either.

      re: "even less surprising -- your convenient espousal -- "Unfortunately, the market can’t either""

      It's not convenient. It's very inconvenient that markets can't efficiently allocate when externalities are present. I wish it weren't so, but wishing that doesn't make it happen.

  4. I genuinely have no idea what you are talking about

    what I meant:

    the individual does not know the future -- using the faculties of his mind he makes moves(decisions)in real time with his capital -- based on his intellectual interpretation of information engaged -- the Klein entrepreneur as I see it is a owner -- different from the way I gather you use the term (owner)

    "It's not convenient."

    it is convenient when you advocate for market interference -- externalities -- community as opposed to private ownership

    you do not know the future with certainty DK -- no one does -- I am not suggesting/advocating that anybody should personally live their life this way -- that one's approach to living must be dominated by this fact -- what I am saying is that because this is a fact -- that this is a reality -- it is dishonest to justify citizen participation under the guise you know via the state

    you excuse the violation of the foundation of the market the entrepreneur(the capital owning decision maker)-- hence again it seems to me "convenient" that you preach market shortcomings

    1. Elliott - that's more or less how I see entrepreneurs too. I'm not sure how else one would think about entrepreneurs. How in the world did you figure I was disagreeing with Klein on this?

      And when have I excused the violation of the foundation of the market?

      As usual, the value added here in your comments is very low, and again you seem to be basically putting words in my mouth. I don't really have time for this today.

  5. I did not say you disagreed with Klein on the entrepreneur I said you had disrespect for the entrepreneur himself -- since Kirzner and to some extant Knight view entrepreneurship differently and since I was not previously aware where you stood -- I thought it important to be specific

    "implied disrespect you have for Klein's entrepreneur"
    again -- this was misinterpreted -- no big deal -- you advocating in specific cases for common good solutions carried out by government at the expense of private ownership (inflation as a hidden tax -- eminent domain for highways and on and on) -- is what I meant by disrespect and the violation of the foundation of the market

    "the value added here in your comments is very low"
    thank you -- since it is unlikely your opinion here will change -- I will not waste more of my time


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