Organizations and Markets

Why Academic Freedom?

10 March 2010 at 11:29 am Nicolai Foss 3 comments

| Nicolai Foss |

At least in Europe, academic freedom is under siege. Politicians justify their meddling with the fact that universities are (largely) financed by taxpayers’ money, and they are assisted in their meddling by a growing class of bureaucrats in ministries, the EU and increasingly in universities themselves. All this derives legitimacy from a questionable ideology of Mode II research that broadly asserts that most important scientific advance (now) happens in the intersection of disciplines and as a result of collaborative relations between universities and business (here is the Wiki on Mode II).

Given this, it seems necessary to rethink the defense of academia and academic freedom. There is, of course, Polanyi’s application of  Hayek’s unplanned order idea in the context of the “republic of science.” However, that argument lacks concreteness and cutting power against those bureaucrats/politicians who wants to intervene just a tiny bit but doesn’t want centrally planned science.

In a recent paper, “Academic Freedom, Private-sector Focus, and the Process of Innovation,” Aghion, Dewatripont, and Stein provide a rationale — derived from property rights economics rather than from considerations of appropriability — for academia. Academia is defined as an organizational form which “represents a precommitment to leave control over the choice of research strategy in the hands of individual scientists” (p. 621) (note that this does not necessarily entail public funding).

In essence, scientists in academia have more control rights with respect to project choice and methods than scientists who work in the “private sector.” In the latter, control rights reside in the hands of owners/managers. Academics value “creative control” and will have to be paid a premium to give it up (i.e., move to the private sector). Academics can work more cheaply, but may end up working on projects that may boost prestige but are economically insignificant, whereas firms can direct scientists to work on projects that have high payoffs. The resolution of this tradeoff, they explain, “depends crucially on how far from commercialization a particular line of research is (p. 618).

Why have academic freedom at all and not the focused research that profit-motivated firms provide? Consider a line of medical research that ranges from basic research to the commercialization of a new drug. At the final stage of the research process the potential payoffs are huge; all scientists should be “focused” on the task at hand. At the initial stages of research, however, the probabilities that the subsequent stages, including the final commercialization state, will succeed are very small. Remember that academics are (realistically, of course) assumed to earn much less than scientists in the private sector. Economizing on scientists wages makes it rational to locate initial projects in academia. So the existence of academia becomes essentially a matter of the demand for inexpensive exploration meeting the supply of scientists who derive utility from possessing “creative control.” Very simple; but there is much more to it. Check for yourself; the paper is worth a read.

One point of critique: Aghion et al. position their paper relative to the traditional Nelson appropriabiltiy argument for government funding of research, and one may get the impression that their rationale for academic research is also a rationale for government funding. However, this is not the case. They do not explicitly contrast government funded academic research with academic research undertaken in, for example, privately funded, non-profit universities. And, yet, a comparative analysis of these two alternatives seems highly warranted.

Here is the abstract:

We develop a model that clarifies the respective advantages and disadvantages of academic and private-sector research. Rather than relying on lack of appropriability or spillovers to generate a rationale for academic research, we emphasize control-rights considerations, and argue that the fundamental tradeoff between academia and the private sector is one of creative control versus focus. By serving as a precommitment mechanism that allows scientists to freely pursue their own interests, academia can be indispensable for early-stage research. At the same time, the private sector’s ability to direct scientists toward higher-payoff activities makes it more attractive for later-stage research.

Entry filed under: - Foss -, Innovation, New Institutional Economics, Papers.