Paula Stephan

In a nutshell

How Economics Shapes Science focuses on how costs and incentives—core concepts in economics—shape the practice of science, especially the practice of science at universities.

Costs matter:  they play a role in determining the size of equipment—Europe had to shelve plans to build the Overwhelmingly Large Telescope in favor of the smaller (and cheaper) Exceedingly Large Telescope.  Costs play a role in determining whether researchers work with male mice or female mice—females can be more expensive to study.  Costs dictate that the Large Hadron Collider not run in the winter but rather during the rest of the year when electricity is considerably less expensive.  Costs play a role when universities choose to staff labs with graduate students and postdocs, who are significantly cheaper than staff scientists.  And costs play a role in determining what is feasible:  when the first human genome was sequenced in 2003, the price tag for the entire project was estimated at $3 billion.  A genome can now be sequenced for $5,000 or less; by the end of this year, 2012, it is highly likely that a genome can be sequenced for $1,000 or less.

Incentives matter as well.  Universities went on an unprecedented building spree in the early 2000s in response to the doubling of the budget of the National Institutes of Health (NIH), the major funder of research in the biomedical sciences.  Universities invest considerable resources in attracting highly cited scientists, in an effort to increase their place in the rankings.  Scientists and engineers are also highly responsive to incentives.  Money matters, as does reputation.  But it’s not all for reputation, and certainly not all for money.  Scientists enjoy the “pleasure from finding a thing out, the kick in the discovery,” to quote the Nobel laureate Richard Feynman.

Science also plays a role, an important one, in shaping the economy.  The lags between research and economic growth are long.  But the connection between research and economic growth is present and important.  Examples of how research in the public sector has contributed to new products and processes are plentiful.  Global positioning devices, which have transformed the way we navigate, would not have been possible without the development of the atomic clock.  Hybrid corn, which has done much to increase food supply, was first produced by a faculty member at (what is now) Michigan State University.  Modern high-capacity hard drives would not be possible were it not for the research of two European physicists, Albert Fert and Peter Gruenberg, who independently discovered giant magnetoresistance in the 1980s—the science behind the ability to store vast amounts of information in a small space.  Nowhere is the relationship between science and growth more obvious than in increases in life expectancy.