The Great Mistake on Research Costs

I'm going to use a lull in my travel for The Great Mistake to start clearing my post backlog, starting with a response to the most recent review, by the sociologist Andrew Perrin.  His piece is at the public sociology blog Scatterplot, and, among its other virtues, it offers the most sustained engagement on research costs (Stage 2 of the book's decline cycle) that I've received.  I posted a comment on his post and crosspost it here.  His skeptical analysis of the emphasis I place on research costs is essential reading. It advances the kind of debate whose general absence has helped dumb down university policy.  I'm very grateful to him for the intelligence and energy that went into his analysis.

This blog has covered research costs many times ("How Can Public Universities Pay for Research?" "UCLA Loses LONI: Why Budget Silence is Bad for Science," "UCSD and the Crisis in Public University Research Funding," etc.) In The Great Mistake I go into the problem in detail, and also, in the final chapter, suggest a way of solving the core research cost problem without needing new money.  

After one talk this winter, someone asked me, "are you arguing that the way we fund research is the public research university's Achilles' heel"?  "I wish," I replied.  "That was just one small though important body part that didn't get protected in the River Styx, so you could armor it and be ok.  Our research funding model is more like a tragic flaw.  It is a secret weakness that cannot be separated from a great strength--unless it stops being a secret and is brought to light."  As I was later watching Toneelgroep Amsterdam's great 6 hour sequence of three Shakespeare plays, Roman Tragedies, I wondered, is the public university like Coriolanus, returned a military hero but unwilling to work with the newly empowered plebeians in the Senate, and so destroyed? Or like Marcus Junius Brutus the Younger, picking the wrong political allies, with the same result? Or Mark Anthony, losing the civil war to Octavian by ignoring his own strategists, who assured him he could not win at sea but must fight on land? Overkill, perhaps.  Start by reading Andrew Perrin.

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My response:

Many thanks for the thought and intelligence that went into this review.  I agree with the criticism of UC-centrism.  I’d like to assemble a research group to do comparative state studies of university policies, or at least work with other people on this.  We’re getting a better picture through a series of books that focus on the systems the authors know from the inside.  Austerity Blues looks at New York, to take just one other example. Jeff Williams and I would love to publish more work on various state systems in our Critical University Studies series. As you say, North Carolina is a crucial case.
On research funding, let me first take a step back.  The book argues that treating universities as private goods has lowered their social value and hurt their finances. Many defenders of any given instance of privatization either deny social or educational costs or say they are less than the life-saving benefits of the new revenue streams. My examples question these life-saving revenue benefits, which in many cases are actually negative.  Universities always generate value even when they lose money on something like extramural research or small-scale teaching.  But policymakers shouldn’t support a practice—privatization—that doesn’t correctly do the one thing it is supposed to be good at, which is provide net financial benefits (gains that aren’t created by losses elsewhere in the institution).
Research costs come where they do in the book’s decline cycle because they are a core example of the university’s primary reaction to abandoning the public-good model of the university (Stage 1), which is to stop saying public benefits justify monetary losses on research, and to start saying the university generates monetary benefits on research (the Bayh-Dole Act in 1980 was one turning point).  The latter statement has the double liability of obscuring research as a public good and of being wrong. Research is a public good and a private (institutional) loss, as it can be in the public good model, and as we disallow in the (inappropriate) private good model.  (A lot of bad things are tied in to this error, like splitting STEM and SASH research on phoney market grounds, hinging some portion of federal funding on science’s (exaggerated) direct economic value, etc.)
Other broad points. Technically, the contrast I draw is between high-research and high-teaching fields, where fields with lots of extramural funding have high gross revenues but lose money when overhead costs are netted out, and fields with essentially no extramural research but lots of enrollments are able to run surpluses—surpluses that administrators must use to cover losses elsewhere.  The fact that these kinds of departments polarize into STEM and non-STEM is contingent on other historical problems that I’m trying to help address.
Also, I am pro-STEM and hate the STEM/SASH divide.  I spent not the happiest years of my professional life as a co-founder of an NSF center trying to overcome it.  I see the divide as an artifact of a two-cultures ideology that has produced fundamentally different—even mutually incomprehensible-- material conditions of research.  The grant scramble in STEM feels to me to be inhumane and even anti-intellectual. I think it’s getting worse all the time, and I have nothing but sympathy and admiration for the colleagues who work 80 hours every week while skipping weekends for months at a time to keep their labs running and students funded.  I take their plight as seriously as I take that of SASH scholars. And yet I also see political inequality between STEM and SASH that is supported by budgetary opacity.  Designated makers always beat takers in America, and my hope is that showing the makers are also takers (we all are both) will create a more open and less biased policy arena and fairer, more effective outcomes.  A side benefit, which I don’t do much with in the book, would be redress for the structural poverty of qualitative and interpretative research, for which I don’t see any ethical or intellectual justification.
Since I advocate a wholesale public good model for universities, I am pro-subsidy.  I am also pro cross-subsidy.  I don’t mind some Sociology enrollment income winding up in Electrical Engineering to pay for accounting staff.  In terms of what you call external funds, my view, which goes beyond that of Walter McMahon and other economists I cite, is that the general public should pay all the costs of public universities, in the full knowledge that some returns will go only to the student they subsidized in the form of private market benefits (a salary increment), while most returns are nonmarket, indirect, and social, and fan out incalculably into the society, as we want them to.  In “internal” terms, we all need to help each other out.  If running one chemistry hood costs as much as running the lights and computers in 35 sociology offices, then sociology coughs up for chemistry.  The reverse should also be true.
The paragraph you call grudging (pp 94-95) reads as follows:

The problem with this situation is not that these subsidies, which are called cross-subsidies, are inherently wrong. To the contrary, these subsidies are commonplace and justified by the public benefits of research results. They are also justified by the private benefit to the student of attending research-intensive universities. At these institutions, students work with faculty who are at the forefront of their part of the knowledge world. They have access to the research process, which helps them to develop creative capabilities sooner rather than later. One can argue that the public and the student receive more benefit from an education in which instructional funding subsidizes research in the same environment. Though the costs can and should be separated so we can see who is paying for what and how much, the cross-subsidy is completely legitimate in principle—as long as it is acknowledged and shared in an equitable way.

The last sentence is the issue for me: not that we have cross-subsidies, but that we hide them. This removes them from the realm of policy and shared governance, and even correct accounting.
 Here are my more specific responses:
You write,

After a few silly anecdotes about scientists prevented from buying printer paper on their grants (do English professors not need printer paper?), Newfield then relies on NSF and university budget data to claim that between 9% and 20% of universities’ outlays for research are uncompensated by federal funders, so must be made up by institutional funds. These funds, he claims, often amount to nearly 100% of institutional research expenditures, which leaves 0% for institutional support of SASH and other research that doesn’t attract extramural funding.

I agree the anecdotes are silly. The point is that research accounting rules set up Catch-22s: some are silly, and others which blow holes in universities budgets. I also break down the range of 9-20% into three models all of which are justified by different sections of research funding reports based on the same data.  The differences reflect not only the ambiguity of semi-official interpretations of federal data, but also unequal budgetary situations for different kinds of universities. We need much more—and much more open—research to have a more complete picture of what is going on.
Next:

There’s a lot of forensic accounting going on here, and I think Newfield makes untenable assumptions to reach those high numbers (20% unfunded, 100% of institutional outlays). Most important here is the accounting for what universities pay for research that is not extramurally funded. Lots of that is implicit; professors spend their time, paid by university funds, on research and scholarly inquiry all the time. They do it with computers, office supplies, and sometimes dedicated funds that don’t count as research expenditures but are university resources spent on research and scholarly activity.

I’m not sure what you mean by untenable assumptions, but I assume you mean the omission of a portion of tenure-track faculty salaries and benefits as university’s internal funding of research.  I mention this omission in a footnote (middle of p 363, and also see the following note), and my reason is that this applies to all research professors in all disciplines, and is part of what one must do for one’s basic salary. Put differently, it would increase both the total amount of institutional funds spent on research and the total amount of research expenditure, so it wouldn’t change the share.  If anything, counting part of salary and benefits would have helped my inequality case, since disciplines that expect extramural grants for tenure, promotion, etc. generally require about half as much teaching as those that don’t.  In any case, I could better acknowledge that research universities do invest in all faculty in this way, especially since I am personally very grateful for that.
Next you write, “Throughout the section on extramural funding, Newfield implies that universities would not be doing the research if it weren’t for that funding.”  I’m agnostic on this. Your counterfactuals are interesting, but I don’t think they affect my argument.  It’s true that universities paying 20% of research is better than them paying 100%.  But paying 0% is better than paying 20% when general operating money per student has never recovered to the levels that the research enterprise assumed, and when students are progressively taking over from taxpayers in supporting it.  20% or 50% fro institutional funds would be fine with me were research funded at adequately high levels and as a public good, such that subsidies (including those from students as private individuals) are no longer extracted, left acknowledged, and not reimbursed.
Then, “That emphasis is puzzling because, unlike the rest of the book, it’s really not necessary to the overall argument. Each other piece of evidence goes directly to the devolutionary cycle (p. 36), but it’s not at all clear to me why the external-funding claims support that argument at all.’’
I tried to address this point above.
And:

his greater claim that in fact the English department is subsidizing STEM is based on treating institutional funds in two conflicting ways. When they pay for English salaries and overhead, they are treated as external income from tuition and state funds: fees paid for English professors’ work. But when they pay for STEM salaries and overhead, they are treated as internal funds. Newfield is right to call out the PR machine’s implication that STEM pays for itself and English doesn’t, but he’s wrong to interpret this as an internal subsidy.

The terms external and internal may be confusing.  External funds become internal funds, or what the federal accounts call institution (or institutional) funds.  Student tuition and state general funds, plus some other smaller streams, become the university’s unrestricted funds that they distribute as they deem best.  It’s an “internal” subsidy in the sense that the university is itself paying a share of research costs on top of what it gets from the specific extramural research sponsor (DARPA, The Legacy Foundation, etc.)  But the university isn’t creating this money itself, and “profits” from other enterprises (like medical clinics) don’t flow toward core campus operations like instruction and research.  So I stick with calling this an internal (or institutional) subsidy. But again, I don’t think subsidies are bad. I just think hidden subsidies are bad.  (One practical reason that helps propel the decline cycle is that they have convinced legislators that research makes money rather than loses it, so they don’t understand why the state should pay more money for university operations.)
Finally:

That account masks a much bigger problem with reliance on external funding: its intellectual costs. Funding rates are already very low, and today’s “skinny budget” contains draconian cuts to those low budgets. All that means that scientists will be spending more of their time trying in vain to attain funding instead of doing science. (Grant applications are the beginnings of science, yes — but only when high-quality applications are likely to be funded.) Furthermore, the bottleneck by which such an enormous majority of science is funded by just a few agencies raises the prospect of an intellectual monoculture; heterodox inquiry is unlikely to flourish under such concentration. I think it would be better for science and for SASH disciplines for universities to find ways to fund more research across the disciplines internally.

I hope my account doesn’t mask this problem, even if it doesn’t analyze it.  I also hope my account helps the discussion you call for by shining a light on how we spend institutional funds now, precisely so we can imagine spending them differently. 
In general, I agree with you that the agency funding situation poses major intellectual problems.  These are important and longstanding.   Clark Kerr described federal granting agencies as having created a “putting-out system” that made universities dependent subcontractors with borderline sweatshop conditions, and that was during the golden age of federal granting growth in the late 1950s and early 1960s. More internal funding would help with this quite a bit.  Projects could be developed in collaboration between faculty and their offices of research, and consortia could be created bottom-up to share costs across universities.  It would be helpful to draw up some questions and projects that can’t get funded in the current system but that could under this alternative.
The drawback of course is that universities would need to quadruple their research funds to cover what we currently fund today, which still wouldn’t be enough, either for STEM or for SASH disciplines.  I’d like to see a cultural shift that would allow the public to trust universities and their associated professionals enough to do that, but that’s a long road.
In any case, many thanks again for your very helpful and insightful analysis.