March 06, 2011

Aporias of the Efficiency Frontier (Why Oh Why Can't We Have a Better Academic Publishing System?)

Attention conservation notice: 350+ grumbled words about the price of academic papers, a topic of little moment even to scholars directly involved, let alone anyone with a sense of perspective.

One of the fundamental principles of economics is the virtue of marginal cost pricing: everything should be sold for just the cost of producing one extra unit. Prices below marginal cost are obviously bad for the sellers — you can't keep losing money on every sale and keep producing — but prices above marginal costs mean that the good will be consumed less than it ought to be, than its actual utility warrants.

With this in mind, let us look at the National Bureau of Economic Research, which is about a good an embodiment of the discipline's core as one could hope to find. One of its key outputs is working papers. To read these, you need either an institutional subscription, or you need to pay \$5 per download. This price is orders of magnitude more than the marginal cost of serving a few hundred more kilobytes of PDF*. It is literally a textbook Econ. 1 result that NBER is ensuring its own economic research will be under-consumed. It isn't even recovering the fixed costs of production through average-cost pricing, since those costs are paid not by NBER (which is a non-profit largely funded by grants anyway) but by the authors of the papers. Rather, it confirms Healy's law, that each "discipline's organizational life inverts its core intellectual commitments".

(This rant was brought to you by wanting to read this paper, mentioned by Krugman. CMU has a subscription, so I can, but it is senseless that twenty years after the beginning of the arxiv, a central organization of the discipline of economics prices its preprints this way.)

Update, later that day: As several people have written me to point out, the authors of the paper in question have a free version PDF version online. This does not make NBER's policy any more efficient or even sensible; quite the contrary. Fortunately, I am not the kind of man who goes around making revealed preference arguments.

Update, 23 March: Hopefully, the good example of the Brookings Institution will help establish a norm, and shame NBER into adopting marginal cost pricing.

*: will sell you 240 GB/month for \$50, which works out to something like 0.02 cents for a 1 MB paper, which would be quite large or graphics-heavy. I decline to believe that NBER is being ripped off by their Internet service provider by a factor of 25,000. (This is not an endorsement of Pair's hosting services, or even a claim that their prices are especially good.)

The Dismal Science; Learned Folly

Posted at March 06, 2011 13:40 | permanent link

Three-Toed Sloth