US University Science: The Shopping Mall Model

Lambert here: The comparison is hardly fair to shopping malls. Many retail positions pay just as well or better than adjunct professorships.

By Paula Stephan, Professor of Economics at the Andrew Young School of Policy Studies, Georgia State University; Research Associate, NBER. Originally published at VoxEU.

Universities have relied heavily on federal funds for research for many years. Yet, since 2005, federal funds have been flat in real terms, with the exception of funds received through the American Recovery and Reinvestment Act (ARRA). More importantly, the hope for a substantial increase in federal funds is dim. At the same time, public research institutions such as the University of California Berkeley, the University of Michigan, and the University of Wisconsin, face the added challenge that funds from state governments for higher education have been flat or have declined in recent years and are likely to remain low.

The economic rationale for governments to invest in university research was laid out more than 60 years ago by Kenneth Arrow (1962) and Richard Nelson (1959). It rests on the understanding that knowledge has properties of what economists call a public good in the sense that once research findings are made public it is difficult to exclude others from their use, and that research findings are not depleted when shared. Economists have gone to considerable lengths to show that, if left to the private sector, society would underinvest in public goods. An additional rationale is that research, especially basic research, is inherently risky and society has a tendency to underinvest in risky research without government support (Arrow 1962). Last but not least is the role that research plays in economic growth (Romer 1990).

Governments in the US have not always played a major role in supporting university research. Nor was much spent on university research historically. Indeed, prior to World War II, less than 1% of what is spent today was spent on university R&D (in real terms). The funds that were spent came almost exclusively from private foundations, donations and endowments. That was to change with the implementation of the vision spelled out by Vannevar Bush in Science: The Endless Frontier. Bush, who was President Roosevelt’s Science Advisor and Director of the Office of Scientific Research and Development during World War II, understood that the significant contributions made by research to the successful war effort meant the time was ripe to push for federal funding for scientific research. In 1945, at President Roosevelt’s request, he wrote the report laying out a federal course of action. The report recommended that the government fund basic research at universities and medical schools because these “institutions provide the environment which is most conducive to the creation of new scientific knowledge and least under pressure for immediate, tangible results.” (Bush 1945, p. 7). It also recommended that the government provide scholarships and fellowships to promote training. Both, Bush argued, were essential for economic growth and both addressed the concern that due in part to the War the US faced a scientific deficit in terms of basic research and the highly trained individuals required to conduct the research.

In recent work I examine how The Endless Frontier changed the research landscape at universities, the response of universities to the initiative, and subsequent stresses that have emerged (Stephan 2013). To cut to the chase: The Endless Frontier set about to grow research capacity at universities and increase the supply of individuals qualified to do research. The agencies that it established or greatly enhanced (NSF and NIH) supported faculty research in the form of funds for equipment, supplies and faculty summer salary. Occasionally, they paid for research assistants and postdoctoral trainees, although, as Bush intended, they originally focused their efforts on supporting training through scholarships and fellowships. The indirect rate was as low 8% at NIH; at NSF, which did not open for business until 1952, the rate was initially set at 15%. In the beginning, these agencies were in missionary mode, encouraging individuals to submit proposals and students to apply for fellowships. “It wasn’t anything to travel 200,000 miles a year” to accomplish this goal, to quote one NIH officer circa 1950 (Strickland 1989).

Universities were extremely responsive to the capacity-building initiatives of NSF and NIH, increasing the number of PhDs they trained and the number of grants they submitted. By the 1960s the tables had begun to turn and universities, having tasted federal fruit, aggressively began to push the government for more funds to cover academic-year salaries on grants and raise the allowable indirect. They also began to push faculty to bring in more grants. Training became less about building future research capacity and more about getting the research done today by hiring graduate students and postdocs off grants to work in labs.

Universities of today are a far cry from those of the 1940s, having been transformed from a focus on educating students and taking care of patients, to placing a high—if not the highest—value on research. In many ways universities in the US have come to resemble high-end shopping malls. They are in the business of building state-of-the art facilities and a reputation that attracts good students, good faculty, and resources (Stephan 2012). They turn around and lease the facilities to faculty in the form of indirect costs on grants and the buyout of salary. To help faculty establish their labs—their firm in the mall—universities provide start-up packages for newly hired faculty. External funding, which was once viewed as a luxury, has become a necessary condition for tenure and promotion.

The shopping mall model puts tremendous stress on universities, especially in a time of flat resources. Three are noted here and discussed further in my research. First, incentives have arguably led faculty, as well as the agencies that fund faculty, to be risk averse when it comes to research. Applications are often scored for “doability” (Alberts 2009). The pressure on faculty to receive funding quickly in their academic career—at the end of their third year at many universities—means that faculty can ill afford to follow a research agenda of an overly risky nature. This proclivity for risk aversion should be of concern to the university community and more importantly to society. Incremental research yields results, but in order to realize substantial gains not everyone can be doing incremental research. Moreover, recall that one of the main reasons for research being placed in the university sector was the view that society needed to undertake basic research of an unpredictable nature. When university research begins to be practiced in a way that closely resembles the practices of industry, much of the rationale for federal support vanishes.

Second, the shopping mall model has a tendency to produce more PhDs than the market for research positions demands. Incentives again play a major role. Faculty actively seek graduate students and postdocs to work in their labs, supporting them on grants. They need ‘worker bees’ to get the research done so they can compete for additional research funds. They resist providing placement data to students. Yet increasingly graduates cannot find research positions—either in academe, firms or government—that use their skills. Nowhere is the problem more acute than in the biomedical sciences and nowhere have faculty and universities been more deaf to calls for reform. Such a model for staffing labs is inefficient in the sense that substantial resources have been invested in training these scientists and engineers. The trained have foregone other careers—and the salary that they would have earned—along the way. The public has invested resources in tuition and stipends. If these ‘investments’ then enter careers that require less training, resources have been used inefficiently. Moreover, the practice discourages highly able students from choosing careers in science.

Third, the shopping mall model encourages universities to overbuild, especially in areas where funding is large and thought to be growing, such as the biomedical sciences. Net assignable square feet for research increased by 30% at universities between 2001 and 2011. Most of the increase is for facilities in the biological, biomedical and health sciences (see Figure). But funding for NIH shrank in real terms by about 4.4% between 2004 and 2009. It has continued to decline since, with the exception of ARRA funds. Success rates at NIH are at an all-time low. The only way that a university can hope to cover the costs of these buildings is to outcompete other institutions when it comes to bringing in grants. But, as Princeton’s former President Shirley Tilghman notes, “this just can’t be true for every academic medical center. It does not compute.” (Mervis 2013, p. 1399). It is not surprising that today universities find themselves with excess capacity.

Figure 1. Net Assignable Square Feet at Universities for Research by Field and Year

stephan fig1 19 mar: National Science Foundation (2013).

A widely held belief among university faculty and administrators is that the contract between federal funds and universities has changed dramatically in the past sixty-five years. Yes, the contract did change. But a careful reading of the record suggests that the change was orchestrated more by universities than by the federal government. Many of the stresses that the system now faces are a result of these changes. We are reaping not so much what Bush sowed but what universities and faculty pressed to put in place in the 1950s and the 1960s in response to the Endless Frontier and the opportunities it offered.

Please see original post for references.

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About Lambert Strether

Readers, I have had a correspondent characterize my views as realistic cynical. Let me briefly explain them. I believe in universal programs that provide concrete material benefits, especially to the working class. Medicare for All is the prime example, but tuition-free college and a Post Office Bank also fall under this heading. So do a Jobs Guarantee and a Debt Jubilee. Clearly, neither liberal Democrats nor conservative Republicans can deliver on such programs, because the two are different flavors of neoliberalism (“Because markets”). I don’t much care about the “ism” that delivers the benefits, although whichever one does have to put common humanity first, as opposed to markets. Could be a second FDR saving capitalism, democratic socialism leashing and collaring it, or communism razing it. I don’t much care, as long as the benefits are delivered. To me, the key issue — and this is why Medicare for All is always first with me — is the tens of thousands of excess “deaths from despair,” as described by the Case-Deaton study, and other recent studies. That enormous body count makes Medicare for All, at the very least, a moral and strategic imperative. And that level of suffering and organic damage makes the concerns of identity politics — even the worthy fight to help the refugees Bush, Obama, and Clinton’s wars created — bright shiny objects by comparison. Hence my frustration with the news flow — currently in my view the swirling intersection of two, separate Shock Doctrine campaigns, one by the Administration, and the other by out-of-power liberals and their allies in the State and in the press — a news flow that constantly forces me to focus on matters that I regard as of secondary importance to the excess deaths. What kind of political economy is it that halts or even reverses the increases in life expectancy that civilized societies have achieved? I am also very hopeful that the continuing destruction of both party establishments will open the space for voices supporting programs similar to those I have listed; let’s call such voices “the left.” Volatility creates opportunity, especially if the Democrat establishment, which puts markets first and opposes all such programs, isn’t allowed to get back into the saddle. Eyes on the prize! I love the tactical level, and secretly love even the horse race, since I’ve been blogging about it daily for fourteen years, but everything I write has this perspective at the back of it.


  1. Steve H.

    My father became a sociologist in the 1960’s. He said Sputnik caused Congress to throw money at the research institutions, too much for the hard sciences to initially use. Since money must never be turned away, excess flowed into social sciences, enough to answer some long-standing questions. (Childhood poverty causes long term damage? Food stamps. Drug addiction raising crime rates? Legalize and treat medically.) Such answers may be on the way to lost knowledge.

    1. R Foreman

      You don’t hear too many people describe their profession today as ‘sociologist’. We used to study things like sociology to understand more fully how society worked. Today we don’t do that so much, except perhaps behind closed doors in agenda-setting meetings, where the goals and views of the population are being determined.

  2. Moneta

    A few centuries ago, University studies were divided between the trades and the state functions. Masters would take on apprentices and pay room and board. They knew exactly how many “students” they needed and could afford. As the trades got more efficient thanks to technological developments, the model got pushed down to the guilds. But there was still a strong control of supply vs. demand.

    Today, apart from a few sectors, there is nearly no link between the needs of a sector and the number of graduates. I guess it stems from the belief that markets are efficient. Companies should probably be footing the bill, especially those getting the best and brightest…

    We have not had to deal with this issue because as long as individuals and countries could lever up, we could keep the game going. And since most jobs don’t really require the advanced skills learned in university, the degrees have been interchangeable.

  3. EconCCX

    @Lambert The comparison is hardly fair to shopping malls. Many retail positions pay just as well or better than adjunct professorships.

    The author is likening universities to mall operators, who sell no merchandise and support no retail positions, but instead collect rent from mall tenants. Adjuncts are actually getting a break under this model; they bring in no grant dollars but are paid from an imputed share of tuition and other general income, and thus continue to live anachronistically as cost centers rather than profit centers on the university’s ledgers.

    1. James Levy

      If you cut back on the credit hours that now go to adjuncts and forced full-timers to do the work you would have a tough time making the one compensate for the other (on some campuses, the difference could not be made up). And research “production” would plummet, and with it grants. So adjuncts serve a vital role in the political economy of higher education (and they, like the poor, remind those above them the cost of messing with the system and the benefits of going along and getting along, a huge plus to those on top).

    2. OIFVet

      Cost centers, profit centers: does it not strike you as ironic to use such terms in regards to what are supposed to be non-profits? This is precisely the problem afflicting modern higher education: their primary mission has gone from education to profit-making, with you and me picking up the tab for their tax-exempt status and a trillion dollars in outstanding student loan debt used to pay their ever rising tuition rates. All this while they are sitting on billions in endowments and many are de facto real estate development corporations paying no local property taxes either. At least mall operators do pay these.

  4. afisher

    One group has a plan. Just quit funding public institutions of all research dollars. Those dollars / researchers / findings / patents, etc should not be a part of the public domain, instead they should be held by private institutions that can write the contracts with researchers so that they gain bubkus from their own research – that was just “part of the job”. This group also seem to believe that Universities are only for teaching classes.

  5. Jim Haygood

    ‘Incentives have arguably led faculty, as well as the agencies that fund faculty, to be risk averse when it comes to research. Applications are often scored for “doability.” Faculty can ill afford to follow a research agenda of an overly risky nature.’

    Such cautiousness is inherent with public funding. The state is not going to fund mold-breaking iconoclasm. This argues, at least, for a mixture of private and state-funded research.

    Cartelization of academia is another ugly side effect. Federally-sponsored student lending funds a tuition spiral; antitrust issues are dismissed with a knowing wink. Ex-policitians are brought in as university presidents (e.g., the egregious appointment of Janet Napolitano to head U. Cal.) to buy political insurance.

    Live by the sword, die by the sword.

    1. James Levy

      I disagree. The Kaiser Wilhelm Gesellschaft funded all kinds of innovating research with long gestation periods, as did Sandia and Lawrence-Livermore in earlier decades. So it can be done via the State. What you now have is a situation in which State and Corporation both have incredibly short time horizons. As do researchers, who are working for tenure or on fixed contracts–no results, no job, no future.

      In 1906, so the story goes, Max Planck told Einstein to forget about gravity; the problem was too hard and when the physics community caught up to his 1905 papers, he’d be a Big Man. Einstein ignored him, and spent ten years wrestling (in the end successfully) with general Relativity. Today, it’s hard to imagine that happening with a scientist in his or her prime (25-35 years old). You’d have to be an Einstein (and they come along once a century if you’re lucky) to resist the incentives and temptations and chuck everything on one role of the dice (and get the funding to carry it through for years until you get results).

    2. Calgacus

      Yup, James. Jim Haygood’s comment exactly reverses things – historically, funding for mold-breaking iconoclasm comes from the state or non-profit organizations like universities. Private industry hardly ever does. Private funding is inherently cautious, not public funding.

  6. George Phillies

    My university (WPI) requires undergrads to do a junior year science and society thesis (It has a fancy name, too). For a fair number of years I had students do studies of research patterns in chemistry. It was painfully obvious that the Federal government was putting way too much money into the very top schools relative to the middle half or so, namely you had but to look at dollars per citation or dollars per paper. I don’t see an easy way to fix this.

  7. impermanence

    Institutions all work the same way. They are simply wealth collectors/re-distributors. It is the leaders who position themselves to use the power of the collective for self-enrichment.

    In this example, “education,” is used as the lure, but it matters not. It’s just particularly insidious [in this case] because education is essentially free for the taking.

    As the institution matures, its skills in de-frauding becomes finely honed until it kills its host. We are seeing a confluence of such in the Western world, as all of the institutions are approaching maximum efficiency in the transfer of wealth from their targets, i.e., maximum, debt, taxes, tuition, health care costs, etc.

    Coming up with creative rationale for stealing other people’s labor-value owned is the perhaps what mankind will be noted for long after our species has run its course on this planet.

    Just listen to the non-sense most people in positions of power come up with to explain the dire need to take from others [and stuff it in their own pockets].

  8. Lonely_in_Dallas

    Prof. Stephan makes a number of excellent observations. I would add a few more.

    1. The fact that the indirect cost (also known as overhead) is now upwards of 50% everywhere means that “big science” is promoted by universities over “good science.” A lonely mathematician sitting in his/her room proving theorems, and requiring nothing more than a pencil, an eraser and a pad of paper, does not enrich the home institution in any way. This is why universities over-build capacity.
    2. There is no polite way to put this point, so I might as well put it bluntly. Two fields of science stand out for blatant exploitation of students, namely biology and chemistry. In both fields, “research” for the most part consists of nothing beyond mind-numbing repetition of routine tasks. In other parts of the world, such tasks are farmed out to “Scientific Assistants” or “Technicians” or some such category of persons, who have a steady job and career prospects. But under the “capitalism model of research” that prevails in the USA, it is simply too expensive to employ technicians at $50K or $60K per year. Instead graduate students are employed for the same tasks at $25K to $30K per year. However, since these young persons cannot be kept in bondage in perpetuity, after six or seven they are given a diploma and a handshake and tossed out into the world at large. They are not budding researchers, and never have been. It is a myth that they have been “educated” during their graduate studies. The over-supply of unemployable Ph.D.s in biology in chemistry is directly attributable to the fact that graduate assistantships are plentiful (because graduate assistants are cheaper than technicians) while faculty jobs are almost nonexistent.

    3. Exacerbating this problem is the lack of mandatory retirement and the lack of decent public healthcare in the USA. In Canada too there is no mandatory retirement age, but most professors I know happily take retirement because neither their income (salary vs. pension) nor the quality of medical care suffers by doing so. In the USA, most professors hang on to their jobs not for the salary but for the medical care. If professors retired at 65 or 70 (whether forced to do so or incentivized to do so), there would be some natural turnover to create faculty openings. This does not happen in the USA, whereas it does happen in other advanced economies.

  9. allcoppedout

    I’m for disestablishing the universities to re-establish education. Impermanence gets at the “postmodern” bit of this. Paula’s argument sounds like the general economic tune of neo-liberalism – hand over more resources to sets of people already abusing them.

    Einstein is not a good example of university research. At least 95% of what does get done is numpty and closely associated with copying. Jim is right on the “doable”. Most of the funds you can apply to have already set agendas and gatekeepers that prevent creativity. We might like the word doable when first heard, but in fact it’s a fantasy term that really mean satisfying bureaucratic metrics. In regional development projects one might promise to create 4000 jobs and safeguard another 2000. How do you prove you have created or safeguarded a job? Don’t fret. The “doable” bit is lacking the morals to make the promise. If the sky falls and there are no jobs, that was the reason your project didn’t work. If there are still jobs you safeguarded them, well you obviously safeguarded them. And if jobs churn as they do, then you created 4000 of the new ones. Any funding not spent or stolen by university bureaucrats might leave a bit over to fund a bit of research, Now you just have to find academics who will do the project work for nothing. Strangely, most of these truth-seekers won’t.

    Einstein was struck on the difference between Maxwell’s great equations and the contradictory empirical results. The experiments were often vary approximate, but he still came up with kinematics that made better sense of Maxwell and the boys at the bench. He was not in an academic position while doing the creative work. About 300 papers came about once he was a university man. These are probably not much compared with his work done as an electromagnetic patent examiner (I’m guessing).

    The doable becomes something like writing easy papers directed at the right journals in order to attract research funding for your department. I know people who have written hundreds and said squat. Most of them don’t teach. Bright students, given an old file of a hundred or so papers on (say) motivation at work, soon start asking what the process of ‘dross production’ is all about. Some of these do their own literature searches, discovering academics have said something about almost everything. Some of these would like to junk the lot as meaningless (outside science) and get out observing and talking with people. This is very costly and not doable. They end up studying the scriptures. It’s easier to do a PhD on characters in Enid Blyton than build a few ramps for wheelchair users.

    Research quickly becomes an excuse for not doing the obvious, or doing more the what obviously fails because there is no research into the soaked-up positive models that encourage the bland. Deep into this, we lack proper and widespread notions of what data is. I don’t mean stuff like calling it capta, though I do read into the depths of structuralism in physics.

    It would take too long to argue the data issue here. One gets the double-helix (there’s a quadruple form too) from x-ray crystallography. In the social sciences you can’t afford the “x-ray machine”. When someone like Yves or Steve Keen points to such as private debt or dire finance-Ponzi schemes instead of productive investment we have massive problems with their data (to me what they are saying is at least as data driven as cries the Emperor is naked). What discussion there is immediately treats what they are saying as (idiot heresy) “theoretic” in order to drown out the ‘cries of naked’. It is easier to get research money to design eye-implants that will let the populace see invisible cloth than into the new finance-economics that might produce decent lives and a human future.

    We know data is not formed in a neutral observation language. We know equally powerful argument can be made on which argument cannot decide (Sextus Empiricus). Yet we go on as though we don’t know and can’t find the crucial experiments that would decide better ways. I suppose the equivalent of the x-ray machine in social science would be the bulldung meter. We could at least try sortition and lot for some research funding. We could recognise that when Dimon and others justify their obscene wealth, the experiment that would really say yay or nay would be a cull. I doubt the last human cry ever heard would be ‘run, the sky is falling’, if we could really do this experiment. In science, we often can’t do the actual experiment, like building an inter-galactic particle collider. We sort of sneak up on stuff indirectly.

    So imagine trying to get research funding to ‘dataorise’ statements like Yves’ assertion at conference the other day that UScorp has been in share buy-back dodges for 30 years rather than productive investment, and other apparently contradictory statements. You want to put a multi-disciplinary group of social scientists, scientists and big data people on this. The idea is to find a “kinematics” of social study and a new way to discuss the issues.

    Remember McNulty in the last series of ‘The Wire’ creating false murders the establishment had to fund in order for him to divert this money to real policing?

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