Should the federal government be paying more or less overhead to universities?

by on June 1, 2017 at 12:55 am in Economics, Law, Political Science, Science | Permalink

That is the topic of my latest Bloomberg column, here is one excerpt:

…it is possible to imagine an alternative vision where federal overhead allocations fall and the liberated money allows more scientists to get more (smaller) grants. Would that be a good idea?

If we look to the private sector as a model, maybe so. Private philanthropy is typically more oriented toward specific projects than toward overhead. One view is that makes federal government funding of overhead all the more important to fill in the gaps; an alternative take is that the private sector realizes a lot of overhead funding ends up wasted, and the federal government ought to see the same. There is some truth to both of these stories, but not surprisingly the academic scientific community is stressing the former.

Research funds spent on overhead strengthen the power and discretion of administrators (who capture and allocate the funds), senior scientists, the lab-based sciences and relatively expensive projects. They make universities more hierarchical and less egalitarian places, where the ability to bring in overhead funds yields status and influence.

Spending less on overhead and more on individual projects would favor small-scale research, and would decentralize authority and influence. Lower overhead allocations would give the government more authority over project choice, and the university less discretion, for better or worse. Overall, projects would have to prove themselves more in the broader world of prizes, donors and news coverage, rather than lobbying within the university for support.

A mixed bag of course — there is much more at the link.

1 Thomas June 1, 2017 at 1:16 am

I look forward to reading the arguments in favor of taxpayer funded overhead. My bias is that rent-seeking faculty and the beneficiaries of a highly gated science will provide self-serving reasoning but I am hoping for the best.

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2 OldCurmudgeon June 1, 2017 at 9:58 am

I toured my alma mater for the first time in about 20 years. Everything was *so* much nicer than I remembered. It made me sad; all I could think of is TANSTAAFL.

At the risk of sounding like an old curmudgeon, it felt like the place had lost it’s way. In my mind, the U’s basic mission was a “high quality education at a reasonable price” plus a bit of “innovation to serve the needs of the state.” It’s hard to see how elaborate atriums, plush fitness facilities, fancy facades, hip meeting spaces, elaborate public artwork, etc serve that goal.

And get off my lawn.

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3 mulp June 1, 2017 at 12:37 pm

Oh, the horrors!

So many workers paid too much to make the campus so nice!

Students and professors should live in caves wearing sack cloth and ash eating food scraps from begging and water. That is the true path to enlightenment.

All the money you donate should pay for professional football and basketball players and their coaches, and for grand colloseums. Lion, tigers, and bears would be nice to motivate students by throwing those who seek comfort into the arena.

Seriously, what is the point of cutting costs of essentials like food and clothing if more isn’t spent on past luxuries like education?

And it seems like education is seen as more of a luxury than in my 60s youth because employers spend far less on education today then they did then. Factories were pulling kids in from high school to start educating them before they graduated. For my computer industry employer, college experience was evidence you would embrace company education which was a constant until thE late 80s when industry switched to hiring from or buying competitor workers to do the same job instead of hiring and training younger workers.

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4 anonymous June 1, 2017 at 1:38 pm

Nothing improves educational outcomes like elaborate stonework

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5 OldCurmudgeon June 2, 2017 at 10:36 am

>Oh, the horrors!
>
>So many workers paid too much to make the campus so nice!

It depends whether they are using their own money or someone else’s.

Personally, I’d prefer that ‘my’ money be spent on research, not soaring atriums.

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6 GoneWithTheWind June 1, 2017 at 10:31 am

The federal government (the tax payers) should pay the universities nothing. They should not be involved in tuition assistance loans and grants to students either. IMHO the ONLY appropriate role for the federal government in regards to all schools (K-12 and college) is perhaps it would be useful to mandate a class on the constitution. In fact everyone, every group seeking federal funding should be required to take a class on the U.S. constitution.

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7 mulp June 1, 2017 at 12:55 pm

Eduration and research do not advance the arts and sciences and promote the general welfare?

Or is paying workers the part that’s unconstitutional?

By the way, keeping in mind the fact women, children, Jews, blacks, etc were never citizens when the Founders were alive, where in the Constitution is restricting immigration and migration authorized? I find that those who find authority hidden in the Constitution for border walls, etc consider the 14th and 19th amendments to be unconstitutional by granting citizenship to those never intended to be allowed to participate in government, something restricted to citizens who were selected for that status primarily by the property holders of the State’s.

I would point out that Africa is in far greater compliance with your implied sense of proper government. No big government building canals, national interstate railroads, highways, comprehensive education, advancing the science and arts, and most important, very little effort to promote the general welfare. Africa is proof of the greatness of free market health care!

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8 athEIst June 1, 2017 at 1:46 pm

How else would we have learned that baby-rape cures AIDS?

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9 GoneWithTheWInd June 1, 2017 at 7:29 pm

If you believe the phrase “promote the general welfare” was intended to allow the government to transfer wealth and to subsidize special interests than you do need a class on the U.S. constitution.

Education and research is critical. That alone is reason enough to keep the federal government out of it. But the constitution does not authorize the federal government to inject themselves into education and research. The state and local governments are free to do so and not hindered by the constitution on this.

Africa’s problems are not because of the size of the government nor how much their governments have. Africa’s problems are corruption and tribalism. Well, that and a couple dozen other self inflicted problems.

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10 Dots June 1, 2017 at 1:16 am

EAs seem to say priv phil should b much larger

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11 Bfff@fdss.com June 1, 2017 at 2:48 am

Shut down the universities shut them down

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12 Thiago Ribeiro June 1, 2017 at 6:07 am

Thanks, Chairman Mao.

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13 Sam the Sham June 1, 2017 at 8:33 am

Don’t shut them down, just drop all federal funding, including student loans. Heck, make student loans dischargable through bankruptcy (which I know would make student loans very rare and expensive). Make universities great again!

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14 Daniel Weber June 1, 2017 at 10:49 am

make student loans dischargable through bankruptcy

Yes please.

We often hear that “there could have been” a great abuse of the bankruptcy system by people getting a bunch of medical school debt, discharging, then becoming a doctor anyway, but when I ask for examples they never turn up. Bankruptcy courts are public record. And you would need a bankruptcy judge to sign off on it, as well.

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15 Floccina June 1, 2017 at 12:17 pm

+1

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16 mulp June 1, 2017 at 1:19 pm

The bankruptcy law changes came after Congress started funding primary care doctor training with hospital residencies.

The outrage leading to the changes on student debt were over the public intellectuals discharging debt through bankruptcy, mostly because philosophers, religionists, political economists were just a bunch of lazy leaches sucking blood from workers. Only the wealthy elites were allowed to be public intellectuals. Eg, WFBjr.

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17 Ray Lopez June 1, 2017 at 3:02 am

Yawn, boring. A better question is whether the fed govt should pay for patents that universities generate. A useful step in the right direction was the Bayh–Dole Act of 1980, but at the moment the government does not pay for patents when giving research grants to private parties.

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18 AlanG June 1, 2017 at 9:41 am

Ray – I don’t get the point of what you are saying here. The government certainly does pay for the patent if there is a marketable invention arising from the patent. It just might be hidden in the cost of goods and services that are paid for. Take the case of a new drug that is developed off a university invention. It’s patented and licensed out to a pharma company for development. There are going to be royalty payments built into the cost of the drug that are payable by Medicare, Medicaid and the VA. This is just one example.

Maybe I’m missing your point.

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19 Viking1 June 1, 2017 at 1:21 pm

The point is quite clear:

if the taxpayers financed the research in the first place, why shouldn’t they get the spoils?

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20 Zach June 1, 2017 at 4:06 am

Speaking as a PI in lab science: If median project size goes down, overhead goes up… more projects to administer, more grant applications to oversee, more research support required because less common that grants are large enough to fund a self-sufficient lab (becoming increasingly common, especially in USA, for labs to use almost no university-provided scientific resources and outsource instead).

I support dropping overheads to European levels (typically ~10-25% of ALL costs; not adjust-direct-costs like USA) combined with increased institution-level funding. Also, MUCH less effort directed towards subsidizing labs in high-cost-of-living/doing-business areas. If you want to run a lab at a university in San Francisco or NYC and need to pay your people more and pay huge overheads, that’s on you; now this aspect of cost/benefit is mostly ignored in grant review with overheads negotiated separately.

Of course, that’s in a universe of an efficient, non-corrupt Federal science administration… which even with an unrealistically virtuous Federal government will face the same state-by-state problems that plague base realignment & closure, etc (of course, pan European science funding is very successful with even bigger concerns here). But I could see a state like California cutting a deal to unify public/private universities and public/private funding agencies into a single administration … would help with some things; especially if it created some kind of IP umbrella to remove red tape for collaboration.

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21 TMC June 1, 2017 at 8:25 am

“MUCH less effort directed towards subsidizing labs in high-cost-of-living/doing-business areas.”

+1 Do this with ALL federal spending.

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22 mulp June 1, 2017 at 1:26 pm

What prevents researchers from applying for and getting NIH grants in Mississippi, West Virginia, Alabama, etc? They could get some big university to establish a research lab/projects in those very poor States like they get support for labs and research in Antarctica, Africa, ….

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23 Thomas June 1, 2017 at 9:52 am

“Also, MUCH less effort directed towards subsidizing labs in high-cost-of-living/doing-business areas. If you want to run a lab at a university in San Francisco or NYC and need to pay your people more and pay huge overheads, that’s on you”

This is critical.

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24 ItMe June 1, 2017 at 12:53 pm

“Also, MUCH less effort directed towards subsidizing labs in high-cost-of-living/doing-business areas.”

I don’t have a real position on the lab subsidies but if they exist then they should be directed to high-productivity labs. Science and technology development seem to have strong geographic network effects. So lots of those high-productivity labs will be in high-cost-of-living areas.

Shutting down one lab at UCSF to fund two labs in Omaha seems unwise. Do private technology companies direct their R&D budgets this way?

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25 Harun June 1, 2017 at 1:54 pm

Taxing one man at a higher rate because he likes to work and then sending a check to another man who earns less because he doesn’t like to work seems unwise as well, but I’ve been told income inequality is a major issue and redistribution needs to happen.

So, sorry, academics will have to take their medicine with the rest of us.

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26 Harun June 1, 2017 at 2:01 pm

Oh, and yes, private industry will move R&D to lower cost areas where possible, but that’s really not important.

Remember, government is supposed to be tweaking incentives and redistributing wealth to make a fairer society.

Its not fair that SF has a research lab and Omaha does not.

The government is in a great position to relocate a lab, and have all of the workers dutifully relocate with the lab. It could revitalize a poor region and all that jazz!

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27 Brian June 2, 2017 at 10:07 am

+1 And see Matt below. Presumably the IDC rates at places like Scipps and Mass General are heavily influenced by location. As Zach says, “MUCH less effort directed towards subsidizing labs in high-cost-of-living/doing-business areas.” As a reviewer who has seen many applications from both universities and small businesses, university IDC rates are typically 2-3 fold those of small businesses. (Keep in mind the published rates are the negotiated rates, not the requested rates, which usually are significantly higher). Where are the “efficiencies of scale” at places like JHU, Harvard and Stanford?

But Tyler, why do you think a reduction in IDC rates would lead to more, but smaller, grants? Why not the same? R01 and R21 direct cost caps are unlikely to change. PA and RFA budgets would supposedly be reduced only to reflect the smaller IDC rate allowances. So the same number of applications should be funded, no? Seems like a wash in that regard, with the “saved” money going to the wall or something.

This just came out (paywalled): http://science.sciencemag.org/content/356/6341/893

“Rates vary widely because of geography—costs are higher in urban areas—and because research expenses differ. Biomedical science, for example, often requires animal facilities, ethics review boards, and pricey equipment that aren’t needed for social science. The base rate for NIH grants averages about 52%—meaning the agency pays a school $52,000 to cover overhead costs on a $100,000 research grant (making
overhead costs about one-third of the grant total).”
and
“Adopting the 10% rate, the documents show, would cut NIH’s spending on indirect costs by 71% from 2016, from roughly $6.5 billion to $1.9 billion, while keeping direct research spending flat at about $17 billion in 2018.”

But no discussion of the indirect cost rates charged by small business grantees (through the SBIR/STTR programs run by NIH, DOD and others). They have the same facility costs such as animals and high-end equipment as do universities. Again, as Zach noted, much of the work that uses such facilities is increasingly being outsourced. In which case those costs are borne by the direct cost portion of the grant.

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28 Luis Pedro Coelho June 1, 2017 at 5:03 am

The text mixes together the idea of lowering overheads with moving towards more project-oriented funding, which are not really related at all. The current system is an odd and often not-made-explicit mix of project- and researcher-based funding (both on the public and private sides).

Btw, I’m not sure who chose the caption to the picture, but lab gloves can easily be charged to a grant, not overhead (although some labs may prefer to just get these kinds of low-cost, basic, equipment elements out of general funds so as to ease administration).

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29 Matt June 1, 2017 at 5:23 am

“It is hard politically to justify such a general transfer to universities when federal money is tight”

it’s an interesting empirical question as to whether the overhead rate actually supports the cost of the science being done, whether it’s a transfer to schools, or the schools are in fact subsidizing the federal research. The overhead rate at institutions that act like research universities but without the undergraduate population tend to have much higher overhead rates. Scripps is almost 90, Mass General is 74, so on (http://datahound.scientopia.org/2014/05/10/indirect-cost-rate-survey/), which is probably closer to the ‘true’ overhead rate. The question then is how much more will undergraduate tuition/donations be asked to increase subsidies to basic research.

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30 Clx June 1, 2017 at 7:30 am

This gets at the true problem with this debate. Each institution (and each federal contractor generally) classifies it’s own overhead. These are audited by the respective agencies on a regular basis. Capping rates will only force institutions to particularize expenses so they can be directly billed. It will be inefficient to bill each pen and each fraction of a administrator’s or secretary’s hour. Why are we capping research grant overhead but not defense contractor overhead? If it’s a good idea there’s much more savings to be made…

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31 Michael Cox June 1, 2017 at 7:58 am

Unless they regulate what constitutes a service center you’ll see Universities move all labs to a service center model so they can be billed directly. So instead of one rate to audit now you have hundreds if not thousands. Which will only increase administrative burden on both Universities and Federal Agencies. Also the pressure to raise tuition will continue as the full overhead already is being subsidized through tuition. (The admin portion of the F&A is capped at 26% and most major research universities I know are well above the cap.) Source: Work in Research Finance & Accounting (used to be a Service Center Cost Accountant)

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32 Doug Tree June 1, 2017 at 10:46 am

I think this is a super important question. My impression is that the race to be a highly-ranked university is an arms race (see OldCurmudgeon’s comment above about how nice the buildings are), and the most prestigious institutions want a top research program. So, I would guess that at most universities, tuition is actually subsidizing research (through infrastructure costs and most obviously through paying the salary of faculty). Most students don’t realize this, and most probably don’t want it that way. In fact, in my experience 95% of undergraduate students have no idea what a professor actually does with most of their time, and don’t understand why they aren’t teaching 5 or more classes like their high school teachers.

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33 megamie June 1, 2017 at 7:17 am
34 Art Deco June 1, 2017 at 12:32 pm

I’d say ‘buwahahahaha’ but I’m figuring that people actually responsible for these disasters will be held harmless. The top man will ‘resign’ and minor functionaries will be laid off. The real miscreants are in-between and will stay.

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35 liberalarts June 1, 2017 at 7:29 am

Matt is onto a good point. I am an administrator at the opposite of a Scripps–a teaching college. We don’t have a negotiated rate and thus take the 10% default overhead on any fed grants that we get (sometimes research, more often teaching initiatives and underserved student access). I can tell you that at the 10% overhead rate, we lose money on every grant that we get, with our overhead cost increases to administer the grants costing more than 10%. That is, of course, a truth telling mechanism showing that we really want the grant, but it means student tuition being diverted to those costs.

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36 Art Deco June 1, 2017 at 7:45 am

but it means student tuition being diverted to those costs.

That’s as it should be. Finance your research from retained earnings, hustle money from foundations and corporations, or, if you have to, hit up the state government or even the local government. You’ve got 10 million people living in Los Angeles County with a collective personal income of somewhere north of $400 bn. If they’re not willing to cough up a few bucks for the Scripps Institute of Oceanography, maybe you should work on making your institution less putzadelic.

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37 AlanG June 1, 2017 at 9:45 am

@Art Deco – I think it’s Scripp’s Clinic and Research Foundation which is a private research organization in La Jolla (and a former employer of mine a lot of years ago). Scripps Institute of Oceanography is part of UC San Diego.

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38 Art Deco June 1, 2017 at 12:33 pm

My regrets.

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39 Harun June 1, 2017 at 2:06 pm

Make lemonade…slap a dolphin on the logo when asking for funds and let the donor think its for oceanography instead of oncology.

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40 jim June 1, 2017 at 3:35 pm

Whether or not a given univ loses $$ On overhead is also a function of admin efficiency.

Presumably also research institutions like Scripps also have more and more sophisticated labs and equipment that demand greater support, so the higher overhead at these institutions doesnt imply that support is being drawn from tuition at lower overhead schools

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41 Art Deco June 1, 2017 at 7:40 am

How about paying no overhead? Do the advocates for public funding for research ever make an argument that central co-ordination and control of the sort you get from federal funding is at all necessary or even advisable? It’s time to turn off the spigot of federal patronage to higher education.

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42 Doug Tree June 1, 2017 at 11:11 am

Ok, I’ll bite. As an advocate for public funding of research, I’m not sure that the central coordination is a super important feature of our current system. There are many agencies that fund science, and they are definitely not very coordinated. I think the reason science is funded at a federal level is a historical remnant of WWII and the bomb, and to a lesser extent the cold war and the space race.

But I’m all for reform. My question for you is who should pay for basic science? Or do you think it is all worthless anyway?

If you think basic science is worthwhile, then the central problem is of course that basic science is a public good — diffusely shared benefits but localized costs. And of course, while the ROI is likely very high, the time horizon is too long for a typical corporation. (In my experience, for a corporation the project must deliver within a year or less. The basic science time-scale is much longer.) The only private institutions that engage in basic research that I’m aware of are either monopolies, regulated utilities or *very* large companies (e.g. Exxon Mobil). Maybe you could argue that crowd-sourcing or a donation/charity based model could be effective, but my impression is that funding model currently only comprises a tiny fraction of basic science funding.

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43 Art Deco June 1, 2017 at 12:55 pm

My suggestion is the same as it was to you the last time, Mr. Tree, and the same one I offered above. Finance your research out of tuition revenues, hit up the corporations, hit up the foundations, and try your hand at state and local governments, the former being the actual proprietors of higher education.

I don’t think ‘basic research’ is ‘useless’. I have a strong suspicion that a great deal of it is wheel-spinning or a manifestation of a corollary of Parkinson’s law, but that’s not my point. (And I used to correspond with a disaffected employee of the Oak Ridge Lab who insists that fraud is routine). My point is that it’s not a federal function. The career prospects of scientists are also not a matter of much public interest.

There’s tremendous bloat in higher education. See, for example, Allan Bloom’s remark on the waste incorporated into the conventions of the baccalaureate degree. Briefer and more specialized programs should be the order of the day. Institutions which know their book and do not fritter away resources on what are (contextually) boutique majors which attract few students are to be praised.

The institution I know best insisted on having a physics department and hiring 1 professor for every major subspecialty – seven in all. A grand total of 1.4% of the student body enrolled in the faculty of arts and sciences majored in physics. But they had 3.5% of the faculty, a building they shared with just one other department, expensive equipment, and seemed to think they lived in an economy of abundance wherein scarcity and cost did not apply to them. (The retired acquisitions librarian at that institution had comical stories about the physics department). Nationally, btw. a grand total of 0.4% of baccalaureate degrees issued are in physics. It’s really something that belongs nowhere but research universities, abnormally large teaching institutions, and a very few other loci which have elected to make it a specialty. The same is true of geology. Chemistry has more of a constituency, but does not belong everywhere. Astronomy and Meteorology belong at only a few institutions.

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44 Just a thought. June 1, 2017 at 1:54 pm

Physics and chemistry do a ton of “service teaching” meaning teaching classes to non-majors. So physics may have had 1.4% of the majors, but likely taught a higher fraction of the classes. This is principally because all premeds pass though those classes though they are majoring in bio, public health or whatever.

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45 Art Deco June 1, 2017 at 2:23 pm

Don’t think so.

In any case, you have the ‘service teaching’ because of distribution requirements. The distribution requirements are the vestiges of a core curriculum that disappeared a century ago.

all premeds pass though those classes

I think there’s commonly a token physics requirement for pre-meds and pharmacy students. I doubt it’s anything but conventional or justifies hiring seven professors to teach 38 students.

46 jim June 1, 2017 at 7:01 pm

Universities are for educating, not job training. The biggest prob that I see in employment is that graduates have too little breadth, not too much, especially in science. IMO less “for non-major” things like “when dinosaurs ruled” and more basic science, even if that means fewer grads

47 Butler T. Reynolds June 1, 2017 at 8:24 am

Maybe, like almost everything else, if your activity or institution requires a political subsidy then that might be a strong indication that it should not exist at all.

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48 Doug Tree June 1, 2017 at 10:38 am

Of course, under this logic, we also do away with police, fireman, roads, schools, the military, etc.

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49 The Anti-Gnostic June 1, 2017 at 12:21 pm

It’s not realistic, but it would be interesting to see what would happen if taxpayers were able to earmark their remittances.

Most people will pony up for safe neighborhoods and smooth, functional roadways because those are (probably) truly public goods. And I bet research to repair damaged neural tissue or synthesize human cartilage would always find ready donors. Non-replicable social science BS and schemes by mad scientists to poison the atmosphere with giant clouds of sulfuric acid not so much.

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50 Art Deco June 1, 2017 at 1:05 pm

Again, a public good is something of use with regard to which paying beneficiaries cannot be distinguished from free-riders, hence the incentive for private parties to produce them collapses. (There’s a different optimization problem concerning goods where consumption by one party does not diminish the consumption opportunity of another). The question regarding scientific research is under what circumstances there are any beneficiaries.

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51 Art Deco June 1, 2017 at 1:00 pm

Except for the schools, all the above are public goods.

As for the schools, they are a fee-for-service enterprise. The utility of public agency is that it addresses distributional complaints. Vouchers can do that as well.

I certainly do not wish to do without police and fire departments. Professors producing papers which will be read and cited by one other professor are options.

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52 AndrewL June 1, 2017 at 8:30 am

The major reason why overhead is so great is due to government regulations. Title IX compliance, diversity compliance, etc etc. So a great way for the government to reduce overhead would simply to reduce regulations.

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53 Bill June 1, 2017 at 8:41 am

Aside from what gets considered as overhead for purposes of federal regulation or grants, there is a general question of what should be categorized as overhead in a research entity.

In an antitrust case, classify fixed costs and separate them from variable costs, or identify semi fixed and variable costs, one would take categories of costs and run regressions to determine which category of costs (regardless of how accounting firms treat them) vary with output and which do not vary with output.

But, with research entities, does a computer system or a library’s cost vary with output. I doubt it. Those are fixed costs, but are necessary for the researcher to do the work. Same with general lab equipment, and equipment not purchased specifically for a project.

I would expect that most research involves fixed costs, particularly when you include tenured faculty.

Variable costs might include lab assistants and graduate students who are hired for a specific project.

But, they are expendable anyway.

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54 Bill June 1, 2017 at 8:45 am

I think what should be looked at is not what is fixed or variable, but rather the amount allocated for administration (HR, grant application, grant administration and oversight, etc.)

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55 AlanG June 1, 2017 at 9:50 am

Lab assistant and graduate student salaries are built into the grant application and are not overhead costs. A computer center and library are central facilities and there could be overhead payments to those in addition to what the university is spending directly. The central issue relates to the physical plant (lights, power, janitorial service, etc.) that are apportioned out between what the institution pays our of operating funds and that which is contributed to by the indirect costs from the grant. It used to be that public universities charged off less for indirect costs than grant applications as most of the operating revenue came from the state. This is likely no longer the case because of budget costs.

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56 Bill June 1, 2017 at 10:04 am

Agreed. This fixed (overhead) and variable thing is a bit silly, however, and masks what should be obvious.

For example, I can make a fixed cost a variable costs: Let’s say a university has a lab facility. What would it cost to RENT a comparable lab facility; now I’ve made overhead variable. I would imagine that the rental cost would be very high for a comparable facility, but that’s not all that comes with a university facility. Sometimes “overhead” costs–forget about accounting definitions for a moment–are simply payments for access to the talents of an institution that has been developed over time. I am sure that there are laboratories around MIT, Stanford, CalTech, etc. that one could rent, but, again, what you are paying for is the accumulation of talent and access to it, which you may call overhead, but which I suspect is really payment for access to talent.

Again, I would come back to focusing just on administrative costs, and forget about the rest, because what you are really doing is purchasing in a market a combination of talents and facilities when the government selects–among alternatives–someone to get a grant application.

It’s a market.

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57 Daniel Weber June 1, 2017 at 10:53 am

You should always be skeptical when outsiders want to meddle in the internal funding of another group. They don’t know what they are doing. A lot of things that look silly to outsiders turn out to be essential.

However, if the outsiders are being asked to write blank checks, they’re going to demand a bunch of (expensive) oversight.

As much as possible, we should just use market forces. I don’t care what Ford Motor Company’s internal funding issues are; I just look at the price of the car. If they are wasting a bunch on overhead, that’s their problem.

You can’t get to a nice market in all areas, so: how close can we get here?

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58 Alan June 1, 2017 at 12:35 pm

+1

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59 adam June 1, 2017 at 11:23 am

The most immediate impact of this would be universities reclassifying costs as direct costs. There’s no hard line between the two. So this would at most be a wash, and will likely result in time wasted recording time and property use to particular projects. Hard to see how that benefits the government.

The other thing is that a lot of overhead is caused by the requirements the federal government imposes in grants, i.e. EEO reporting, etc. The government paying for an allocated share of overhead is a rough way of paying for at least some of the costs its own requirements are imposing. If the government isn’t going to pay for overhead, then some grantees, likely the ones with only small grants, are likely to conclude that its not worth the costs to accept federal grants.

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60 mulp June 1, 2017 at 1:34 pm

Are you saying taxpayers should totally trust everyone getting government funding to never violate the public trust and thus never require any accounting of how money is spent?

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61 adam June 1, 2017 at 1:54 pm

No, I’m not saying that at all. You apparently don’t understand what indirect costs and direct costs are. Indirect costs also have to accounted for. The difference is in the way that they are allocated to projects- direct costs are allocated by assigning the cost to specific project. In order to do that, you have to track what time/property is used on each project. Indirect costs are grouped in a pool and then allocated to all of the organization’s projects based on some logical formula

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62 athEIst June 1, 2017 at 1:59 pm

Wasn’t there a scandal at Stanford a long time ago about this? The University charged the max(iirc 76%) on everything including flowers on the President’s desk. They bought him a bed too(a pricey one).
Then there was a audit.

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63 Harun June 1, 2017 at 2:09 pm

How about we start firing some people?

Let’s start with the UC regents who think its cool to hold $270/head parties in SF hotels the day before they raise tuition?

Or hold $13,000 parties for retiring regents?

When no one is scared of accountability, this is what you get.

A fish rots from the head.

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64 Bill June 1, 2017 at 3:23 pm

How much does the government pay to rent Mar Largo or space in Trump towers.

Fish rots from the head, as you would say.

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65 adam June 1, 2017 at 3:39 pm

UC regents’ parties are not (properly) included in overhead costs anyway, so not really relevant to the discussion.

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66 Stevie Welles June 1, 2017 at 3:58 pm

It’s painfully complicated. Overhead rates have risen as regulation has risen. Regulation has risen as a desire to ensure low incidences of fraud have risen. Administrative salaries have risen as the need for expertise in regulatory matters have risen. Faculty salaries have risen as the arms race for research rankings has risen. Overhead costs have risen as near-continuous prestige-oriented building construction has risen. I guess the only question is, have these things resulted in “better” research?

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67 Edgar June 2, 2017 at 1:16 am

Tyler’s notion that a country with a $20 trillion national debt and projected increases in annual deficit spending for the foreseeable future could not possibly reduce research funding and that all research spending is equally valuable deserves a little scrutiny. One could argue I suppose that the multiplier for research spending is higher than that for tax cuts. Good luck finding evidence to support that. Or one could argue that the research funded actually is “valuable” as Tyler claims and its benefits outweigh the costs of additional debt. But if this were the case wouldn’t someone be able to produce examples of such research? As it is, all we get are vague generalities about research in the abstract. There is little to no evidence that reduced research funding would have consequences beyond the recipients.

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68 matt June 2, 2017 at 1:38 pm

Using an internet message board to ask if there are any examples of useful government funded research sort of answers itself, I would think.

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69 Max June 2, 2017 at 7:33 am

I am a bit confused about the meaning of overhead. There is a clear difference between infrastructure overhead (CERN, Large particle collidor) and administrative overhead (hr, student and faculty administration). The former I can understand the latter is mostly wasted.

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