Friday, February 15, 2013

Eric Cantor's Corner Solution for the NSF's Social Science Budget

House Majority Leader Eric Cantor wants to offer the social scientists a NSF budget of $0.  He is a smart man who argues that there is an opportunity cost to giving the "wacky" social scientists $250 million a year.  He argues that the scarce $ could be handed to "real scientists".   He writes:

Republicans and ScienceTo the Editor:Paul Krugman paints Republicans as anti-science (“The Ignorance Caucus,” column, Feb. 11). Unfortunately for Mr. Krugman, facts don’t support the allegations. The effort to double funding for medical research at the National Institutes of Health began with Congressional Republicans. It was the Republican House alone that in November passed legislation ensuring that foreign-born students educated in the sciences at American colleges and universities have the opportunity to remain in this country and contribute to our nation’s scientific endeavors.
Mr. Krugman singled me out for criticism because I proposed increasing medical research funding to help save lives by reducing funding for lower-priority programs like social and political science research. Government can’t afford to pay for everything, and governing is about making choices. 
The National Science Foundation finances important research helping find cures for devastating diseases. But the foundation has only enough funds to support 15 percent of the applications it receives for research grants in the biological sciences. Yet we spend nearly $250 million annually on research in the social, behavioral, economic and political arena, such as a recent $266,821 grant to figure out why voters chose the candidates they did in the 2010 election. This money could fund another 1,000 grants in life sciences!
Reprioritizing government’s existing spending to favor saving lives over more political science research is not anti-science; it’s common sense.
ERIC I. CANTORWashington, Feb. 14, 2013The writer is the House majority leader.

So, the issue here is whether the best economics project is better than the marginal science project.  This raises a fascinating point.  The cost to the NSF of a science grant or an economics grant is measured in $ but the benefits of both types of grants are hard to measure and are they comparable?  This is a classic "apples" to "oranges" comparison issue.

Recall the definition of a corner solution.

Suppose that you gain utility from eating pizza and drinking beer so that your utility = pizza + beer

Suppose that you can use your scarce time to make pizza or to make beer.  God has given you 1 hour of time and your production function of pizza = 10*minutes spent making pizza while your beer production function = beer = 2*minutes spent making beer, your time constraint = 60 = minutes spent making beer + minutes spent making pizza.

You can immediately see that the solution is a corner solution. You will spend 60 minutes making pizza and will devote 0 minutes to beer.  Eric Cantor is making the analogy that life sciences is to pizza as economics is to beer.   Is he right?

While I can't speak for the other social sciences, I think that the economist have earned their small pie.  Milton Friedman taught the world how to fight hyperinflation.   Prescott and Kydland taught the world about the power of credible rules over discretion.   Heckman has offered some social value through his research on human capital formation.   By funding economics, the NSF raises the probability that excellent minds enter the field and remain academics (rather than becoming full time consultants) --- this creates some option value that some future economics superstar may help to elevate our humble craft to being a "real science".

I actually think that Cantor's remarks will create a healthy marketing approach as economists will be forced to explain how we are socially useful people versus just being another set of rent seekers.  Fellow economists, how do you increase the pie?