TOWARD A NEW ECONOMICS OF SCIENCE

Science policy issues have recently joined technology issues in being acknowledged to have strategic importance for national 'competitivenes s' and 'economic security'. The economics literature addressed specifi cally to science and its interdependences with technological progress has been quite narrowly focused, and has lacked an overarching concept ual framework to guide empirical studies and public policy discussions in this area. The emerging 'new economics of science', described by t his paper, offers a way to remedy these deficiencies. It makes use of insights from the theory of games of incomplete information to synthes ize the classic approach of Arrow and Nelson in examining the implicat ions of the characteristics of information for allocative efficiency i n research activities, on the one hand, with the functionalist analysi s of institutional structures, reward systems and behavioral norms of 'open science' communities-associated with the sociology of science in the tradition of Merton-on the other. An analysis is presented of the gross features of the institutions and norms distinguishing open scie nce from other modes of organizing scientific research, which shows th at the collegiate reputation-based reward system functions rather well in satisfying the requirement of social efficiency in increasing the stock of reliable knowledge. At a more fine-grain level of examination , however, the detailed workings of the system based on the pursuit of priority are found to cause numerous inefficiencies in the allocation of basic and applied science resources, both within given fields and programs and across time. Another major conclusion, arrived at in the context of examining policy measures and institutional reforms propose d to promote knowledge transfers between university-based open science and commercial R&D, is that there are no economic forces that operate automatically to maintain dynamic efficiency in the interactions of t hese two (organizational) spheres. Ill-considered institutional experi ments, which destroy their distinctive features if undertaken on a suf ficient scale, may turn out to be very costly in terms of long-term ec onomic performance.