ECONOMICS 4910/8916


                              SPECIAL TOPICS IN ECONOMICS:





                                                                     Spring 1994


                                                       last updated:  August 30, 1994





Arthur Diamond


Office:  CBA 512E


Office phone:  554-3657


Office Hours:   Tues. 11:15am-12:15 and 4:45-5:45pm; Thurs. 11:15am-12:15; and by appointment.


LAN and CWIS userid:  adiamond


Internet address:




Seminar Description:

            The three credit-hour seminar meets on Tuesdays from 6-8:40 pm.  The course will be conducted as a seminar with ample student participation, including a research paper.  Among the questions to be considered will be:  How does scientific research influence technology and economic growth?  Can the government, as part of an "industrial policy" pick promising science projects and technologies of the future?  How should scientists be rewarded to increase the speed of scientific progress?

            Approximately the first nine weeks of the seminar will focus on instructor-led discussion of important topics in the economics of science.  Readings for this section of the course will consist mainly of important, usually recent, academic papers on the topics under discussion.

            Part of one session (to be held in the library) will focus on the characteristics of good writing style in economics and on effective research techniques.  Under the latter heading we will learn how to perform literature searches using a powerful, but initially confusing, research tool:  the Social Science Citation Index.

            During the last five weeks, or so, of the seminar, instructor-led discussions will be significantly supplemented by student presentations on topics related to their term papers.


            ECON 2020 or permission of the instructor.



Resource Materials:

            The core reading assignment for the course will be an extended review essay by the instructor, entitled "The Economics of Science."  Additional journal articles and chapters from monographs will be assigned on a weekly basis related to the topics that are to be discussed.  These readings will be made available at the reserve desk of the library.



491 Course Requirements:

            Course grades will depend on the grades received on a midterm (30%), a final exam (40%), and a medium-length paper (30%) on a topic drawn from those covered on the reading list.  The midterm will consist of a combination of multiple choice questions and essay questions.  The short paper should be 10-15 pages of double-spaced, typewritten text (not including any footnotes and references). 

            Undergraduates are not required to give presentations, but may earn "extra credit" points by doing so.  The number of points earned will depend on the quality of the presentation, but will have a maximum value of 10% of the total points otherwise possible for the course. 



891 Course Requirements:

            Course grades will depend on the grades received on a midterm (30%), a class presentation (10%), an extended research paper (40%) on a thesis related to one of the topics covered on the reading list, and a final exam (20%). 

            In the second half of the course, each graduate student will be expected to give a summary presentation, and then lead discussion on one of the topics listed in the annotated reading list.  The paper should be 20-25 pages of double-spaced, typewritten text (not including any footnotes and references).




            Exams will be attentively monitored.  The result of academic dishonesty will be a grade of F for the seminar and a recommendation for expulsion from the university.




            The presenter will assign readings to fellow students two weeks prior to the seminar presentation.  The presenter should either (1) provide two photocopies to me to place on reserve or (2) provide sufficient photocopies for each student to have her own copy.  Photocopies should have full bibliographic information on the top of the first page of each separate source.  Full bibliographic information means:  author(s), article or book title, volume number (where applicable), journal title (where applicable), publication date and pages.  A presenter will be expected to give a summary presentation, and then lead discussion on one of the topics listed in the annotated reading list.  The presentation should be on the same topic as the research paper, but the presentation should be more self-consciously designed so that all reasonable positions on the topic are given a credible defense.







1.         1/11/94            Description of course.


2.         1/18/94            Introduction to the Economics of Science.  Also:  CWIS, Internet, Uncover and the use of computers in research.


            Dasgupta, Partha and Paul A. David.  "Toward a New Economics of Science."  Center for Economic Policy Research Publication No. 320, October 1992.



3.         1/25/94            Utility-maximizing accounts of the behavior of scientists.


            Hull, David L.  "Altruism in Science:  A Sociobiological Model of Cooperative Behaviour among Scientists."  Animal Behaviour 26 (1978):  685-697.


            Diamond, Arthur M., Jr.  "Science as a Rational Enterprise."  Theory and Decision 24 (1988):  147-167.



4.         2/1/94  Research tools and clear writing in the economics of science.  Bibliographic search using Genisys and Uncover.  Grammatik and writing style.  Meet in library (in Room 304); Library resources:  journals; SSCI; ABI on CD-ROM; journals.  Writing style in economics; discuss McCloskey.  A couple of classics on "macro" issues of the economics of science. 


            McCloskey, Donald.  "Economical Writing."  Economic Inquiry 23 (April 1985):  187-222.


            Nelson, Richard R.   "The Simple Economics of Basic Scientific Research."   Journal of Political  Economy 67 (1959):  297-306.


            Arrow, K.J.  "Economic Welfare and the Allocation of Resources for Inventions."  In Richard R. Nelson, ed., (National Bureau of Economic Research), The Rate and Direction of Inventive Activity:  Economic and Social Factors.  Princeton:  Princeton University Press, 1962, pp. ?-?.



5.         2/8/94  If the reward structure of science is efficient, then why is the variation in research productivity of scientists greater than the variation of salaries?


            Frank, Robert H.  "Are Workers Paid Their Marginal Products?"  The American Economic Review 74, no. 4 (September 1984):  549-571.



            Freeman, Smith.  "Wage Trends as Performance Displays Productive Potential:  A Model and Application to Academic Early Retirement."  Bell Journal of Economics 8 (Fall 1977):  419-443.



6.         2/15/94            Rent-seeking in academia


            Tullock, Gordon.  "The Welfare Costs of Tariffs, Monopolies, and Theft."  Western Economic Journal 5 (June 1967):  224-232 (also reprinted In James M. Buchanan, Robert D. Tollison, and Gordon Tullock, eds., Toward a Theory of the Rent-Seeking Society.  College Station, TX:  Texas A & M University Press, 1980, pp. 39-50.)


            McKenzie, Richard B.  "The Economic Basis of Departmental Discord in Academe."  Social Science Quarterly 59, no. 4 (March 1979): 653-664.


            Brennan, H. Geoffrey and Robert D. Tollison.  "Rent Seeking in Academia."  In James M. Buchanan, Robert D. Tollison, and Gordon Tullock, eds., Toward a Theory of the Rent-Seeking Society.  College Station, TX:  Texas A & M University Press, 1980, pp. 345-356.



7.         2/22/94            Class cancelled by Chancellor Weber due to weather.



8.         3/1/94  Does science promote technological innovation?  (part 1)


            Mowery, David C. and Nathan Rosenberg.  Technology and the Pursuit of Economic Growth.  NY:  Cambridge University Press, 1989.


            Mansfield, Edwin.  The Economics of Technological Change.  N.Y.:  W.W. Norton, 1968.



9.         3/8/94  Does science promote technological innovation?  (part 2)


            Adams, James D.  "Fundamental Stocks of Knowledge and Productivity Growth."  Journal of Political Economy 98, no. 4 (August 1990):  673-702.


            Griliches, Zvi.  "Productivity, R&D, and Basic Research at the Firm Level in the 1970's."  The American Economic Review 76, no. 1 (March 1986):  141-154.


            Jaffe, Adam B.  "Real Effects of Academic Research."  The American Economic Review 79, no. 5 (December 1989):  957-969.



10.       3/15/94            Midterm exam.  (Exam will cover assignments through 3/8/94.) 



11.       3/22/94            Spring Break (no class).



12.       3/29/94            Arthur Diamond, "The Determinants and Career Consequences for a Scientist of Choosing a Mistaken Research Project"



13.       4/5/94  Arthur Diamond, "The Relative Success of Private Foundations and Government in Funding Important Research"


                                    Robert Kingsley, "Is Support for Big Science Based on Scientific Merit or Political Clout?"



14.       4/12/94            David Brandon, "The Rhetoric of Science"


                                    John Radicia, "Do Monetary Incentives Influence What Research is Done in Agriculture?"



15.       4/19/94            Addie Deeds, "Does Gender Discrimination Exist in Science?"


                                    Cindy Dassner, "The Relationship of Productivity and Age"



16.       4/26/94            Papers due.


                                    Jeffry Hebert, "What are Scientists After?"


                                    Cherie Wittmuss, "Forecasting the Supply and Demand of Scientists"



17.       5/3/94  Final Exam.  (Exam is comprehensive and may cover anything covered in course.)


            The research paper should argue for a particular thesis related to one of the topic areas and should reflect critical thought instead of a mere summary of the positions of the published authorities.  (With permission, the student may select a relevant topic that is not included on the reading list).  The paper should be double-spaced, typewritten (or "word-processed) text with a font size of either 10 or 12 points.  For undergraduates, the paper should be 10-15 pages in length and for graduate students, the paper should be 20-25 pages in length (in both cases, not including any footnotes and references).

            Late papers will be accepted, but will have 5% of the possible paper points deducted initially and an additional 1% deducted for each day the paper is late beyond the first day.  Late papers may result in a grade of I (incomplete) for the course on the initial grade report.

            The paper should be written at a consistent level of difficulty.  In most cases, the paper should be written to be understandable by a conscientious undergraduate economics major.  That means you should assume that you are writing for someone who is intelligent, interested, short on time, and does not have a deep knowledge of science or the higher level technical details of economics. 

            The "core" sections of the paper should sum to approximately 10-15 pages for undergraduates and 20-25 pages graduate students.  A few pages extra will not be penalized if the extra pages are truly needed (i.e., not "padding").  

            The paper should have a title page including the title, your name, the name of the course, the course number and the date on which the paper is turned in.  Following the title page, on a separate page should be a 100 word abstract.  Neither the title page nor the abstract page counts toward the page limit of the paper.  Pages in the body of the text (beginning with the Introduction) should be consecutively numbered.  The text of the paper should be double-spaced and should have inch and a half margins on the top, bottom, right and left.  The font size should either be 10 point or 12 point in size.  Please do not put your paper in a special binder that would limit the space for my comments.  Instead, staple or clip it together. 

            Endnotes should be used only if really necessary.  When a source is used in the text, internal references should be given in the text that consist of a parenthetical mention of the author's last name, the date of the publication and a specific page number (if appropriate).  For each brief parenthetical reference, a complete bibliographic reference should be provided in the Bibliography (that is not counted in the page limit).  The ultimate arbiter for reference format is the latest edition of The Chicago Manual of Style.

            Before you turn in your final draft, be sure to submit it to a spell-checking program (available with all major word-processing programs). 

            As you work on the text of your paper, be sure to periodically backup your latest draft onto a floppy disk.  Also be sure to keep a clean copy of your paper for your files---the copy you turn in to me will be marked-up in red ink.

            In your introduction, you should describe your problem and your thesis.  This might be a good place to mention the contents of any broadly relevant articles that you turned up in your UNCOVER, EconLit and other literature searches.  If there is no relevant material on UNCOVER or EconLit for your topic, mention the absence of relevant material (and include in the appendix, a list of the keywords that you used to search under and the articles that resulted).  (That is, it would be very unusual to have no relevant articles appear, so if you claim that there are none, the burden of proof is on you.)  Briefly (in a few sentences) summarize what you will be doing in the rest of the paper. 





            a.         The paper should have inch and a half margins on the left hand side, top and bottom.  (Ample margins make it easier for me to jot down comments.)


            b.         The style for references is flexible, but should be consistent and should provide enough information for the reader to track down a reference, if necessary.  (Some people are very picky when it comes to reference format, so you may make your life easier if you get in the habit of doing it the way these people like.  Perhaps the most widely used style format in economics is that found in:  The Chicago Manual of Style, latest edition, The University of Chicago Press.)


            c.         Attempt to write as McCloskey suggests in "Economical Writing".


            d.         Do not place your paper in a plastic cover.


            e.         Make a carbon or xerox copy of your paper before turning it in.


            f.          The paper is due at the beginning of class on the last day of classes (4/26/94).





Should government take a greater role in picking the winners and losers in science and technology (as the supporters of "industrial policy" suggest)?  (This topic might be more manageable if you focus on one or two particular cases:  e.g., the gov. support of railroads, Japan's support for high definition TV, Al Gore's information superhighway.)  [non-required reference:  Tyson, Laura D'Andrea.  Who's Bashing Whom?  Trade Conflict in High-Technology Industries.  Washington, D.C.:  Institute for International Economics, Nov. 1992.]


Is support for "big science" projects (like the genome project, the supercollider, the Hubble telescope) based on the scientific merit of the projects (as scientists might suggest) or on the political clout of the advocates (as a public choice economist might suggest)?


Was the DARPA government agency a success in funding innovative new technology?  If so, what were the reasons for the success (able people?, luck?, mission?)


Are there important technology "spin-offs" from government science projects such as NASA's Apollo program?  Is this an effective way to advance technolgy, as opposed to investing directly in the area where technological advance is sought?


If government funding of science is cut, what does the economics literature say about the extent to which private funding would fill the gap?  (reference the "crowding out" literature here).


What does the economics literature have to say about how scientific productivity varies with age?


What does the economics literature say about whether there is race discrimination in science?


What does the economics literature say about whether there is gender discrimination in science?


What does the economics literature have to say on the importance of science in the development of technology?


How successful has the NSF been in funding important science?


Does the institution of academic tenure enhance the rate of scientific progress?  (i.e., why is there tenure?)  (include, among others, discussion in Alchian, and in Carmichael)


Is science more accurately characterized as an open meritocracy or as a closed "old-boy network"?


Is rent-seeking an important phenomenon in science?


Do scientists have different motivation from the standard homo economicus (economic man)?


Has the Japanese government been more successful than the U.S. government at supporting science?  (Nobel Prize winners?, applications to technology?)


How successful has the Japanese agency MITI been at implementing an industrial policy to focus resources toward promising technological advance?


Is innovation supply-driven or demand-driven?




Are there increasing returns to scale in department size? 


            Cherfas, Jeremy.  "University Restructuring Based on a False Premise?"  Science 247 (January 19, 1990):  278.


            Recent studies dispute results of 3 earlier studies:  Sir Sam Edwards; Gordon Stone; Ron Oxburgh, 1987 (this was a review of earth sciences, finding that 5 best geophysics departments in US had staffs between 25 and 35)


            Hicks, Diana and James Skea.  Physics World  (prob. sometime in late 1989)


            Jennifer Platt found random relationship between size and productivity


            Gallant, Jonathan A. and John W. Prothero.  "Department Size and Quality." Science 247 (March 30, 1990):  1530-1531.


            This letter refers to the British controversy over size and scale:  Science "News & Comment, 247 (Jan. 19, 1990):  278 and an article by the authors:


            Science 175 (1972): 381


            In economics they found a positive correlation between size and quality; in philosophy, physics and physiology they found no relationship and in bio-chemistry they found a negative correlation.


            They conclude in the letter (p. 1531) that:  "There is little evidence in these numbers for the notion that bigger is better."




The following sample bibliography is intended to illustrate the preferred reference format for several different kinds of publications. 




Ackermann, Robert John.  Data, Instruments and Theory.  Princeton, N.J.:  Princeton University Press, 1985.


Acs, Zoltan J., David B. Audretsch and Maryann P. Feldman.  "Real Effects of Academic Research:  Comment."  The American Economic Review 82, no. 1 (March 1992):  363-367.


Adams, James D.  "Fundamental Stocks of Knowledge and Productivity Growth."  Journal of Political Economy 98, no. 4 (August 1990):  673-702.


Alchian, Armen A.  "Private Property and the Relative Cost of Tenure."  In Economic Forces at Work.  Indianapolis:  Liberty Press, 1977 (essay originally published in 1958).


American Chemical Society.  Directory of Graduate Research 1989.  Washington, D.C.:  American Chemical Society, 1989.


Becker, William E., Jr.  "Maintaining Faculty Vitality through Collective Bargaining."    In Clark, Shirley M. and Lewis, Darrell R., eds. Faculty Vitality and Institutional Productivity:  Critical Perspectives for Higher Education.  New York:  Columbia University, Teachers College Press, 1985, pp. 198-223.


Davis, Elizabeth.  "Compensation Gains of Faculty Unions and the Unemployment Effect of Extending Unemployment Insurance Coverage."  (PhD Dissertation,  University of Michigan, 1988).


Diamond, Arthur M., Jr.  "Age and the Acceptance of Cliometrics." The Journal of Economic History 40, no. 4 (December 1980):  838-841.


       .  "The Career Consequences of Accepting a Scientific Mistake."  working paper, 1992.


Friedman, Milton.  "An Open Letter for Grants."  Newsweek  (May 18, 1981):  99.


Garfield, Eugene, (chairman).  Science Citation Index.  Philadelphia:  Institute for Scientific Information, Inc., 1961-present.


Lucas, Robert E., Jr.  "Incentives for Ideas."  New York Times (April 13, 1981):  23.




Important Dates:

            March 15:  Midterm exam.

            March 20-27:  Spring vacation; no classes.

            April 1:  Last day until 4:00 p.m. to drop course with a grade of "W".

            April 26:  Papers due.

            May 3:  Final exam 6:00-8:40 pm.



Possible course titles:


The Economics and Management of Innovation and Technology


The Economics of Science, Technology and Innovation