Hiya Matt... Have you ever tried to run an organization doing research on 15% overhead? Good luck to you -- it doesn't work if you'd like to have buildings, research labs, fiscal compliance systems, legal compliance systems, and keep the lights on and the water running. The amount of transferring to subsidize other efforts you imagine is, I would venture, grossly overstated. Scientific research is expensive and requires a large infrastructure that is reflected in very robustly substantiated indirect cost rates (aka overhead). But more broadly, the idea the administration is going after medical research to get at sociology departments is laughable. This attack is on universities, experts, and those who can speak with authority, and it is a textbook authoritarian move. The vice president said it out loud, and I quote -- "The universities are the enemy." He meant it -- this is the American Cultural Revolution not an attack on cross-subsidies from physics to English.
I agree with you that Science is expensive. My substack made a different point. Scientists at Universities have been bundled with other fields and the Deans have used the $ for overhead to fund the humanities and non-rational choice social science. This expenditure was diverted from the Sciences and it wouldn’t have been diverted if the sciences had a stand alone college. My column was about fungible budget constraints and Dean discretion. Universities have sprawled and have made some political investments. Universities should return to core science (and I include economics as one of those sciences).
Thanks Matt, I disagree on at least three fronts. First, the bundling you describe isn't always the case because colleges can have divisions that each get their own indirect costs returns. And many have their own colleges. You might have examples where these funds are fungible, but that is not always the case and for the big money it isn't at all (med schools). Second, it isn't indirect costs that are subsidizing humanities -- without appropriate levels of indirect costs the sciences and their research just go away. Third, what a sad world you imagine if you'd wish that only "core science" (in which economics is inexplicably included...) be the focus of universities. I mean, seriously, the righteous response to an attack on higher education isn't to sell out fellow believers in human intellectual growth but to stand up for the endeavor as a whole. History is a humanities discipline and if you don't know history you can't recognize what is happening right now.
This still implies a very odd utility function by the Administration in the amount of harm it is willing to do to STEM departments in order to harm the others.
This seems hopelessly naive and charitable to Trumps intentions.
Also couldn’t the problem be solved by some attempt to align incentives eg the state gives the university $X for its econ department as long as the university gives the econ dept $0.75x.
The principal-agent problem resonated with me as the core of the problem between Trump and the Deans. The fungibility explanation was accurate, but it seemed tangential to your key point: The Principal (The US government as led by Trump) wants to fund research in X and the Agent (the university dean’s) wants to fund other interests of the Deans. The Dean’s are saying if you want research in X you have to fund the unrelated and sometimes other intertwined interests (e.g., DEI) as well. The Principal now realizes he is funding unrelated, and possibly even activities repugnant to him, and responds with “I do not want to fund other than what I want; if you will not do that I will find another institution to perform the research.” Colloquial, “It’s my bat and ball, and if you don’t want to play my game I am taking my bat and ball and going elsewhere.” If the Principal can find other institutions willing and capable of doing the research on his terms, it is likely he will take his money elsewhere. [Bonus points to the students that associate this with the functioning of a free market]
Regarding Eric’s comment, my perhaps erroneous assumption was that it was the STEM projects that brought in the major government funding, while the social sciences (e.g., gender studies) where the ones receiving re-directed funds. Which is currently correct?
Great explanation! I do suggest putting the chosen interior point on each diagram and also labelling it, e.g. (30 food, 80 weapons).
I always thought it was well understood that the reason for the high overhead rates was to make universities appreciate their science departments and try to build them up, so they could get more money they could use for whatever non-science stuff they wanted. If overhead rates are reduced to true overhead costs, the universities will no longer value their science departments. Instead, they will decide to junk physics and chemistry and hire more gender studies and literature professors.
Hiya Matt... Have you ever tried to run an organization doing research on 15% overhead? Good luck to you -- it doesn't work if you'd like to have buildings, research labs, fiscal compliance systems, legal compliance systems, and keep the lights on and the water running. The amount of transferring to subsidize other efforts you imagine is, I would venture, grossly overstated. Scientific research is expensive and requires a large infrastructure that is reflected in very robustly substantiated indirect cost rates (aka overhead). But more broadly, the idea the administration is going after medical research to get at sociology departments is laughable. This attack is on universities, experts, and those who can speak with authority, and it is a textbook authoritarian move. The vice president said it out loud, and I quote -- "The universities are the enemy." He meant it -- this is the American Cultural Revolution not an attack on cross-subsidies from physics to English.
I agree with you that Science is expensive. My substack made a different point. Scientists at Universities have been bundled with other fields and the Deans have used the $ for overhead to fund the humanities and non-rational choice social science. This expenditure was diverted from the Sciences and it wouldn’t have been diverted if the sciences had a stand alone college. My column was about fungible budget constraints and Dean discretion. Universities have sprawled and have made some political investments. Universities should return to core science (and I include economics as one of those sciences).
Thanks Matt, I disagree on at least three fronts. First, the bundling you describe isn't always the case because colleges can have divisions that each get their own indirect costs returns. And many have their own colleges. You might have examples where these funds are fungible, but that is not always the case and for the big money it isn't at all (med schools). Second, it isn't indirect costs that are subsidizing humanities -- without appropriate levels of indirect costs the sciences and their research just go away. Third, what a sad world you imagine if you'd wish that only "core science" (in which economics is inexplicably included...) be the focus of universities. I mean, seriously, the righteous response to an attack on higher education isn't to sell out fellow believers in human intellectual growth but to stand up for the endeavor as a whole. History is a humanities discipline and if you don't know history you can't recognize what is happening right now.
This still implies a very odd utility function by the Administration in the amount of harm it is willing to do to STEM departments in order to harm the others.
This seems hopelessly naive and charitable to Trumps intentions.
Also couldn’t the problem be solved by some attempt to align incentives eg the state gives the university $X for its econ department as long as the university gives the econ dept $0.75x.
Trump is trying to end democracy. And universities are an obstacle to that. It seems you're modeling the wrong problem.
The principal-agent problem resonated with me as the core of the problem between Trump and the Deans. The fungibility explanation was accurate, but it seemed tangential to your key point: The Principal (The US government as led by Trump) wants to fund research in X and the Agent (the university dean’s) wants to fund other interests of the Deans. The Dean’s are saying if you want research in X you have to fund the unrelated and sometimes other intertwined interests (e.g., DEI) as well. The Principal now realizes he is funding unrelated, and possibly even activities repugnant to him, and responds with “I do not want to fund other than what I want; if you will not do that I will find another institution to perform the research.” Colloquial, “It’s my bat and ball, and if you don’t want to play my game I am taking my bat and ball and going elsewhere.” If the Principal can find other institutions willing and capable of doing the research on his terms, it is likely he will take his money elsewhere. [Bonus points to the students that associate this with the functioning of a free market]
Regarding Eric’s comment, my perhaps erroneous assumption was that it was the STEM projects that brought in the major government funding, while the social sciences (e.g., gender studies) where the ones receiving re-directed funds. Which is currently correct?
Great explanation! I do suggest putting the chosen interior point on each diagram and also labelling it, e.g. (30 food, 80 weapons).
I always thought it was well understood that the reason for the high overhead rates was to make universities appreciate their science departments and try to build them up, so they could get more money they could use for whatever non-science stuff they wanted. If overhead rates are reduced to true overhead costs, the universities will no longer value their science departments. Instead, they will decide to junk physics and chemistry and hire more gender studies and literature professors.