Supply and Demand of Academic Research? My question needs prefacing. I was thinking about an analogy between research and a macroeconomy.
In the macroeconomy, there's a supply of investment funds from households that ultimately goes toward firms' production of goods and services. Households then consume those goods and services, and judge the value added by those goods and services to their original investment. The cycle repeats. Government acts as a large &quot;resource allocator&quot; by investing some fraction of household investment funds at their own discretion, and the &quot;outside world&quot; likewise contributes to investment funds, consumes, and produces some of the goods and services.
It seems natural to extend this analogy to research funding and &quot;consumption.&quot; The private industry produces research &quot;investment&quot; money that is then used by firms and government to fund research. That research is then &quot;judged&quot; for its viability by its spawned correspondence in the short term (forward citations) and the related goods and services ultimately produced in the long run. Some fraction of the value added by that research then goes back into investment funding that repeats the cycle.
An idea follows from this analogy. Just as there's a finite propensity to &quot;consume&quot; and a finite supply of investment funds, there's also a finite amount of productive research that can be performed and a finite supply of research funds. This seems to imply that, though the government can choose to throw more and more investment into any research field, there'll eventually come a point where there aren't enough labs that can draw up useful grants and then reasonably complete them for that investment. Research funding supply &quot;shocks,&quot; such as government suddenly quadrupling fundamental research spending in renewables, may have a diminishing return issue.
I understand that there are several conflated classifications here (research vs. R&amp;D) and that many segmentations exist for &quot;research&quot; that may behave differently (laboratories vs firms vs industries). But I'm only interested in the behavior of research grouped as a whole.
So my question is this: are there any analyses of research as a whole that treat it somewhat like a macroeconomy? Is there any value to such an analysis? And if not, why?
Yes, there are such studies. Here is the result of one. The Economic Laws of Scientific Research by T. Kealey.
His basic thesis is that private firms must find out how to motivate researchers. Only part of this is money. It also includes many things that come under the heading &quot;academic freedom.&quot; Freedom to publish, to exchange ideas with colleagues, to be or host a visiting speaker/lecturer, to go to some lab or archive or special site with special resources, etc. etc. etc.
If government takes money through taxes and gives it out, there are many downsides. The persons in government don't usually know what is &quot;good&quot; research. Their motivation is to stay in power rather than doing what is, in any sense, the best thing with the resources. Governing persons do what they calculate will keep them in power. Period. Because anybody who does not do so is soon not in power. Sometimes this results in good things. Usually, mostly always, it results in mediocre things at best, or horrors at worst.
In addition, operating the government funding agencies and tax machinery uses up a non-trivial portion of the total money. And applying for grants uses a non-trivial portion of the university people's time.
Consider a company such as an electronics firm. They want some research done, but don't want to buy a complete specialist lab as they only want it once. So they go to a university that has such a research program. And they must find a way to get those university people to agree to do the research for them. So they drop a stack of cash on the research lab. And another stack of cash on the university. And the only restriction is that the research be held back from publication just enough, and just long enough, so that the electronics firm can commercialize the results.
As to how the lab and the uni spend the money, they literally do not care. The lab can buy new equipment, pay post-doc salaries, buy journal subs, whatever they like. The university can use their cash any way they please. The money can stay in the same department as the research was done. Or go to overhead. Or be used to subsidize some other department that does not have corporate clients. Or be used to fix up the landscaping around campus, or whatever the uni decides.
The important thing is, the uni and the researchers get to decide how to spend the money. The electronics firm gets their research and goes away happy, not placing any restrictions on the  money. And once they have commercialized it, the researchers can usually publish the results, possibly withholding certain details such as detailed measurements required for the commercial process. And even those are usually available to researchers on a non-disclosure agreement basis.
The net result Kealey found was this. Private research funding winds up producing roughly 50% more money for the universities. And the restrictions on how they spend it are far less with private money. And research of every kind is funded more. Not just &quot;practical&quot; things like making better electronics. But abstract things such as philosophy, art theory, linguistics, etc.
What does it mean? It means that, by treating research as a human activity that needs to be negotiated for in the same way as any other good, service, or commodity, you wind up with more and better results. And so, university research can get on the slope of The Most Important Graph in the World. The application of freedom to human interaction results in exponential expansion of human knowledge. That in turn results in exponential expansion of every other measure of human well being. A free market for research is objectively a massively preferred choice.