Does Academic Publishing Pass the Real Market Test?

Does Academic Publishing Pass the Real Market Test?Author(s): Mark ThorntonSource: Public Choice, Vol. 120, No. 1/2 (Jul., 2004), pp. 41-61Published by: SpringerStable URL: http://www.jstor.org/stable/30025829 .

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Public Choice 120: 41-61, 2004. 41 © 2004 Kluwer Academic Publishers. Printed in the Netherlands.

Does academic publishing pass the real market test? *

MARK THORNTON Ludwig von Mises Institute, Auburn, AL 36832-4528, U.S.A.; e-mail: mthornton©mises.org

Accepted 9 May 2003

Abstract. The academic market test is dissected here into its component decision-making processes to establish a basis for comparing the commercial market test that we know, with the one we seek to pass in academia. Important differences between the two markets exist, but the market test for academic publishing does pass muster and may surpass that of the commercial market. This provides an analytical foundation for resolving issues of professional debate concerning who passes the academic market test.

For it would be an absurd undertaking to banish from the language of economic theory every manner of speaking that is not literally correct; it would be sheer pedantry to proscribe every figure of speech, particularly since we could not say the hundredth part of what we have to say, if we refused ever to take recourse to a metaphor. One requirement is essential, that economic theory avoid the error of confusing a practical habit, indulged in for the sake of expediency, with scientific truth.

Eugen von Bbhm-Bawerk (1881: 135)

1. Introduction

Sherwin Rosen (1997) ignited a debate over the value of heterodox schools of economics to mainstream economics. Using the example of the Austrian school, Rosen concluded that such schools could contribute, as the Austrians did long ago, but that this no longer holds for the Austrian school because its members no longer appear with any regularity in top mainstream journals; thus they fail the "market test."' Caplan (1999) provides a more direct and analytical assessment of the modern Austrian school's contributions, and he too finds them lacking in almost every fundamental aspect.2

* The author would like to thank William Anderson, Walter Block, Robert Ekelund, Jef- fery Herbener, Guido Hiilsmann, Paul Wicks, and Leland Yeager and the referees for helpful comments and criticism.



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Yeager (1997), a member of the Virginia school, did not strongly support the merits of the Austrian school,3 but does argue against using measures such as acceptance rates at leading journals and citation counting as market tests, and, more forcefully, that the market is not a proper test for such things as truth and beauty. In response, Laband and Tollison (2000) support the academic publication process and its market tests. They claim that such market tests may even be superior to commercial markets, because academics have their professional reputations at stake with every decision they make as referees and editors, whereas academic administrators have a limited knowledge on which to base their independent assessments.

Not surprisingly, Austrian economists have not appreciated their role as the primary whipping boy in this debate over the value of heterodox economics, despite numerous statements of affinity and admiration for Austrian economics on the part of the combatants. For example, Block (2000) chal- lenges Rosen's conclusion that Austrians should give up their independent paradigm because they have failed the market test. Block criticizes Yeager as being an unqualified proponent of the Austrian school, but concurs with him that the market test is an inappropriate judge of academic truth and culture.4 Furthermore, he criticizes Laband and Tollison's "free market" admonition to play by the rules of the profession and publish in mainstream journals by pointing out that their own school established the trend toward specialized journals by starting Public Choice.5 He argues that, if taken to its logical conclusion, Laband and Tollison's position would lead to monopoly and tyranny in refereed journals.

Vedder and Gallaway (2000), whose affinity encompasses neoclassical, public choice, and Austrian schools, find that Austrian economics is actually growing in professional importance and that it is complementary to mainstream economics, but Block argues against such complementarity and suggests that while Austrian journals often accept non-Austrian mainstream articles, mainstream journals rarely accept pure Austrian-style articles. An- derson (2000) questions the use of the analogy of a "market test" and presents several cases of market failure in the academic marketplace.

Of course, this interchange is not just about the position of Austrian economics within the mainstream of economic thought. There have been and continue to be several heterodox schools within the economics profession, each of which is critical of the mainstream and working to replace or modify the mainstream approach. Also underlying this debate are the much broader issues of intellectual integrity and how academic research is organized and monitored. Vast resources have been appropriated for academic research, and there are numerous critics who claim that these resources have been put to unproductive, if not destructive ends. On the one hand, Bloom (1987) finds



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a serious systemic crisis in higher education, but he places little emphasis on problems in academic research.6 On the other hand, economists such as An- derson (1992) have argued that most academic research is of dubious value; while agreeing in the main, Sowell (1993) interestingly concedes that the best academic research in the world is conducted in the top (mostly private) universities and that scientific research can have real-world value. Economists are in a unique position to analyze this resource allocation problem, and, according to Gans (2000: vii) the validity and efficiency of the publication process has universally captured the attention of the profession at all levels.

The even larger issue is whether economic theory tends to improve con- sistently over time, as suggested by Milton Friedman, George Stigler and others, or whether the notion of continuous progress from error to truth is a mere "intellectual stunt" propagated by historians of economic thought.7

Rather than attempt to settle interschool disputes or answer the global issues of the validity of academic research, I propose to address the more basic issue of the institutional nature of academic publishing, and to develop an economic model that can subsequently be used to answer these issues on common grounds. This investigation is important because the disputants in the debate over the value of the Austrian school argued their case on the basis of a "market test" in academics without having established a common conception of that test within the context of economic theory. Combatants argued that the Austrians failed the test, that they passed the test, that the test was inappropriate, and that alternative tests should be applied. There was also a general dispute over the differences between the market test in academia and the market test in commercial markets.

These foundation issues concerning the institutional nature of academic publishing are addressed here using basic tools of economic theory and analysis. The focus is on the precise differences and similarities between the traditional markets that we know and the market in academic research that we seek to understand. These differences, in turn, create different forms of decision making, most of which are found to be present, in some form, in both the commercial marketplace and the academic marketplace. A similar analysis was conducted by Walstad (2002), who applied economic analysis to better understand the market in the physical sciences and the methodology of science. In contrast to Yeager (1997), Walstad argued that science is a "market process" and that economic constraints are both beneficial and necessary for science to seek the truth.

In examining the institutional nature of academic publishing from the prospective of economic theory, I find that the academic market test is not the same as the test for success in commercial markets. However, when the core institutions of academic publishing are exposed for their ability to judge



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academic success they are found to approach, or even exceed the ability of the commercial market test to evaluate academic research. This finding would apparently support the conclusions of Rosen (1997) and Laband and Tollison (2000), but it also provides some support for their critics. More importantly, this analytical structure can serve as a basis of future research that investigates the public choice implications and property rights ramifications of current institutional arrangements in academic publishing; it also provides a solid foundation for debates over heterodoxy and the mainstream, and the more general questions concerning the philosophy of science.8

2. The nature of the academic marketplace

It is perfectly reasonable, of course, to apply the term "market" to the process of academic publishing. In everyday language, it is quite common to speak of the marketplace for ideas and to comment on the implications of that marketplace as Coase (1974) has done. It is also quite common for academic colleagues to speak about the potential "market" for an unpublished paper, knowing they are discussing the potential journals that are appropriate for or receptive to publishing the paper. It is also perfectly reasonable in discussing the quality of a publication to examine its impact on the "marketability" of the author in the academic labor market, because publications - or the lack thereof - are a primary determinant of success in the academic labor market. Indeed, a substantial literature has developed around the notion of ranking economists, economics departments, and journals on the basis of objective and qualitative measures of published journal articles and citations.

It is also acceptable, if not required, for modern modeling purposes to apply economic analysis and the economist's notion of the market to institutions where a traditional market does not in fact exist, but where, for purposes of economic analysis, the real-world institution is equivalent or analogous to real-world marketplaces. Economists have analyzed the isol- ated individual - Robinson Crusoe economy, the family, primitive societies, insects and animals, political institutions, warfare, clubs, and not-for profit organizations, and have even applied their tools to science fiction societies and works of fiction. When these "markets" are equivalent to commercial markets, the economist can safely employ the tools of economics to develop theoretical insights and improve our understanding of how these institutions function. Economists from many schools of economic thought, including the Chicago, Public Choice, and Austrian schools, use the tools of economic analysis to analyze, understand, or at least inform us about institutions outside of traditional commercial activity involving monetary exchange.9 The primary



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purpose here is to investigate whether the institutions of academic publishing are indeed equivalent or analogous to real world commercial markets.

Given the immense role of government in higher education, it is important to separate the influence of government from the basic institutions of academic research in order to isolate the characteristics of those institutions - their success and failure - from those attributable to government interventions. Therefore, for purposes of simplification, all institutions of higher education (colleges, universities, libraries, journals and academic book publishers)lo are assumed to be privately owned and not subject to government intervention." These institutions can be for-profit, nonprofit, or subsidized by private sources. This assumption, which is the same starting point adopted by Manne (1973) in his analysis of higher education, elim- inates the potential for government intervention to cloud our analysis and distort our results without fundamentally changing the institutions of academic research. These institutions developed prior to the age of significant government involvement in academic research, and have not fundamentally changed in response to the significant increase in the role those corporations and governments play in the academic publication marketplace.12

The institutions involved in academic research include colleges and universities, academic publishers who publish refereed journals and academic books, and the academic researchers themselves who produce research. Aca- demics also produce educational services (teaching) and other services in connection with their jobs at institutions of higher education, including serving as referees and journal editors. Academic publishers produce journals and academic books for sale to academic libraries, academics, their students, and non-academics. Libraries provide academic journals and books to their membership, which generally consist of academic researchers and their students. Institutions of higher education sell their services to students, their parents, donors, alumni, and others who value both the quality of education, the research production of the faculty, and other services and amenities. Let us stipulate that the level and quality of research output is an important component of the prestige and value of a degree and, therefore, the price students are willing to pay for it. Likewise, research also enters into the willingness of alumni and donors to support an institution financially. Research, especially research in prestigious journals and book publishers, has a value on the market of attracting students, revenues, and donations.13

3. Types of market testing

Meeting the market test in commercial markets means that your product idea actually has been produced and sold successfully in the market. In its



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weakest form, meeting the market test is to participate in the market and not go bankrupt or withdraw from a market prior to plan. This could include thousands of small businesses within a single industry, such as restaurants. In its strongest form, passing the market test means that your product has dominated its particular product market on the national or global scale, such as McDonald's and Kentucky Fried Chicken. An entire spectrum of passing grades exists between these two endpoints of the commercial marketplace. In similar fashion, mainstream Neoclassical economics represents a global corporate giant like McDonald's, while Austrian economics, having passed the Stiglerian survivorship test, represents a fine specialty restaurant with a limited but devoted clientele. While it may or may not be easier to establish a single market test in academic research or within one field of academic research, the purpose here is to determine the types of decision making that occur in commercial markets and the academic publication process, and to then compare their proficiencies.14

Economists know that when moving from a simple barter economy of direct exchange to a complex, modem economy based on money and indirect exchange, the types of decisions increase and become more complex, and the allocation of resources improves. In a barter economy, an individual can only compare the personal value of one good versus another. With indirect exchange, however, an individual can compare the value of one good versus all other goods. And, most importantly, the entrepreneur can compare the value of inputs to the potential value of outputs, and therefore can conduct economic calculations of profit opportunities. Hence, the division of labor can be expanded beyond a primitive level and individuals can develop specializations and expertise, which further enhances the market process.

Basically, there are four types of economic decision-making processes. The most complex economic decision process is economic calculation

- the basic entrepreneurial decision where the monetary prices of inputs are compared to the expected prices of output. This permits evaluation of potential profit opportunities, comparison of alternative profit opportunities, and computation of post hoc results of previous actions (profits and losses), thereby establishing a basis for the pricing of capital goods. The ability to make such calculations rests on the common denominator of money and on the assumption that all the things being compared are private property.15 Here, an individual makes a single economic calculation that takes place over several specific markets, including both input and output markets, in order to judge the overall marketplace and the prospects for profit. In this manner, the subjective values of individuals can be accounted for in such a way that resources are used economically. Without economic calculation in society, concepts like profit, loss, and income lose their anchor to consumer choice,



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making the rational pricing of capital goods impossible. The basic requirement for economic calculation is that goods and their inputs be exchanged in the economy on the basis of monetary exchange and money prices. Economic calculation is the basis of the advanced market economy, and the real market test to which other "market" tests can be compared.16

While economic calculation is critical for the overall economy, it need not be the sole basis of economic decision making, nor need it apply to the allocation of all resources in society. Home production, barter exchange, and production of religious goods can exist parallel to a commercial economy, based on economic calculation. Many things of everyday life, such as the value of a beautiful flower garden, or concern for your health and family honor, certainly need not be governed by economic calculation. As Mises (1920: 14, emphasis added) notes:

It is customary to term such elements "extra-economic." This perhaps is appropriate; we are not concerned with disputes over terminology; yet the considerations themselves can scarcely be termed irrational ... they are just as much motive forces of rational conduct as are economic factors in the proper sense of the word.

Therefore the value of things like beautiful objects in nature, personal relationships, and honesty, are perfectly rational, but they are values not based completely on economic calculation.

Economic valuation is the decision-making process whereby consumers determine the value of a particular good and whether that value is worth the required sacrifice to obtain it vis-a-vis other goods available in the market.17 Economic valuation by consumers is the basic input into how prices are established in the market. If I value a statue at $50,000 and no one places a value any higher than $140,000, then the statue would be sold for an amount no greater than $140,000, but not less than $50,000. Economic valuation is what determines real world prices in a market and is the basis of price theory.

In contrast, economic appraisement is a type of economic decision that seeks not to determine the value of the good for the individual in question, but for an individual to calculate approximately the market price of a good. For example, if I place a personal value on a Francisco Zifiiga painting of $50,000, but I appraise that on the market someone will be willing to pay $200,000, then I am presented with a profit opportunity of up to $100,000 if the current owner of the painting has set a price of $100,000. Economic appraisement is a supply-side phenomenon that is common in activities such as speculation, arbitrage, wholesaling, and retailing, where entrepreneurs seek to estimate future market prices and profit from buying now and selling later.



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A similar but different form of appraisement arises when individuals seek the services of a professional appraiser for determining the value of a good for purposes of wise investing, taxation, or insurance.18 Appraisals by independent experts enhance the decision making of entrepreneurs and consumers, but they are not market decisions in themselves, and are better categorized as professional assessment.

Professional assessment is a valuable component of many different kinds of decision making in both market and non-market settings. Here, potential buyers and sellers consult established experts to evaluate the objective claims of sellers. In commercial markets, experts are paid fees to determine whether the item in question has the specified characteristics and, in the case of the appraiser, to ascertain its expected market value. The compensation of such experts is generally unrelated to the opinion given or the appraised value, in order to eliminate bias and to enhance the reliability of the professional's advice.19 Economists, for example, are hired to provide expert testimony in legal trials. Real estate appraisers provide estimates of the market value of houses, and home inspectors assess the mechanical and structural condition of buildings. In academic markets, referees evaluate the claims, methodology, and significance of a manuscript so that the journal editor(s) can make a more informed decision regarding which articles to publish. Like the manuscript itself, however, the services of referees are exchanged without the benefit of money prices.20

Professional assessment is typically sought in cases where quality is difficult to detect and where there is a high probability of forgery.21 To carry forth the Francisco Zifiiga example, professional assessment would take place by an expert in Mexican art who is hired to determine a painting's authenticity to protect against forgery and to estimate the painting's expected market value. Professional appraisers provide advice that assists individuals in valuation and appraisement, the two components of economic calculation, in exchange for fees or compensation.22 Professional assessments are considered scientific and objective, although imperfect and of a different nature than actual determ- inations of price, which ultimately are based on subjective values and market conditions. Strictly speaking, these professional assessments do not represent market values or prices.

4. The academic market test

Now let us return to the institutions of the market for academic research. Here we have colleges, universities, and libraries, all of which are assumed to be private institutions. The labor market consists of utility-maximizing



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academics - of geniuses, basic researchers, applied researchers, and a variety of non-research oriented instructors.

In the academic marketplace, the primary consumer is the student. Col- leges and universities sell their services to students, supplemented with donations from alumni and foundations. Students, alumni, and foundations purchase their services based not solely on the quality of classroom instruc- tion, but also on the basis of the institution's reputation - which, in turn, is heavily dependent on its faculty's accomplishments in producing academic research, as well as other services and amenities. The flow of funds into an institution is therefore dependent, in part, on the success of its faculty to publish research.23

In order to produce notable research, institutions of higher education enter the academic labor market to purchase the services of academics who have published and will likely continue to publish refereed journal articles.24 In- stitutions can provide various resources for the production of research such as laboratories, computers, libraries of publications and data, graduate as- sistants, secretarial support, teaching release time to produce the research, travel budgets, etc. - all of which have objective market prices. Research is a primary determinant of salary, and is often the primary determinant of tenure, promotion, and pay increases (see Hamermesh, Johnson, and Weisbrod, 1982; Sauer, 1988).

The direct consumers of academic research publications are libraries, academics, and their students. Clearly the non-academic private sector does purchase academic research publications, subsidizes research, and purchases consulting services, but the bulk of consumption comes from libraries and academics themselves. Libraries, in turn, serve their members - primarily academics and their students. Academic researchers are therefore both the suppliers and primary demanders of the product.

Between higher education's production sector and consumption sector lies the selection terminus of academic journals and book publishers. Journals receive academic manuscripts free of charge and, in many cases, charge fees just for examining the manuscripts. Very rarely do academics receive compensation from journals, and when they do, it represents a very small fraction of their total compensation.25 Academic books do provide some compensation to the author, but such compensation is rarely a significant component of their annual income. The budgets of refereed journals are comprised of subscription fees from libraries and individuals, and subsidies from institutions of higher education and professional organizations. Sales to non-academics, advertising revenue, and other resources usually comprise a small component of the total budgets of journals in many academic disciplines. Academic



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book publishers derive their revenues from sales to libraries and individual academics, with non-academic sales generally playing a minor role.

The determination of whether to publish a particular manuscript is clearly not a process of economic calculation, where an entrepreneur determines potential profit opportunities by comparing the monetary cost of inputs to the potential revenue from sales. The output side (publication) does not com- pensate the input side (writer) of academic research - although, interestingly, both sides come from the same group of research-oriented academics. This is a crucial distinction. The selection of academic research is more like a beauty contest or juried art show where the expert selects a winner or handful of winners who receive ribbons and prizes. The artist's ribbon, like a letter of acceptance from a journal, is highly valuable for one's career, but the process is of a different nature than the restaurateur buying inputs for the kitchen. Modern research on the academic marketplace has investigated many specific complaints about the peer review process, but many of the facets investigated have been found to be reasonably efficient.26

Economic valuation and pricing certainly take place on many margins in academia. Students make valuations on institutions and pay tuition; institutions place valuations on academics and pay salaries; customers place valuations on journals and books and pay subscription fees and prices. But journals and publishers do not place economic valuations on the manuscripts they accept for publication.

Economic appraisals also take place throughout this market, in that students appraise the potential value of the degree they seek, institutions appraise the value of the employees they hire, and academics appraise the value of the articles they publish in terms of impact on future wages. It could even be said that one editor is behaving more entrepreneurially than another by contacting potential authors and requesting that they submit manuscripts, but it cannot be said that either the editors or their referees are conducting the process of economic calculation that is so essential to the well-functioning of commercial markets.

Walstad (2002) and many others have considered citations as a substitute for money prices. Ultimately, however, citations have to be rejected as a substitute for money prices in the process of economic calculation because citations cannot serve as a medium of exchange (e.g., they are not divisible or exchangeable), they do not represent prices (e.g., they are not scalable), they do not represent a true exchange, and they are not relevant for the decision to publish a prospective manuscript. Citations are, however, a good indicator of an article's professional importance and interest, and therefore serve as a good guide to its reputation effect and a reasonable guide to economic valuations in the academic labor market.



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The lack of monetary calculation in matters of judging truth, beauty, hap- piness - or, in the case of manuscripts, their scientific validity and significance - is no problem at all in an otherwise capitalistic economy. Such decisions are rational and directed toward professional goals rather than the profit goal of minimizing the monetary cost of inputs relative to the monetary value of outputs. Professional discretion and prestige perform the role that monetary calculation plays in the allocation and reallocation of resources in society.

The process by which manuscripts are selected for publication is one link that breaks down the process of economic calculation in academic research and is an area in which economic valuation and appraisement do not play a role. The process of manuscript selection is one of professional assessment. Editors and referees evaluate manuscripts for professional competence, quality of presentation, relevance of subject matter, and the significance of the contribution to the literature. Journal editors do not base their decisions on the profitability of an article, but presumably on professional standards, academic prestige, and significance.27 The term "significance" merely represents the editor's goal to fill the journal with the best possible articles. While the editor certainly has some notions about the journal's audience, this determination is not economic, but scientific.28

There is an important difference between professional assessment in the marketplace and professional assessment in academic publishing. In the case of the art expert, the final decision to buy still rests with the individual who puts money at risk, while in the case of intellectual contributions, the professional experts (referees and editors) make the final real-world decision, absent any considerations of cost, price, or profit. Also, while professional experts in the marketplace are paid fees, referees are given little or no compensation from the journals for their efforts. Likewise, journal editors are provided little compensation for their efforts29 and typically are not given lavish budgets with which to produce the journal. Referees and editors have no basis to make any type of economic valuation of manuscripts and are restricted to making their assessments largely on the basis of professional merit.

The choice of journals to submit your manuscript is affected by a variety of factors, such as the likelihood of publication, audience reached, and the prestige of the journal. While rewards for academic research are some function of the prestige of journals, these rewards come from institutions of higher education, not from the journals themselves. Employment and pay raises are based in part on the quantity and quality of research, which again, are based on the prestige of the journal and the attention the article received, as estimated by the number of citations to the article.30 Both of these factors are based on professional assessment.



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The customers of journals and academic books consist of academics and libraries. To the extent that libraries buy journals and books based on the demand of academics, the demands of libraries are linked to the choices of academics, and are thus also linked to professional assessment. To the extent that journal subscriptions and book purchases come from non-academic sources, market forces other than professional assessment would exist, but such demand is very limited or nonexistent for most academic products. And to the extent that it does exist, non-academics are still largely dependent on professional assessment.

Therefore, the determination of academic publishing is based, not on economic calculation, but on assessment by professional experts who use their expertise to judge manuscripts by professional standards. Market forces exist on almost every margin, but the hand of professional experts who have refereed the manuscripts, judged them for publication, and cited them as noteworthy contributions, ultimately directs all of these market forces by their collective decisions about what are the most prestigious publications. In other words, market forces on all of these other margins are themselves based on the one decision that is not monitored by the market force of economic calculation.

The relationship between the buyers and sellers of academic research is illustrated in Diagram 1, which shows that academic publishers do not have to consider the cost of the academic labor that goes into the production of the manuscript when making a decision of acceptance or rejection. Here, there are five main institutional groups - journals, researchers, libraries, colleges and universities, and their consumers - each of which make exchanges of goods and money. The only deviation from the normal pattern is that money is not exchanged between academic journals and academic researchers.

Table 1 shows the type of decision making that can take place in the market for goods and the market for ideas. In commercial markets, economic valuation and appraisement take place, and economic calculation plays the central role between the two. In the market for academic publishing, economic valuation and appraisement take place, and professional assessment plays the central role. Professional assessment can certainly play a role in the market for goods when, for example, a company hires consultants to conduct marketing studies. However, economic calculation does not take place in the determination of what manuscripts should be published.31

Given that pure socialism is impossible and that experts cannot run a so- cialistic economy economically, this finding might suggest that the basis for decision making in academic publishing is not an efficient or effective market test. However, the fact that academic publishing decisions are removed from monetary valuation and decisions about costs and benefits is not necessarily a



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Academic Publications

Manuscripts

{?)

$ Publications Subscriotion

Academic Researchers $

Teaching, Research $

Academic Research Libraries

Higher Education

Diplomas $

Students and Donors

Diagram 1. The market for academic publishing.

bad thing, as it would be with food, clothing, and shelter. Academic journals in a market economy have access to market prices of all other resources in the economy on which to base their production calculations. Removing prices from the decision process over academic research is likely necessary to achieve a reliable, high-quality product. Furthermore, journals that do a bad job in picking correct and relevant articles will lose subscribers, advertisers, and sponsors, and go out of business, while journals that select the better articles increase subscribers, advertisers, and sponsors.

There are additional reasons why the market for academic research is directed by professional assessment rather than market forces. Professional assessment is generally viewed as a more dependable and reliable form of quality control. Making publication decisions on the basis of profit may well result in an inferior product. A profit-driven, price-directed process might



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Table 1. Decision making in markets and academia

Type of Markets for Academic Key to

decision goods publishing institutional decision

Economic Yes Conceivable? Central for

calculation markets, not used in

academe

Economic Yes Yes Both

valuation

Economic Yes Yes Both

appraisement

Professional Possible Yes Central in

assessment academe,

secondary in

markets

produce less research, or a lower quality of research. It might also result in research being biased in favor of special-interest groups, or in an imbal- ance between basic research and applied research, or between research with shortrun appeal and long-run productivity. Journals might bias their publications to the benefit of their advertisers and sponsors to the detriment of the truth. Making payments to authors for their scientific works would seem to be a highly inexact procedure, given that the academics also provide the possibly more important evaluation via the citation process.

Goods and services deemed by society to be too important to be left to the market are often turned over to institutions based on non-market decision making. In order to obtain the best rulers and representatives, we turn to the vote of the people. From an American perspective, the job of national defense is given to the Pentagon. Protection from criminals and terrorists is the job given to federal agencies such as the CIA and the FBI. Safety in the skies and airports is the job of the FAA, and how would we protect our borders from unwanted immigration if not for the INS and the Border Patrol? Voters, politi- cians, and bureaucrats are surely making rational decisions, but they generally do not have access to market prices for their outputs, nor do they engage in



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profit maximization. Journals have market prices for their outputs, but they lack input prices for manuscripts, and yet can engage in profit maximization.

Academic research could be considered superior to the standard examples of non-market decision making because, in addition to a reward system based on professional assessment, the direction of academic research is also monitored by outside funding sources and the non-educational private sector. High-quality researchers have better access to grants from outside funding sources, and such grant money would be directed to its highest-valued uses. Control is further bolstered by consulting opportunities outside of higher education. Academics that produce the highest-valued research will generally have better opportunities to do consulting, or to move entirely from higher education to non-education employment. Initially such opportunities are based on the professional prestige of their research, but subsequent opportunities depend on actual performance in meeting the needs of customers under competitive conditions. Academic publishing therefore has both a survivorship constraint similar to profit and loss and also provides inducements for improvement over time.

Therefore, there is nothing that would lead us to conclude that professional assessment is somehow inferior to market determination of academic research, and much to lead us to think that it is superior. Manne (1973: 196) concluded that in this market, there would not be a "monolithic uniformity of viewpoints" and that a variety of viewpoints would compete against one another, that the best viewpoints would be publicized, and that consumer selection would ultimately rest with the fundamental consumers of universities. In other words, the results of "competition" in this academic marketplace for ideas are true in the sense that they are as accurate as possible, although certainly not perfect. Indeed, it is difficult to imagine how academic publishing could be based entirely on market forces and a matter of true economic calculation in the commercial sense. Even the commercial publishers of academic journals have not sought to fundamentally change the process of professional assessment. The fact that professional assessment mechanisms of the academic publication process have remained intact so long is testament to the fact that they have passed a market test.

5. Conclusion

In addressing Bbhm-Bawerk's concern that we remain scientific in our use of metaphors, an analysis is presented here that helps refine the debate regarding the market test in academia. The main finding of this analysis is that the publication of academic research is based on professional assessment, not economic calculation. It would therefore be incorrect to say that academic



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research passes a market test, except as an analogy. Academic research must pass the test of professional assessment, and there is every reason to believe that this test is both sufficient and appropriate for academic research. Com- mercial goods and academic research are so fundamentally different from one another that it would be as difficult to imagine a monetary or commercial market test for academic research, as it is to imagine a properly functioning government property rights. As a result, market valuations in academia, such as professors' salaries, must be viewed as being determined in large part by professional assessment.

Given these results, therefore, the basic criticism of Yeager seems some- what misplaced. Why argue against the market test when in fact there is no real market test in academic research. What he calls for - independent professional assessment - is exactly what the market for academic research provides. Decisions about journal subscriptions, journal articles, and citations arc all made by or directed by professional assessment. Truth is elusive, and in the big picture his arguments about truth and beauty are well taken, but if his arguments are to have practical merit, it is not likely to be found in the basic institutions of academic research and publishing.

Studies that provide rankings of this professional assessment process certainly face numerous empirical and theoretical hurdles in their quest to provide analysis of the overall market test in academia. Statistical rankings produce anomalies and never provide complete information, but they do present a picture of the profession as it exists. The profession may oc- casionally stray from the path dictated by market forces. It certainly has produced what Tollison (1986: 912) calls "idiosyncratic results," but it is hard to fathom economists ignoring incentives and market forces within their own marketplace.32 Likewise, in the spirit of Walstad's (2002) analysis, it is difficult to imagine that academics in general could stray too far from the truth, or at least the path toward truth, for very long, when the institutions in which they operate are constrained by proper economic incentives.

Much of the analysis in this paper was devoted to showing what the differences are between the commercial marketplace and the academic marketplace, and then to argue that these institutional differences do not make the academic market test inferior to the commercial market test. Criticisms of the profession, its research output, and the dominance of neoclassical methodology need not be leveled against the basic underlying institutions of the publication process. Those who reject journal rankings and citation surveys as the "truth," or who find fundamental flaws in modern mainstream economics must look - analytically - elsewhere.

Here we return to the primary assumption of this paper, which was that all institutions of higher education were private property. Relaxation of



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this assumption would include such factors as public institutions of higher education, subsidies for higher education, government research grants, and government regulation of higher education. Without the constraint of economic calculation and the incentives of private property, academic research and the peer review process could be subject to distorting influences. The tools of microeconomic analysis, public choice theory, and property rights analysis can, and to a limited extent have been used to determine the impact of these interventions on the institutions of higher education, and on higher education's production and dissemination of the "truth" (see, for example, Alchiam, 1958, 1968).

Can government intervention and market failure have an impact on the academic market test based on professional assessment? Did, for example, the rise of the German state and its control of higher education have an impact on the production of knowledge in economics and the development of the latter German Historical School? Rosen may be justified in concluding that the Austrian School did not pass the market test, circa 1997, but the more interesting question is why the Austrian School fell into near extinction during the 1930s and 1940s. Many such questions await investigation and resolution. By presenting the micro-analytic structure of the institutions, this paper provides a foundation for future studies of the academic market test.33

Notes

1. To the extent that Austrian economists have failed the market test, it remains an open question whether they failed in the competition or they simply failed to enter the competition by submitting quality manuscripts to top-ranked mainstream journals.

2. Block (1999) and Hiilsmann (1999) provided responses to Caplan (1999), which were not accepted for publication in the Southern Economic Journal, but were subsequently published in the Quarterly Journal of Austrian Economics.

3. Yeager (1997: 153) eschews such membership labeling and describes himself as a fellow traveler of the Chicago and Austrian schools.

4. In contrast, Cowen (1998, 2000) has marshaled considerable evidence concerning the important relationships between the market and culture.

5. This journal, established by Gordon Tullock was originally titled Papers in Non-Market Decision Making.

6. Bloom does not see the problem in the research of the natural sciences, but in the social sciences and humanities. He (1987: 361) does mention the problem of the use of mathematics in economics.

7. For more on this question see Tollison (1986: 909-910). 8. A similar issue and framework of analysis is provided in Bovitz, Druckman, and Lupia

(2002). 9. See, for example, von Mises (1949) who proposes the term praxeology for the general

study of human action that would include "non-calculative action" such as bureaucracy, politics, and war as well as the "calculative" action of the marketplace. Neoclassical



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economists have adopted Mises's general study of human action, but have not adopted the distinction between calculative and non-calculative action.

10. Textbook publishing and popular books and articles are not included because they are categorically different than academic publishing even if both categories take place within the same firm. The publisher generally compensates textbook and popular writers for their efforts and abilities, but not academic writers. Furthermore, higher education generally does not value the production of popular writings, especially at research institutions.

11. Mahoney (2002) shows precisely why property rights are of central importance to economic decisions.

12. That is not to say that government intervention has had no impact on these institutions, only that for our purposes it has had no fundamental impact on the academic publication process.

13. See, for example, Clotfelter (1996) and Winston (1999) who argue that the perceived prestige of a university, including the research of faculty, may influence the behavior of student-customers and donors.

14. A market is where goods and services are traded, bought and sold within the overall economy. Although not a necessary feature of modern markets, a primary feature of the first marketplaces was that they were neutral places where no one had an unfair home advantage, because traders came from different societies that were often military rivals. Markets can be complex and highly sophisticated, like the New York Stock Exchange, or they can be primitive like bazaars and flea markets. In modern times, commercial markets have moved beyond the physical marketplace, constrained by place and time, to become electronic, virtual, and 24/7/365 and the academic marketplace has kept apace with many of these changes.

15. See, for example, Alchian (1989: 233) who notes that private property is necessary in economic theory for markets or the "decentralized coordination of productive specializ- ation to work well" and that the same results do not hold in government. The conditions necessary to make "government property rights" even approach the coordination and efficiency results of private property rights is difficult to image happening in the real world and Alchian concludes that it "is difficult to take that possibility seriously."

16. This is the reason Mises (1920) won the first round of the socialist calculation debate because it was agreed that pure socialism unaided by some prices, money, and property titles could not exist above that of a small primitive economy (Lavoie, 1985).

17. Here the term valuation is used to signify when a person imputes a particular quality or value to a particular object or good rather than its meaning to a statistician estimating the total value of a farmer crops, a nation's imports, or a property's worth. See Fetter (1915: 21).

18. In the context of auction markets, it should also be clear that we are not speaking of the reserve price or reserve valuation, which is the price that the owner would bid for the good auction if he considered the bids too low.

19. An expert with an established record of accuracy and precision will generally be able to obtain higher fees than experts with limited experience or an average record of accuracy.

20. The referee process can certainly add value to the research production process (Laband, 1990), but why then are referees not paid and rarely compensated for their efforts? Laband (1990), Hamermesh (1994), Engers and Gans (1998), and Chang and Lai (2001) have investigated various aspects of this question and generally concluded that notions of professional spirit and personal reputation account for the voluntary nature of referring while Walstad (2002: 23) suggests a more sinister self-interested reason to serve as a referee without pay.



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21. Despite these efforts there remains a significant risk of error in the process of professional assessment, such as forgery in the art market, medical opinions, and home inspections.

22. Auction companies will typically waive their appraisal fees if the item is put up for auction.

23. Other related goals such as accreditation by accrediting institutions are also in part dependent on the ability of the faculty to publish.

24. In recent years there has been significant competition among highly ranked institutions to hire the superstar publishers from other department with blockbuster salaries and benefit packages.

25. This is not to suggest that an acceptance letter from a prestigious journal is not a valuable commodity, like the restaurant that receives a good review in the New York Times.

26. See, for example, Laband (1990), Blank (1991), Laband and Piette (1994), and Hamer- mesh (1994) and Gans and Sheppard (1994) as a counter example, although obviously none of these papers address the question of "the truth" directly.

27. This assumption has been questioned and investigated many times with interesting results. See for example, Laband (1985), Laband and Piette (1994), and Laband, Tollison, and Karahan (2002).

28. Editors will on occasion accept articles from friends and colleagues, or articles that address the editor's personal tastes in research, but generally we expect editors in a private property regime to pursue their primary objectives under proper constraints.

29. The most common form of compensation is teaching release time from their employer, not the journal itself.

30. Liebowitz and Palmer (1984) and Davis (1998) discuss the pros and cons of using citations in this manner.

31. It should be noted that academics do pay submission fees to journals and it should be acknowledged that journals based on a fee-for-manuscript basis is conceptually possible. However, the fact that it is difficult to conceive of academic publishing based on economic calculation only reinforces it unlikely possibility.

32. For example, Goff, Shughart, Tollison, and Pociask (1987) find that economists as a profession do respond predictably to changes in opportunity cost, market prices, and property rights.

33. In particular, property rights structures and government intervention should be investigated along with differences in market tests between disciplines and between academic and non-academic market tests for the same professions.

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Does Academic Publishing Pass the Real Market Test?

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