To Have and be Had:To Have and be Had:Some Economics of Some Economics of Academic Journals Academic Journals

Ted BergstromUCSB

A curious market structure A curious market structure

• Private profit-maximizing firms and Private profit-maximizing firms and non-profit societies and academic non-profit societies and academic presses presses bothboth are significant are significant players. players.

• Most of the workforce--authors and Most of the workforce--authors and referees--work for free.referees--work for free.

JournalJournal Prices by DisciplinePrices by Discipline

Ecology 1.01 0.19 0.73 0.05Economics 0.83 0.17 2.33 0.15Atmosph. Sci 0.95 0.15 0.88 0.07Mathematics 0.70 0.27 1.32 0.28Neuroscience 0.89 0.10 0.23 0.04Physics 0.63 0.19 0.38 0.05

CostCost per pageper pageFor-profitFor-profit NonNon-profitprofit For-profitFor-profit Non-profitNon-profit

Cost per citeCost per cite(In US $)(In US $)

Costs of a Complete Costs of a Complete Economics CollectionEconomics Collection

Publisher Publisher

TypeTypePercent of Percent of CostCost

Percent of Percent of CitesCites

Non-ProfitNon-Profit 9% 62%

For-ProfitFor-Profit 91% 38%

Costs of a Physics Costs of a Physics Collection: Heinz Collection: Heinz

Barshall’s List of JournalsBarshall’s List of Journals

Publisher Publisher

TypeTypePercent of Percent of CostCost

Percent of Percent of CitesCites

Non-ProfitNon-Profit 39% 79%

For-ProfitFor-Profit 61% 21%

Division of LaborDivision of Labor • The greatest improvements in the The greatest improvements in the

productive powers of labour… seem to productive powers of labour… seem to have been the effects of the division of have been the effects of the division of labourlabour…. Adam Smith, …. Adam Smith, Wealth of NationsWealth of Nations

• Illustrated by academic journals:Illustrated by academic journals:• Non-profits supply most of the Non-profits supply most of the

citations.citations. • For-profits collect most of the For-profits collect most of the

money.money.

Monopoly Profits in Academic Monopoly Profits in Academic Publishing?Publishing?

• Hint: University press and Hint: University press and professional society journals are professional society journals are usually usually notnot subsidized subsidized

• They charge 1/5 as much per They charge 1/5 as much per page as for-profit journals.page as for-profit journals.

If there is free entry, how can If there is free entry, how can there be monopoly?there be monopoly?

• Unlike shoes or groceries, competition from Unlike shoes or groceries, competition from perfect substitutes is prevented by copyright.perfect substitutes is prevented by copyright.

• Reputation makes it hard for new entrant to Reputation makes it hard for new entrant to attract top quality articles. attract top quality articles.

• Rents fall to owner of a coordinating signal– a Rents fall to owner of a coordinating signal– a journal name.journal name.

• Like the rents to record companies for talent-Like the rents to record companies for talent-free musicians who are popular because they free musicians who are popular because they are popular?are popular?

The strange economics of The strange economics of academic journalsacademic journals

• If one brand of car cost 6-15 times as If one brand of car cost 6-15 times as

much as others of better quality, how much as others of better quality, how many would be sold?many would be sold?

• Almost zero, because people would Almost zero, because people would substitute low priced for high priced.substitute low priced for high priced.

• Why then do commercial journals that Why then do commercial journals that cost 6-15 times as much per cite as cost 6-15 times as much per cite as nonprofits continue to sell? nonprofits continue to sell?

Journals as Complements Journals as Complements • Academic journals tend to be Academic journals tend to be

complements, not substitutes. complements, not substitutes. • Two copies of cheap society journal will Two copies of cheap society journal will

not replace a subscription to Elsevier not replace a subscription to Elsevier journal that costs 10 times as much per journal that costs 10 times as much per cite. cite.

• Many scientists want to read all Many scientists want to read all significant research in their area, not significant research in their area, not just the top papers.just the top papers.

More strange economics More strange economics

• With most goods, middleman pays With most goods, middleman pays

producer, consumer pays producer, consumer pays middleman.middleman.

• With journals, producer pays With journals, producer pays middleman (often not much), middleman (often not much), consumer pays middleman consumer pays middleman

Open Access Model Open Access Model • Producer pays middleman, consumer Producer pays middleman, consumer

pays nobody. pays nobody.

• Would this work for nonprofits?Would this work for nonprofits?

• Would this work for profit-maximizers?Would this work for profit-maximizers?

Non-profit open access? Non-profit open access?

• To succeed, an open access journal To succeed, an open access journal must attract authors.must attract authors.

• Are authors and their universities willing Are authors and their universities willing to pay to have their work read and to pay to have their work read and cited? cited? – Evidence that open access articles are Evidence that open access articles are

more cited.more cited.– Economic study: avg citation worth $35 per Economic study: avg citation worth $35 per

year in salary.year in salary.

• Will they pay $1500 as for PLOS?Will they pay $1500 as for PLOS?

Open access and Open access and competitioncompetition

• Competition for authors will be stiffer Competition for authors will be stiffer

than for readers.than for readers.• Would an author submit papers to a Would an author submit papers to a

journal with submission fees 6-15 times journal with submission fees 6-15 times as high as equivalent competitor?as high as equivalent competitor?

• Not likely. Why?Not likely. Why?• For authors, journals are substitutes, not For authors, journals are substitutes, not

complements.complements.

University-paid author University-paid author feesfees

• University could limit amount it would University could limit amount it would

pay per page.pay per page.• Authors can choose to top up fees.Authors can choose to top up fees.• As outlets, competing journals are As outlets, competing journals are

substitutes, not complements substitutes, not complements • Price competition for author fees is Price competition for author fees is

likely to prevent extreme fees.likely to prevent extreme fees.

Libraries as toll collectors?Libraries as toll collectors?

• In PNAS, CB and I argue that library purchase of In PNAS, CB and I argue that library purchase of site licenses from profit-maximizers reduces well-site licenses from profit-maximizers reduces well-being of academic community. being of academic community.

• Better outcome if Elseviers are forced to deal Better outcome if Elseviers are forced to deal with individuals. with individuals.

• For nonprofit journals, the conclusion is opposite.For nonprofit journals, the conclusion is opposite.• For these site licenses enhance efficiency by For these site licenses enhance efficiency by

improving access without increasing cost. improving access without increasing cost.

Polysyllabic ThunderPolysyllabic Thunder

• After UC signed its latest Big Deal with After UC signed its latest Big Deal with Elsevier for $7.3 million, the official UC Elsevier for $7.3 million, the official UC statement was: statement was:

• “ “ the economics of scholarly journals the economics of scholarly journals publishing are incontrovertibly publishing are incontrovertibly unsustainable”unsustainable”

• Wow. Wow. • Does this mean something, or is it just Does this mean something, or is it just

deanspeak?deanspeak?

What can UC do?What can UC do?

• UC is a giant— prestige, research output, UC is a giant— prestige, research output, research readership.research readership.

• Individual journals need UC more than UC Individual journals need UC more than UC needs individual journals.needs individual journals.

• Journals not stocked by UC won’t attract top Journals not stocked by UC won’t attract top authors.authors.

• Big publishers have bundled their weak Big publishers have bundled their weak journals with their strong to avoid this journals with their strong to avoid this vulnerability.vulnerability.

Shorter words, tougher Shorter words, tougher actsacts

• Set minimal acceptable standards of Set minimal acceptable standards of value-per-dollar value-per-dollar

• Refuse Big Deals. Subscribe only to Refuse Big Deals. Subscribe only to journals that meet minimal value-per-journals that meet minimal value-per-dollar standards. dollar standards.

• Charge overhead for UC faculty serving Charge overhead for UC faculty serving on editorial boards of journals not on editorial boards of journals not meeting standards.meeting standards.

Possible TacticsPossible Tactics

• Might start with middle-sized publishers: Might start with middle-sized publishers: Taylor & Francis, Springer, Wiley, Sage Taylor & Francis, Springer, Wiley, Sage

• Subscribe to their “good deal” journals at list Subscribe to their “good deal” journals at list prices.prices.

• Offer UC-determined value-based price for a Offer UC-determined value-based price for a package of their remaining journals. package of their remaining journals.

• What would it mean to journals lose their UC What would it mean to journals lose their UC subscription base?subscription base?

• How bad would it be for UC?How bad would it be for UC?

Why we can afford to Why we can afford to cancelcancel

• Subscriptions much less important than Subscriptions much less important than they were.they were.

• Scholars can still get pay-per-view—Scholars can still get pay-per-view—could be could be partiallypartially subsidized. subsidized.

• Most articles can be found online for freeMost articles can be found online for free—or at worst, obtained by email from —or at worst, obtained by email from author.author.

Overhead for overpriced?Overhead for overpriced?

• Universities charge overhead onUniversities charge overhead on research grants. research grants. • They charge no overhead for journal They charge no overhead for journal

editors and often give courses off.editors and often give courses off.• This makes sense for publishers that This makes sense for publishers that

cooperate in academic enterprisecooperate in academic enterprise• But not for publishers that are extracting But not for publishers that are extracting

maximal rents.maximal rents.

One way to set standardsOne way to set standards

• Preston McAfee and I have proposed Preston McAfee and I have proposed a measure ata measure at

www.journalprices.com www.journalprices.com • Compares value per dollar with Compares value per dollar with

that of non-profits in same field.that of non-profits in same field.• Select cutoff for good and bad buys.Select cutoff for good and bad buys.

Or we could just keep making Big Or we could just keep making Big Deals, even if they are Deals, even if they are

“incontrovertibly unsustainable”“incontrovertibly unsustainable”• Elsevier statement after the last UC Big Elsevier statement after the last UC Big

Deal:  "Deal:  "Although the negotiation period Although the negotiation period was challenging for both parties, the tone was challenging for both parties, the tone of the discussion was professional and of the discussion was professional and cordial throughout.cordial throughout." "

• At least we didn’t get our pockets At least we didn’t get our pockets picked by surly amateurs.picked by surly amateurs.

• Maybe being had is not so bad.Maybe being had is not so bad.

Had enough?Had enough?

• OK, then, I’ll quitOK, then, I’ll quit

Want more?Want more? www.econ.ucsb.edu/~tedb

… …papers, statistics, papers, statistics,

weasel’s manual, etc weasel’s manual, etc

Fable of the Anarchists’ Fable of the Anarchists’ Annual meetingAnnual meeting

• Once upon a time a bunch of anarchists Once upon a time a bunch of anarchists happened to get together on January 3 in happened to get together on January 3 in a hotel in Kansas City a hotel in Kansas City

• They had a grand time.They had a grand time.• Next year more anarchists came and Next year more anarchists came and

they had even more fun.they had even more fun.• The tradition grew and meetings got The tradition grew and meetings got

bigger and more enjoyable. bigger and more enjoyable.

Trouble in Kansas CityTrouble in Kansas City• One year, the hotel owner raised his One year, the hotel owner raised his

rates at conference time.rates at conference time.• Attendance fell a little and owner’s Attendance fell a little and owner’s

revenue rose a lot. revenue rose a lot. • Next year owner did it again.Next year owner did it again.• Anarchists groused, had less fun with the Anarchists groused, had less fun with the

smaller crowd and higher prices. smaller crowd and higher prices. • Why didn’t they move to another hotel?Why didn’t they move to another hotel?• They are anarchists!They are anarchists!