Tuesday, July 26, 2011

NSF Social, Behavioral and Economic Sciences--attack and defense

As budget talks go on in Washington, the Social, Behavioral and Economic Sciences division of the National Science Foundation has become a specific focus of discussion (as distinguished from support for other science funded by NSF). The Consortium of Social Science Associations posts a number of documents, including Talking Points, which highlights some of the economics research funded by NSF over the years, including several research streams in market design (e.g. spectrum auctions and kidney exchange).

"According to the Consortium of Social Science Associations (COSSA), amendments will probably be offered to disproportionately cut or completely eliminate funding for the National Science Foundation's Social, Behavioral, and Economic (SBE) Sciences Directorate when NSF's 2012 appropriations are voted on by the House.
"Amendments to cut NSF/SBE funding are most likely to be submitted when the spending bill comes to the House floor in the first week of August.

"We are calling this to your attention now because there might not be enough time for AEA members to express their opinions once the amendment is proposed and before it is voted on. Economists of all people understand the need to take action to deal with the U.S. fiscal challenge. But these amendments might target the social sciences for disproportionate funding reductions and possibly elimination. Economic research has profound value for society and we want to make sure that this is understood by policymakers. Although the NSF budget for the social and behavioral sciences is small (in FY2010 $255 million out of a total NSF budget of $7 billion), eliminating it would have very negative consequences for economic research and economic policy.

"The following are some reasons why Republicans and Democrats both should oppose this amendment:
Unique Role: NSF’s SBE Directorate is the only place in the Federal government with a broad mandate to maintain and strengthen the basic science of economics. It provides over one-half of all external support by the Federal government for basic research in economics. SBE’s Economics Program current budget is only $26.5 million. Although other government agencies, private foundations and the private sector support applied and some basic economics research, none have the resources and the incentives to support the new methods, data and broad range of substantive research funded by NSF. Severe cuts in an already small NSF budget for economics would be a major blow to the infrastructure needed to support the best research on extremely complex and important economic questions.

Very High Return on Past Investments: Since 1994 spectrum auctions have generated more than $50 billion for the U.S. Treasury and worldwide revenues in excess of $200 billion. Researchers at Stanford University and the California Institute of Technology, supported by grants from NSF, developed the simultaneous ascending auction mechanism as a technique for auctioning off multiple goods whose values are not fixed but depend on each other. The mechanism was then tested experimentally in a laboratory, also financed by NSF, before its implementation by the Federal Communications Commission. These auctions not only benefit the US taxpayer, but ensure efficient allocation of spectra so that the winners of the auction are indeed the individuals who value the spectra the most. This method has also been extended to the sale of divisible goods in electricity, gas, and environmental markets.

Innovation and Adoption of New Technologies: SBE funded a number of awards that have resulted in fundamental advances in our understanding of the economic factors that encourage innovation and the adoption of new technologies. For example, Nicholas Bloom at Stanford University was awarded a Faculty Early CAREER Development award for his research into the role innovation plays in determining economic productivity and growth. This research includes developing new data collection methods for measuring management practices and adoption of information technology (IT) in business. Using an innovative double-blind survey, he has been able to gather systematic evidence about the effects of specific management practices on the success and failure of firms. His research also has shed new light on the links between increased use of IT and patterns of international trade between the US and less developed countries. Other
work supported by SBE contributes to our understanding of how uncertainty shocks affect decisions made by businesses that in turn contribute to macroeconomic fluctuations.

Lives Saved: Researchers in economics at Harvard University, the University of Pittsburgh, and Boston College have applied economic matching theory to develop a system that dramatically improves the ability of doctors to find compatible kidneys for patients on transplant lists. Organ donation is an example of an exchange that relies on mutual convergence of need; in this case, a donor and a recipient. This system allows matches to take place in a string of exchanges, shortening the waiting time and, in the case of organ transplants, potentially saving thousands of lives. Similar matching markets exist in other contexts, for example, for assigning doctors to residencies or students to schools.

Millions Lifted out of Poverty: Microfinance has spread very rapidly in the last decade, raising the hope that it has the power to lift millions out of poverty by providing them with access to capital. Loans are often given to groups of five to ten women who are jointly liable for the loan to the group. Basic research findings from SBE grants have led to important practical advice for microfinance practitioners. SBE grantee Esther Duflo was named by TIME magazine one of the 100 most influential people in the world in 2011 for her work this area.

• Many More Accomplishments: ...

In a possibly related development, the NSF recently (June 2011) highlighted some of our early (1992 and 2006) grants: Economists Design Life-Saving Exchange for Kidney Transplants

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