Friday, November 6, 2009

Government vs. Private Sector

Here's some tasty research:

Incentives and Creativity: Evidence from the Life Sciences

by Pierre Azoulay, Joshua Graff Zivin, and Gustavo Manzo

Despite its presumed role as an engine of economic growth, we know surprisingly little about the drivers of scientific creativity. In this paper, we exploit key differences across funding streams within the academic life sciences to estimate the impact of incentives on the rate and direction of scientific exploration. Specifically, we study the careers of investigators of the Howard Hughes Medical Institute HHMI), which tolerates early failure, rewards long-term success, and gives its appointees great freedom to experiment; and grantees from the National Institute of Health, which are subject to short review cycles, pre-defined deliverables, and renewal policies unforgiving of failure.

Using a combination of propensity-score weighting and difference-in-differences estimation strategies, we find that HHMI investigators produce high-impact papers at a much higher rate than two control groups of similarly-accomplished NIH-funded scientists. Moreover, the direction of their research changes in ways that suggest the program induces them to explore novel lines of inquiry.

So, the institution started by a mad man is more successful and productive than the institution run by mad men.

Quel surprise.