A new study highlights how the hidden nature of effort and risk influences the research choices of scientists and the incentive systems they operate under, based on a mathematical framework grounded in economic theory.
A recent study released on August 15 in the open-access journal PLOS Biology, conducted by Kevin Gross from North Carolina State University and Carl Bergstrom from the University of Washington, focuses on a mathematical framework enhanced by the economic theory of hidden-action models. This framework sheds light on how the unobservable elements of effort and risk affect researchers’ strategies and the reward systems they function within.
Scientific research inherently involves taking risks, as overly cautious methods tend to hinder rapid advancements. However, a large portion of funded research tends to adopt safer approaches, leading funding agencies to express frustrations over the lack of high-risk, high-reward projects. To investigate this issue, Gross and Bergstrom modified an economic contracting model to understand how the unobservability of risk and effort can deter risky research.
The model addresses a hidden-action dilemma where the scientific community must incentivize discoveries while encouraging effort and risk-taking, all while safeguarding researchers’ livelihoods against unpredictable scientific results. The conflict arises because the motivations to promote effort may contradict those encouraging risk-taking; a failed project might indicate a risky endeavor, yet it could also stem from a lack of effort. Consequently, the incentives that encourage greater effort might simultaneously hinder risk-taking.
In response, scientists tend to focus on safer projects that provide proof of effort without advancing scientific knowledge as quickly as more daring projects could. A social planner prioritizing scientific output over researchers’ welfare could alleviate this issue by offering substantial rewards for major discoveries, thereby catalyzing high-risk research. However, such an approach may put researchers’ livelihoods at risk, ultimately leaving them worse off. Given that the scientific community largely self-governs and creates its own reward systems, the incentives they establish fall short of promoting the scientific risks necessary for optimal progress.
When determining how to compensate discoveries, the scientific community must face the contradiction that reward systems encouraging effort inherently discourage risk-taking, and vice versa. As the community seeks to motivate both effort and risk, yet finds effort expensive for researchers, it often ends up fostering a more cautious approach to science than what would be ideal for enhancing scientific advancement, even when risky research isn’t more burdensome than safer alternatives.
The authors conclude, “Critics frequently lament the lack of high-risk, high-return projects in science, attributing this to institutional or personal shortcomings. We contend that this isn’t necessarily true; scientists, wishing to protect their careers, will naturally gravitate towards safer projects than what scientific funders might prefer.”
