The Perverse Incentives in Scholarly Publishing

Competition drives the economy, but it often works in strange ways. A study done a few years ago (before managed care became a serious factor) compared hospital costs in mid-sized U.S. cities that had either one or two hospitals. An obvious guess might be that competition between hospitals would lead to lower costs in cities that had two hospitals. However, the results were just the opposite, with the twohospital cities having substantially higher prices. This result did not mean that basic economic laws did not apply. Competition was operating, but at a different level. Since it was doctors who in practice determined what hospital a patient went to, hospitals were competing for doctors by purchasing more equipment, putting in specialty wards, and the like, which was increasing their costs (but not making any noticeable difference in the health of the population they served). The patients (or, more precisely, their insurers and employers) were paying the extra price.

Scholarly publishing as a business has many similarities to the medical system, except that it is even more complicated. Journals do not compete on price, since that is not what determines their success. There are four principal groups of players. The first one consists of scholars as producers of the information that makes journals valuable. The second consists of scholars as users of that information. However, as users, they gain access to journals primarily through the third group, the libraries. Libraries purchase journals from the fourth group, the publishers,

usually in response to requests from scholars. These requests are based overwhelmingly on the perceived quality of the journals, and price seldom plays a role (although that is changing under the pressure to control growth of library costs). The budgets for libraries almost always come from different sources than the budgets for academic departments, so that scholars as users do not have to make an explicit trade-off between graduate assistantships and libraries, for example.

Scholars as writers of papers determine what journals their work will appear in and thus how much it will cost society to publish their work. However, scholars have no incentive to care about those costs. What matters most to them is the prestige of the journals they publish in. Often the economic incentives are to publish in high-cost outlets. It has often been argued that page charges are a rational way to allocate costs of publishing, since they make the author (or the author's institution or research grant) cover some of the costs of the journal, which, after all, is motivated by a desire to further the author's career. However, page charges are less and less frequent. As an extreme example, in the late 1970s, Nuclear Physics B, published by Elsevier, took over as the "journal of choice" in particle physics and field theory from Physical Review D, even though the latter was much less expensive. This takeover happened because Phys. Rev. D had page charges, and physicists decided they would rather use their grant money for travel, postdocs, and the like. Note that the physicists in this story behaved in a perfectly rational way. They did not have to use their grants to pay for the increase in library costs associated with the shift from an inexpensive journal to a much pricier one. Furthermore, even if they had to pay for that cost, they would have come out ahead; the increase in the costs of just their own library associated with an individual decision to publish in Nucl. Phys. B instead of the less expensive Phys. Rev. D (could such a small change have been quantified) would have been much smaller than the savings on page charges. Most of the extra cost would have been absorbed by other institutions.

To make this argument more explicit, consider two journals: H (high priced) and L (low priced). Suppose that each one has 1,000 library subscriptions and no individual ones. L is a lean operation, and it costs them $3,000 to publish each article. They collect $1,000 from authors through page charges and the other $2,000 from subscribers, so that each library in effect pays $2 for each article that appears in L. On the other hand, H collects $7,000 in revenue per article, all from subscriptions, which comes to $7 per article for each library. (It does not matter much whether the extra cost of H is due to profits, higher quality, or inefficiency.)

From the standpoint of the research enterprise or of any individual library, it would be desirable to steer all authors toward publishing in L, as that would save a total of $4,000 for each article. However, look at this situation from the standpoint of the author. If she publishes in L, she loses $1,000 that could be spent on graduate students, conferences, and so on. If she publishes in H, she gets to keep that money. She does not get charged for the extra cost to any library, at least not right away. Eventually the overhead rates on her contract might go up to pay for the higher library spending at her institution. However, this effect is delayed and is

weak. Even if we had accounting mechanisms that would provide instantaneous feedback (which we do not, with journal prices set more than a year in advance and totally insensitive to minor changes caused by individual authors deciding where to publish), our hypothetical author would surely only get charged for the extra $5 that she causes her library to spend ($7 for publication in H as opposed to $2 in L ) and not for the costs to all the other 999 libraries. She would still save $995 ($1,000 - $5) of her grant money. Is it any wonder if she chooses to publish in H ?

A secondary consideration for authors is to ensure that their papers are widely available. However, this factor has seldom played a major role, and with the availability of preprints through e-mail or home pages it is becoming even less significant. Authors are not told what the circulation of a journal is (although for established publications, they probably have a rough idea of how easy it is to access them). Further, it is doubtful this information would make much difference, at least in most areas. Authors can alert the audience they really care about (typically a few dozen experts) through preprints, and the journal publication is for the résumé more than to contact readers.

In 1993-94, there was a big flap about the pricing of International Mathematics Research Notices (IMRN ), a new research announcement journal spun off from the Duke Mathematical Journal. The institutional subscriptions cost $600 per year, and there were not many papers in it. The director of publishing operations for Duke University Press then responded in the Newsletter on Serials Pricing Issues [NSPI ] by saying that his press was doing the best it could to hold down prices. It's just that their costs for IMRN were going to be $60,000 per year, and they expected to have 100 [sic ] subscriptions, so they felt they had to charge $600 per subscription. Now, one possibility is that the Duke University Press miscalculated and that it might have been easier for them to sell 400 subscriptions at $150 than 100 at $600, since IMRN did establish a good reputation as an insert to Duke Math. J. However, if their decision was right, then there seem to be two possibilities: (1) scholars will decide that it does not make sense to publish in a journal that is available in only 100 libraries around the world, or (2) scholars will continue submitting their papers to the most prestigious journals they can find (such as IMRN ) no matter how small their circulation, since prestige is what counts in tenure and promotion decisions and since everybody that they want to read their papers will be able to get them electronically from preprint servers in any case. In neither case are journals such as IMRN likely to survive in their present form. (IMRN itself appears to have gained a longer lease on life, since it seems to have gained considerably more subscribers and, while it has not lowered its price, it is publishing many more papers, lowering its price per page, as mentioned in Section 2.)

The perverse incentives in scholarly publishing that are illustrated in the examples above have led to the current expensive system. They are also leading to its collapse. The central problem is that scholars have no incentive to maintain the current system. In book publishing, royalties align the authors' interests with those of publishers because both wish to maximize revenues. (This situation is most ap-

plicable in the trade press or in textbooks. In scholarly monograph publishing, the decreasing sales combined with the typical royalty rate of, at most, 15% are reducing the financial payoff to authors and appear to be leading to changes, with monographs becoming available electronically for free.) For the bulk of scholarly publishing, though, the market is too small to provide a significant financial payoff to the authors.