To Have and be Had: Some Economics of Academic Journals Ted Bergstrom UCSB

A curious market structure Private profit-maximizing firms and non- profit societies and academic presses both are significant players.Private profit-maximizing firms and non- profit societies and academic presses both are significant players. Most of the workforce--authors and referees--work for free.Most of the workforce--authors and referees--work for free.

Journal Prices by Discipline Ecology Economics Atmosph. Sci Mathematics Neuroscience Physics Costper page Cost per page For-profit Nonprofit Non-profitFor-profitNon-profit Cost per cite (In US $)

Costs of a Complete Economics Collection PublisherType Percent of Cost Percent of Cites Non-Profit9%62% For-Profit91%38%

Costs of a Physics Collection: Heinz Barshall’s List of Journals PublisherType Percent of Cost Percent of Cites Non-Profit39%79% For-Profit61%21%

Division of Labor The greatest improvements in the productive powers of labour… seem to have been the effects of the division of labour …. Adam Smith, Wealth of NationsThe greatest improvements in the productive powers of labour… seem to have been the effects of the division of labour …. Adam Smith, Wealth of Nations Illustrated by academic journals:Illustrated by academic journals: Non-profits supply most of the citations.Non-profits supply most of the citations. For-profits collect most of the money.For-profits collect most of the money.

Monopoly Profits in Academic Publishing? Hint: University press and professional society journals are usually not subsidizedHint: University press and professional society journals are usually not subsidized They charge 1/5 as much per page as for-profit journals.They charge 1/5 as much per page as for-profit journals.

If there is free entry, how can there be monopoly? Unlike shoes or groceries, competition from perfect substitutes is prevented by copyright.Unlike shoes or groceries, competition from perfect substitutes is prevented by copyright. Reputation makes it hard for new entrant to attract top quality articles.Reputation makes it hard for new entrant to attract top quality articles. Rents fall to owner of a coordinating signal– a journal name.Rents fall to owner of a coordinating signal– a journal name. Like the rents to record companies for talent- free musicians who are popular because they are popular?Like the rents to record companies for talent- free musicians who are popular because they are popular?

The strange economics of academic journals If one brand of car cost 6-15 times as much as others of better quality, how many would be sold?If one brand of car cost 6-15 times as much as others of better quality, how many would be sold? Almost zero, because people would substitute low priced for high priced.Almost zero, because people would substitute low priced for high priced. Why then do commercial journals that cost times as much per cite as nonprofits continue to sell?Why then do commercial journals that cost times as much per cite as nonprofits continue to sell?

Journals as Complements Academic journals tend to be complements, not substitutes.Academic journals tend to be complements, not substitutes. Two copies of cheap society journal will not replace a subscription to Elsevier journal that costs 10 times as much per cite.Two copies of cheap society journal will not replace a subscription to Elsevier journal that costs 10 times as much per cite. Many scientists want to read all significant research in their area, not just the top papers.Many scientists want to read all significant research in their area, not just the top papers.

More strange economics With most goods, middleman pays producer, consumer pays middleman.With most goods, middleman pays producer, consumer pays middleman. With journals, producer pays middleman (often not much), consumer pays middlemanWith journals, producer pays middleman (often not much), consumer pays middleman

Open Access Model Producer pays middleman, consumer pays nobody.Producer pays middleman, consumer 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? To succeed, an open access journal must attract authors.To succeed, an open access journal must attract authors. Are authors and their universities willing to pay to have their work read and cited?Are authors and their universities willing to pay to have their work read and cited? – Evidence that open access articles are more cited. –Economic study: avg citation worth $35 per year in salary. Will they pay $1500 as for PLOS?Will they pay $1500 as for PLOS?

Open access and competition Competition for authors will be stiffer than for readers.Competition for authors will be stiffer than for readers. Would an author submit papers to a journal with submission fees 6-15 times as high as equivalent competitor? Would an author submit papers to a journal with submission fees 6-15 times as high as equivalent competitor? Not likely. Why?Not likely. Why? For authors, journals are substitutes, not complements.For authors, journals are substitutes, not complements.

University-paid author fees University could limit amount it would pay per page.University could limit amount it would pay per page. Authors can choose to top up fees.Authors can choose to top up fees. As outlets, competing journals are substitutes, not complementsAs outlets, competing journals are substitutes, not complements Price competition for author fees is likely to prevent extreme fees.Price competition for author fees is likely to prevent extreme fees.

Libraries as toll collectors? In PNAS, CB and I argue that library purchase of site licenses from profit-maximizers reduces well-being of academic community.In PNAS, CB and I argue that library purchase of site licenses from profit-maximizers reduces well-being of academic community. Better outcome if Elseviers are forced to deal with individuals.Better outcome if Elseviers are forced to deal with individuals. For nonprofit journals, the conclusion is opposite.For nonprofit journals, the conclusion is opposite. For these site licenses enhance efficiency by improving access without increasing cost.For these site licenses enhance efficiency by improving access without increasing cost.

Polysyllabic Thunder After UC signed its latest Big Deal with Elsevier for $7.3 million, the official UC statement was:After UC signed its latest Big Deal with Elsevier for $7.3 million, the official UC statement was: “ the economics of scholarly journals publishing are incontrovertibly unsustainable”“ the economics of scholarly journals publishing are incontrovertibly unsustainable” Wow.Wow. Does this mean something, or is it just deanspeak?Does this mean something, or is it just deanspeak?

What can UC do? UC is a giant— prestige, research output, research readership.UC is a giant— prestige, research output, research readership. Individual journals need UC more than UC needs individual journals. Individual journals need UC more than UC needs individual journals. Journals not stocked by UC won’t attract top authors.Journals not stocked by UC won’t attract top authors. Big publishers have bundled their weak journals with their strong to avoid this vulnerability.Big publishers have bundled their weak journals with their strong to avoid this vulnerability.

Shorter words, tougher acts Set minimal acceptable standards of value- per-dollarSet minimal acceptable standards of value- per-dollar Refuse Big Deals. Subscribe only to journals that meet minimal value-per-dollar standards. Refuse Big Deals. Subscribe only to journals that meet minimal value-per-dollar standards. Charge overhead for UC faculty serving on editorial boards of journals not meeting standards.Charge overhead for UC faculty serving on editorial boards of journals not meeting standards.

Possible Tactics Might start with middle-sized publishers: Taylor & Francis, Springer, Wiley, SageMight start with middle-sized publishers: Taylor & Francis, Springer, Wiley, Sage Subscribe to their “good deal” journals at list prices.Subscribe to their “good deal” journals at list prices. Offer UC-determined value-based price for a package of their remaining journals.Offer UC-determined value-based price for a package of their remaining journals. What would it mean to journals lose their UC subscription base?What would it mean to journals lose their UC subscription base? How bad would it be for UC?How bad would it be for UC?

Why we can afford to cancel Subscriptions much less important than they were.Subscriptions much less important than they were. Scholars can still get pay-per-view—could be partially subsidized. Scholars can still get pay-per-view—could be partially subsidized. Most articles can be found online for free—or at worst, obtained by from author.Most articles can be found online for free—or at worst, obtained by from author.

Overhead for overpriced? Universities charge overhead onUniversities charge overhead on research grants. research grants. They charge no overhead for journal editors and often give courses off.They charge no overhead for journal editors and often give courses off. This makes sense for publishers that cooperate in academic enterpriseThis makes sense for publishers that cooperate in academic enterprise But not for publishers that are extracting maximal rents.But not for publishers that are extracting maximal rents.

One way to set standards Preston McAfee and I have proposed a measure atPreston McAfee and I have proposed a measure at Compares value per dollar with that of non-profits in same field. Compares value per dollar with 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 Deals, even if they are “incontrovertibly unsustainable” Elsevier statement after the last UC Big Deal: "Although the negotiation period was challenging for both parties, the tone of the discussion was professional and cordial throughout." Elsevier statement after the last UC Big Deal: "Although the negotiation period was challenging for both parties, the tone of the discussion was professional and cordial throughout." At least we didn’t get our pockets picked by surly amateurs.At least we didn’t get our pockets picked by surly amateurs. Maybe being had is not so bad.Maybe being had is not so bad.

Had enough? OK, then, I’ll quitOK, then, I’ll quit

Want more? …papers, statistics, …papers, statistics, weasel’s manual, etc

Fable of the Anarchists’ Annual meeting Once upon a time a bunch of anarchists happened to get together on January 3 in a hotel in Kansas CityOnce upon a time a bunch of anarchists happened to get together on January 3 in a hotel in Kansas City They had a grand time.They had a grand time. Next year more anarchists came and they had even more fun.Next year more anarchists came and they had even more fun. The tradition grew and meetings got bigger and more enjoyable.The tradition grew and meetings got bigger and more enjoyable.

Trouble in Kansas City One year, the hotel owner raised his rates at conference time.One year, the hotel owner raised his rates at conference time. Attendance fell a little and owner’s revenue rose a lot.Attendance fell a little and owner’s revenue rose a lot. Next year owner did it again.Next year owner did it again. Anarchists groused, had less fun with the smaller crowd and higher prices.Anarchists groused, had less fun with the 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!