To Have and be Had:
Some Economics of
Academic Journals
Ted Bergstrom
UCSB
A curious market structure
• Private profit-maximizing firms and nonprofit organizations are both
significant players.
• Most of the workforce--authors and
referees--work for free.
Contrasting Prices
(In US $)
Cost per page
For-profit
Ecology
Economics
Atmosph. Sci
Mathematics
Neuroscience
Physics
1.01
0.83
0.95
0.70
0.89
0.63
Non-profit
0.19
0.17
0.15
0.27
0.10
0.19
Cost per cite
For-profit
Non-profit
0.73
2.33
0.88
1.32
0.23
0.38
0.05
0.15
0.07
0.28
0.04
0.05
Costs and Benefits from a complete
Economics collection 2004
Share of
Cost
Share of
Pages
Share of
Cites
Nonprofit
11%
32%
45%
For profit
89%
68%
55%
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 Nations
• Illustrated by academic journals:
• Non-profits supply most of the
citations.
• For-profits collect most of the money.
Monopoly Profits in Academic
Publishing?
• Hint: University press and professional
society journals are usually not subsidized
and often make profits
• They charge less than 1/3 as much per
page as for-profit journals.
Elsevier Financial
Statement for 2005
• Reported revenue: $2.67 billion
• Reported profits : 31% of revenue.
• A remarkable rate. Remember profit is revenue
above costs.
• Not so surprising since they charge 3 times as
much per page as non-profits.
Why are profits only 31% and
not 66%?
• They charge 3 times as much as non-profits.
Non-profits at least cover costs.
• Why aren’t Elsevier costs be about 1/3 and
profits about 2/3 of revenue?
• High prices reduce subscriptions. Revenue
rises by proportionately less than price.
• Also Elsevier has large lobbying
expenditures, high executive pay etc. all
counted as costs.
If there is free entry, how can
there be monopoly?
• Unlike shoes or groceries, competition from
perfect substitutes is prevented by copyright.
• Reputation makes it hard for new entrant to
attract top quality articles.
• Rents fall to owner of a coordinating signal–
a journal name.
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?
• Almost zero, because people would
substitute low priced for high priced.
• Why then do commercial journals that cost 615 times as much per cite as nonprofits
continue to sell?
Journals as Complements
• 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.
• 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 journals, producer pays middleman
(often not much), consumer pays middleman
Open Access Model
• Producer pays middleman, consumer pays
nobody.
• Would this work for nonprofits?
• Would this work for profit-maximizers?
Non-profit open access?
• To succeed, an open access journal must
attract authors.
• 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?
Open access and competition
• 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?
• Not likely. Why?
• For authors, journals are substitutes, not
complements.
University-paid author fees
• University could limit amount it would pay per
page.
• Authors can choose to top up fees.
• As outlets, competing journals are
substitutes, not complements
• 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.
• Better outcome if Elseviers are forced to deal with
individuals.
• For nonprofit journals, the conclusion is opposite.
• For these site licenses enhance efficiency by improvin
access without increasing cost.
Polysyllabic Thunder
• 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”
• Wow.
• Does this mean something, or is it just
deanspeak?
What can UC do?
• UC is a giant— prestige, research output, research
readership.
• Individual journals need UC more than UC needs
individual journals.
• Journals not stocked by UC won’t attract top
authors.
• Big publishers have bundled their weak journals with
their strong to avoid this vulnerability.
Shorter words, tougher acts
• Set minimal acceptable standards of valueper-dollar
• 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.
Possible Tactics
• Might start with middle-sized publishers: Taylor &
Francis, Springer, Wiley, Sage
• Subscribe to their “good deal” journals at list prices.
• Offer UC-determined value-based price for a
package of their remaining journals.
• What would it mean to journals lose their UC
subscription base?
• How bad would it be for UC?
Why we can afford to cancel
• Subscriptions much less important than they
were.
• Scholars can still get pay-per-view—could be
partially subsidized.
• Most articles can be found online for free—or
at worst, obtained by email from author.
Overhead for overpriced?
• Universities charge overhead on
research grants.
• They charge no overhead for journal editors and
often give courses off.
• This makes sense for publishers that cooperate
in academic enterprise
• But not for publishers that are extracting maxim
rents.
One way to set standards
• Preston McAfee and I have proposed a
measure at
www.journalprices.com
• Compares value per dollar with that of
non-profits in same field.
• 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."
• At least we didn’t get our pockets picked
by surly amateurs.
• Maybe being had is not so bad.
Had enough?
• OK, then, I’ll quit
Want more?
www.econ.ucsb.edu/~tedb
…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 City
• They had a grand time.
• Next year more anarchists came and they had
even more fun.
• 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.
• Attendance fell a little and owner’s revenue
rose a lot.
• Next year owner did it again.
• Anarchists groused, had less fun with the
smaller crowd and higher prices.
• Why didn’t they move to another hotel?
• They are anarchists!