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The great publishing swindle: the high price of academic knowledge

One of the great outrages of academia in the modern age is the privatisation of the profits accruing to publicly-financed knowledge. One form is that of academic journals, a primary method of disseminating…

Academic publishing firms have been all too keen to monopolise a crucial public good: academic knowledge. giulia.forsythe

One of the great outrages of academia in the modern age is the privatisation of the profits accruing to publicly-financed knowledge. One form is that of academic journals, a primary method of disseminating scientific ideas and information among individuals and groups operating within universities, research and development (R&D) centers, knowledge-intensive institutions, and so on.

Some light was shed on this outrage recently with an article published in the conservative Economist magazine. It called the academic journal business “a licence to print money”, on the basis of the enormous profits that industry makes from providing licenses to access its depository of journals. The article noted that an annual subscription to a chemistry journal costs $US20,269, while a mathematics journal costs $US20,100.

The largest academic journal firm, Elsevier, made a staggering profit margin of 37% in 2011, up from 36% in 2010. This resulted in profits of £768 million from revenue of £2.1 billion. Even the hugely state-subsidised FIRE (finance, insurance and real estate) sector would be hard pushed to realise profit margins of this magnitude. Clearly, in terms of market returns, there is something seriously wrong with the way this industry operates, indicating excess levels of non-competitive profits.

The problem, however, is obvious to see. Academic journals, as with much of today’s R&D outputs and creative art, are protected by a medieval government monopoly created during the time of the feudal guilds: copyright. This is one of the elements of the umbrella known as intellectual property rights (IPRs), or as should be more accurately termed, intellectual monopoly privileges (IMPs). The latter terminology stems from the recognition that IMPs are a privilege granted by the state to some favoured party, in this case, the private sector.

IMPs restrict everyone except the license holder (and authorised parties) from creating and distributing copies of the protected item, thus bestowing a monopoly to the holder. Unlike traditional industrial monopolies, for instance, airports or telecommunications that exist due to economies of scale and thus lower prices, IMPs have the reverse (and perverse) effect. They can raise prices by several thousand percent about the cost of production, whether it be journals, medicines, or software.

Previously, universities provided subsidies to cover the cost of producing journals, but defunding, combined with incentives to relinquish journals to for-profit firms, has seen industry acquire the vast majority of market share.

Academic journals are a public good. What marks their importance is not the paper that comprises the journal, but the knowledge embedded within it. The vast majority of journal content is produced overwhelmingly by academics from the university sector. This sector is subsidised in a variety of ways by governments, as it is seen as another public good. Academics, however, are not paid to be the authors of papers, even though these papers represent the continual advancement of science and understanding of our world.

Some journals even require that potential authors pay a fee to have their manuscripts considered. The editors and reviewers are typically academics, usually unpaid like the contributors. One would think that considering that the scientific knowledge embodied in journals is a public good, produced within a university sector subsidised by taxpayers, edited and reviewed without charge, and can be reproduced at zero cost electronically on the internet, they should either be made available for free and/or for a nominal charge to cover the cost of printing.

Clearly, the opposite has occurred. Tens of thousands of academic journals are owned by a handful of corporations that set onerous terms for licensing. The worst, of course, is the monopolistic pricing. Bundling is another perverse practice: for instance, if a university library needs access to a single journal, it can’t be purchased individually, but rather as part of a bundle of journals, which radically increases costs. This is simply a method of extracting as much revenue - and hence profit - from universities. There are no substitutes for individual papers and journals; if someone needs to gain access to a specific article, they can’t make do with another that is similar in content. Also, those who use journals are not the ones who purchase them; consumers are accordingly price-insensitive.

As industry has undergone merger and acquisitions activity over the decades, prices have invariably increased as firms wield ever more market power. It should come as little surprise that journals cost as much as they do. Unfortunately, there is little data about the cost of access to journals in Australia.

The arguments for the privatisation of journals are flimsy at best. Perhaps some may say that journals need to be privately owned (courtesy of government intervention) to ensure innovation and creation of new market niches and that business and technical expertise are lacking within universities. The real innovation in this context, however, is the content, not the method of delivery. Printing hardcopy journals has existed for ages and can be carried out by publishers, whether in the public or private sectors. Creating electronic copies to be put on the internet is hardly innovative.

After all, universities are the locus of innovation in our economy, and have a veritable army of business, management and IT academics and specialists who can help provide the necessary expertise. Many universities already have their own book publishing presses, so it is a minor step to include journal publishing.

The current arrangement is utterly perverse. Those who do the productive work get nothing in terms of monetary compensation, yet firms reap massive profits (economic rents). Economic efficiency requires that consumers be charged the marginal cost, but have no choice but to accept monopolistic pricing.

There is no natural law that ensures this state of events. In a rational system, those who do the work should get paid directly for their efforts. Accordingly, a system of public financing should be set up to pay a lump sum to all authors who have a paper accepted in a journal, and perhaps a small prize fund to provide rewards to those who have authored scientifically important and/or popular papers. Editors and reviewers should be paid the prevailing market wage for their work, along with those who publish the journals, whether in print or electronically online.

Instead of having to access journals online through a myriad of security features, they should be made available for anyone to access and make copies if they so wish. This achieves two outcomes: consumers are charged the marginal cost (in this case, nothing) and scientific knowledge is freely available to all.

It is quite possible that with the aggregate amount of money that Australian universities and other institutions spend every year on financing access to privately-owned journals, it could be used to finance a far more efficient system of journal production - rewarding authors, reviewers, editors, and publishers, without gouging consumers and end-users, while promoting a more effective dissemination of scientific knowledge.