One of the more intriguing economic developments of the last decade has been the emergence of crowdfunding for creative projects, new businesses, new products, and even charitable goals. Two of the more prominent crowdfunding platforms are Indiegogo.com and kickstarter.com, which were established in 2008 and 2009. Crowdfunding allows people seeking to start a business, produce a film, or even fund a class trip to connect directly with potential donors, raising money through numerous, typically small donations. Crowdfunding cuts out the middleman, like banks, in the case of a new business.

Kickstarter has funded 78,000 projects to date, which have together raised nearly $1.5 billion. The creative arts comprise the largest project categories on Kickstarter: film & video, music, art, and publishing. The amounts raised for projects are typically modest, with over 70% involving less than $10,000, but 88 projects have raised $1 million or more. Kickstarter now provides more funding for the arts than the National Endowment for the Arts.

Recently professors have begun to seek crowdfunding for their research, using specialized platforms like RocketHub.com and Experiment.com. RocketHub.com now has an agreement with the A&E cable network to promote selected projects. The emergence of crowdfunding raises questions about how to pay for university research generally, including the role of government.

Professors are seeking crowdfunding in part due to reduced government support for research. State government appropriations to higher education have been steadily declining, while the National Science Foundation’s budget, adjusted for inflation, has been largely constant. Federal support remains substantial at $41 billion a year, but Congressional Budget Office projections of rising Social Security, Medicare and Medicaid spending make future cuts to Federal research dollars appear likely.

Why should government fund science and research at all? Knowledge has the characteristics of what economists call a public good. Knowledge can be shared without being used up and is easily relayed from one person to another. A workable business plan to “sell” knowledge profitably will prove challenging. Imagine trying to sell multiplication. Once you sell someone the knowledge that six times six equals thirty six, they can turn around and tell others. Knowledge built into a product design can receive patent protection, a legal remedy for the public good problem which allows a financial return. But profitably selling the knowledge contained in the multiplication table seems intractable. If so, then how do we pay people to produce such knowledge? Government funding and dispersing the knowledge free of charge is a workable solution.

Crowdfunding taps into peoples’ interest and curiosity about nature and science to fund research. National Geographic’s 3.5 million subscribers demonstrate a willingness to pay for science. Crowdfunders of research likely feel pride in supporting scientists, just as patrons of the arts feel toward the artists they support. And some projects allow for donor interaction, either with the researchers, or in one case, through personal use of a space telescope.

The amounts raised for research have been small so far, averaging less than $2,000, according to a recent study of projects on RocketHub. And successful fundraising requires considerable time and effort by researchers, both in preparing descriptive materials (typically a short video) and promoting the project on social media. Yet today’s initial efforts may be setting the stage for larger projects tomorrow.

Pursuit of crowdfunding will almost certainly improve communication about the value of professors’ research. Academics are notorious for writing papers accessible only to other professors. To some degree this is inevitable, since making a research contribution in economics, physics or math requires considerable specialized knowledge. Yet professors should be able to explain the big picture contribution of our research to a wider audience. A failure to communicate may well result in a lack of public support for continued government funding.

Ultimately somebody must pay for research, either through taxes, investment in commercial applications, or crowdfunding. Government dollars allow professors to do the research we want without having to explain ourselves to others, but this is not sustainable in the long run. Perhaps the lure of crowdfunding dollars will help reverse this cycle.

 

 

Daniel Sutter is the Charles G. Koch Professor of Economics with the Manuel H. Johnson Center for Political Economy at Troy University and host of Econversations on TrojanVision. Respond to him at dsutter@troy.edu and like the Johnson Center on Facebook.