Jul 19, 2011

Journal Economics and the Value of Academic Liberties

I’ve heard people say both that academic journals are too expensive and that journals may be too quick to sacrifice the freedoms of authors in the face of threatened or actual lawsuits. It should be obvious that these positions tend to undermine each other. In the long run, it’s generally cheaper for journal publishers (like other kinds of businesses, as well as non-profits for that matter) to settle out of court rather than face a lengthy and expensive lawsuit. In other words, journals are cheaper when publishers settle rather than fight each potential lawsuit tooth and nail. If you value the academic liberties of authors, you should be willing to pay a price for it. 

Now, how much risk should publishers be taking on, and is that risk being priced fairly, or do some publishers have sufficient market power to overcharge for the assumption of that risk? These seem like the important questions to me, whereas railing against the cost of journals while advocating for a policy that keeps the cost high seems unproductive.

Update: I've started discussing this issue at the terrific NewAPPS blog.


  1. Why is charging a price higher than marginal cost unfair?

    If you've ever sold anything to the highest bidder (at his asking price), and the highest bidder was asking more than the second highest bidder (i.e. there was no tie), then you charged a price higher than marginal cost. I don't think that was unfair of you.


  2. I would guess that almost every seller you buy anything from has some market power. E.g. If you buy milk from a store, they could probably lower their price or raise their price by at least a few cents. That's market power. Theoretically, they are charging a price at which marginal revenue equals marginal cost.

  3. R.d.,

    Yes, lots of firm will have market power-- but if market power is highly concentrated then the likelihood of anti-competitive behavior that inflates prices increases, right?

    And no, I don't think charging more than marginal cost is always unfair, though it might be in certain cases (like price gouging in natural disasters).

    This is all somewhat independent of the point I was after in the post, but obviously these are interesting questions as well.