Overhead Projections

Meehl's Philosophical Psychology, Lecture 3, Part 4.

This post digs into Lecture 3 of Paul Meehl’s course “Philosophical Psychology.” You can watch the video here. Here’s the full table of contents of my blogging through the class.

Just as experimenter and publication dispositions have existed for as long as there has been science, systemic biases of funding pressure have warped the scientific record. Someone has to pay for the lowly scientists to do their work. The hope is that these nerdy monks will produce valuable knowledge for society, but someone needs to pay for them to sit around and try to figure stuff out.

In the post-war United States, the federal government decided to be such a scientific benefactor. But the means in which it did so had pernicious side effects. My favorite part of Lecture 3 is the 20 minutes Meehl spends ranting about these pernicious means: indirect costs. I promised I’d draw out some of the more troubling trends that Meehl points out in his lectures, and the ballooning of indirect costs is one of them. So let me break this discussion into two parts. Today, a history of the indirect costs and their absurdities. In the next post, how investigator funding further complicates the reconstruction of science.

Though the seeds of the idea were around before the war, the modern indirect cost model for federal grants was codified in the great academic boom after World War II. The federal government enthusiastically promoted expanding and accelerating scientific research, but universities argued that they needed funds to support these endeavors. There were costs that were hard to itemize and quantify in a grant proposal. Electricity. Water. Custodial services. These cost money. There were also “administrative costs” associated with the central campus support of a sponsored project. Someone needed to correspond with the federal government and transfer funds back and forth. To pay for these indirect costs (often called F&A costs for facilities and administration), the government agreed to allow universities to charge 8 cents for every dollar requested on a grant proposal. The investigator would get a dollar to do research, the university would get 8 cents for indirect costs, and everyone was happy.

Or at least, they were happy for a while until universities found that these funds didn’t cover their bills. After a couple of decades of small raises, the government removed the cap on indirect costs altogether in 1966. As Meehl mentions in his lecture, by 1989, the indirect rate at the University of Minnesota was 42 cents. That means when Meel wrote a grant for 500 thousand dollars, the university would get 148 thousand dollars, and he’d get 352 thousand for his direct research costs of researcher salaries, lab animals, apparatuses, or direct administrative support.

Now, fine, you’ll say the university has actual costs, right? But the slippery part of the indirect costs is how they are unbudgeted. When I write a grant, I have to intricately itemize how my share gets spent. Most of the costs will go to salary and benefits for graduate students or postdocs. Some might go to supplies or computers. There are detailed line item estimates. Indirect costs, on the other hand, don’t get itemized. Universities argue that it’s too hard to write down the exact costs of electricity or water or grant management.

Meehl argues that indirect rates are thus a total scam. He proves this by telling the students a surprising fun fact. The indirect rates are only for federal grants. If some other private organization wants to give a researcher money for whatever reason, they can negotiate their own indirect rates. If a foundation says it will only pay for 15% overhead, the university doesn’t turn the money away. This is not because projects funded by the US taxpayer cost more than projects funded by philanthropists.

Meehl notes that the “university gets in the habit of using this money for whatever it pleases.” And he was right. In the early 1990s, the government started looking into what “F&A” costs went to fund and found some troubling surprises.

Meehl mentions that the indirect rate at Stanford was 70 cents in 1989. This was suspiciously high. The Government Accountability Office dug and found the overhead money went to all sorts of weird things. For example, two hundred thousand dollars of F&A money went to a yacht for the sailing team. Oops! The GAO report went public, everyone was embarrassed, and overhead rates fell for a bit. In response to Stanford’s public embarrassment, universities hired a bunch of staff to ensure F&A funds were properly spent. But you’ll never guess how the university pays for its internal auditors. Oh, that’s right, with F&A funds. And hence, to keep up with reporting and auditing, indirect cost rates crept back up again.

The overhead rate at Minnesota is now 55 cents. At Berkeley, it’s 60.5 cents. Just to be clear what this means, when I write a grant for 500 thousand dollars, the university gets 188 thousand dollars, and I’ll get 312 thousand for actually spending on research. In 2020, The University of California, a flagship public institution, received 3.7 billion dollars from the state general fund to fund its operations. It received 5.1 billion dollars in tuition and fees from students. And it received over 1.2 billion dollars in indirect costs from the federal government. And the university still claims this funding is insufficient to cover the actual costs of supporting research.

And therein lies the rub. Indirect costs are a significant source of university funding. Departments are favored if they can generate more of this funding stream. Professors are evaluated based on how much funding they can bring in. You don’t get tenure unless you get grants. Now, I know some people say to junior faculty, “you are evaluated on your work, not your grants.” But most scientists can’t do their work alone in their bedroom. They need to hire research assistants and post-docs. They need to buy equipment. Whereas before World War II, this money might have come from campus coffers, these costs are now almost entirely dependent on the fundraising of individual faculty.

This pressure for federal grants means that professors might work on research problems that are likely to be funded. And, uh oh, there’s another bias that creeps in to influence the scientific literature. In the next post, I’ll unpack exactly how Meehl claims it manifests itself.