Academic journal article Economic Inquiry

Fear of Novelty: A Model of Scientific Discovery with Strategic Uncertainty

Academic journal article Economic Inquiry

Fear of Novelty: A Model of Scientific Discovery with Strategic Uncertainty

Article excerpt

I. INTRODUCTION

Fundamental research frequently progresses in a discontinuous manner, with structural breaks driven by major innovations that are followed by long periods of exploitation of the results of such structural breaks (Bramoulle and Saint-Paul 2010). In his masterpiece, The Structure of Scientific Revolutions, Thomas Kuhn (1962) offers substantial historical evidence that demonstrates that established research paradigms prove to be extremely resilient and that only the inadvertent emergence of critical anomalies can generate paradigm change. (1) Indeed, many good ideas, that is ideas with scientific value higher than the research produced in the existing paradigm, fail to be implemented or take an abnormally long period of time to be recognized as such. In the "small world of economics," Cans and Shepherd (1994) provide evidence about the high rejection rates and unbelievable delays in publication of papers that are now considered as cornerstones of modern economics. In the opposite direction, Gardner (1957), Stephan (1996), Diamond (1996), and Abrahamson (2009) point out the emergence of fads and fashions in science, where scholars rush to develop ideas that ultimately prove to be sterile.

This paper aims to provide an explanation for these "bumpy" output trajectories in fundamental research by accounting for the coordination risk perceived by researchers considering whether to pursue or adopt a new idea. In scientific research, the scholar exposes his findings to a large community of peers, and takes the challenge of being judged and criticized by them. Yet humans fear criticism and peer rejection. They can hedge against this risk by following the herd, a psychological bias emphasized by Keynes (1936:158), who noticed that "worldly wisdom teaches that it is better for reputation to fail conventionally than to succeed unconventionally." (2) Sociologists of science have argued that success of a new idea depends on whether it will manage or not to generate a sufficiently large degree of consensus (Shwed and Bearman 2010). Taking this logic one step further, a new idea will reach the "science status" only if a critical mass of researchers adopt it, then test, extend, and develop applications of that idea. Given that research programs are typically confidential (Bobtcheff et al. 2013), a researcher will decide to develop a new idea only if he believes that a sufficient number of researchers are following the same research strategy. Knowledge of the belief formation mechanism is thus fundamental to gaining a deeper understanding of the idea adoption mechanism.

In this context, the researcher's problem can be analyzed as a typical coordination game with strategic complementarities. With complete information and identical players, such games present multiple equilibria; optimal actions are motivated by beliefs, and equilibrium beliefs are correct, but beliefs are ultimately undetermined, which generates the multiplicity of equilibria (Morris and Shin 2001, 2004). Carlsson and Van Damme (1993) proved that this indeterminacy can be removed in a two-person game if players observe only a biased signal of the variable defining the state of the economy. In this case, individuals should consider not only their own assessment of the economy but also the possible beliefs that the other player may hold regarding the same state of the economy. These authors showed that this type of game in which beliefs are no longer common knowledge presents a unique equilibrium of a particular form: there is a critical state of the economy above which both players take the high-risk high-yield strategy and below which they adopt the opposite wait-and-see strategy. Morris and Shin (1998, 2001) extended this analysis to "-player coordination games in which each player obtains an idiosyncratic signal regarding the underlying state of the economy. If the private signal is sufficiently precise, then this "global game" also presents a single threshold equilibrium in which players follow an equilibrium "switching strategy. …

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