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Re: universities experiment with paying OA fees

But, Ahmed, you are assuming a world of perfect market competition, which probably exists only in the minds of some economists who may still believe in the old models of neoclassical economics. Economics has moved well beyond these models now, with such developments as "rational expectations" and behavioral economics. Differences in cost alone surely will not determine what choices scholars , or administrators, make.

As I said earlier, even if we admit (with David Prosser) that at secondary or tertiary levels, differences in perceived quality among journals are not so pronounced as to rule out an important role for cost in driving less efficient journals out of the market, it is likely that the very top journals will continue to have so much prestige that scholars will want to publish in them even if the fees are a great deal higher than those of other journals in the field. Universities operate in a complex mixture of three economies--market, gift, and prestige--and behavior reflects this complexity. So, because journals are not perfectly substitutable for each other, prestige can trump price for at least some segment of them. Heck, even if you are just talking about automobiles, there is not perfect substitutability between different models and types of cars. If we learned anything from the heyday of SUVs, it is that the public's love affair with such uneconomic vehicles was driven by considerations other than price--until we now have reached a point where the cost of gas has risen so much that their inefficiencies have become magnified and people are deserting them in droves.

Sandy Thatcher
Penn State University Press

Sandy:

> Costs may be saved in one area only to reappear in another.
> I hope those who talk about "efficiency" will know where to
> look to identify all the new costs as well as the savings.

Please allow me to make some clarifications regarding this issue. In my message, I spoke of market efficiencies. I didn't speak of areas for cost savings in Gold OA in the sense of a current subscription publisher can realize cost savings in switching today to Gold OA. Gold OA does not mean that publishers will be cutting right and left what they do for every journal and every article they publish. The cost savings I speak of are not coming because of down-sizing and doing less and less. The cost savings are not going to be realized because publishers will not need access controls and authentications (which is very small cost) and not because publishers will not need print and distribution (which is an e-only saving that has little to do with open access) and not because publishers will not need a large subscription sales team (they will still need to collect their revenue).

What I was speaking of is not any particular publisher's cost, but the community cost. The total aggregate price that the society pays in return of publishing 2m articles or so a year. The cost savings will come because of market competition between publishers. Cars are much better and lower priced now than they used to be 50 years ago, not because car manufactures are cutting the features of cars, far from it. It is rather because they have significant market pressure to lower their costs, to produce betters car for less money. This is not an overnight process. A publisher switching over today from subscription to open access will not save much of its own cost. A whole market (or large part of it) switching in the next few years is something entirely different.

There are many publishers who spend an X amount of dollars per article in their publishing operations. And other publishers who spend several times that same amount of money per article. Gold OA will drive the second set of publishers out of the market. It will reward the first, more cost efficient publishers, with larger market share. More costly publishers will have to find a way of lowering their cost and prices or loose market share. Either way this will lower the total cost of the system.

In other words, the cost savings I believe in will not be from areas we can sit down today and agree that they can be removed in an OA world (although there may be an area of two like these indeed), but from market forces. From the pressure on publishers to compete on and lower their cost and prices. What exactly are they going to be doing different than what they do today: ask the airline companies that went out of business because they could not cut their costs as much as their competitors were able to do (or better yet, ask their competitors who were able to do it). Sometimes airlines had to cut some of their services (services that customers didn't care enough about to justify the cost associated with them) but many times they simply found better ways of doing what they do.

Cost reduction will be very significant, I believe, if publishers continue to offer the same level of service they offer today (because I can imagine a future where Gold OA publishers may be forced to offer higher or lower services than what publishers offer today because of market demand). If publishers are spending today X dollars per article (on average, and the average here is across publishers), they (or some of them) will find a way of spending only half or a third of that amount.

How is that possible? Actually, it is true that some of them already are much more cost effective than others. Some publishers spend only half the industry average and still produce the same level of service and quality. The American Physical Society, for example, spends (as much as I know) about $1900 per article which goes down to $1500 if you exclude print and distribution. IEEE on the other hand, spends around $4000-$5000, as far as I can tell, per article. They both produce leading publications in their fields. How can they both survive? They can and do in today's inefficient market where no one cares or does anything about the cost. (APS and IEEE don't compete in the same subject areas, and because of their mandates cannot expand into each others areas, but the cost discrepancies exist everywhere and there are many publishers who don't limit themselves into one subject area.) In an efficient market, the more cost effective publishers will get more market share (which will lower the total cost) and will put huge pressure on less cost effective publishers to lower their cost (which will lower the total cost).

Do you see this large cost and price discrepancy between publishers anywhere else in the economy? Imagine Sony with a 50" LCD TV for $1500 and Toshiba with a comparable 50" LCD TV with $4000? What do you think will happen if this was in fact the case? How long will it take for Toshiba to go out of business?

In a Gold OA world where price actually matters, more efficient publishers will have their day. They will wipe their less efficient competitors out of the market. And it is a wonderful thing for all of us, isn't it? It is what efficient markets bring to the society. It is capitalism at its best. Strong competition that results in better products and lower prices for consumers. It works for almost everything we produce and consume. Why wouldn't it work for scholarly publishing?

In order to have an efficient market, you have to have customers (authors, departments, institutions, research funders) who actually care about their cost, the price they pay per article. There is no way around it. There must be mechanisms for resource allocation, but I don't see this being as problematic as you do. Resources are limited and there is no way we can go around the fact that we need to allocate them in one way or another. Research funds have to be and are being allocated today. These research funds are 100 times the funds needed for scholarly publishing (even if we assume no cost reduction in the future).

Wouldn't it be wonderful for any of us to pick the car of our choice and not having to worry about how much it costs to produce it? Or the LCD TV that we like no matter how costly it is to produce? Or get any medical procedure we want or need without having to pay for it? Or fly first class to attend any conference of our choice at any cost without cost or price barriers? Or hire any number of graduate students to work in our research groups? Or get colleagues to visit and stay for a few weeks or months to do research projects with us? No, it will not be wonderful, because without price barriers and proper resource allocation, we will all be very, very poor.

Best regards,

Ahmed Hindawi