The cost, value and price of scientific publication

We have a tendency to be sloppy about language in everyday usage, so that words like “cost”, “value” and “price” are used more or less interchangeably. But economists will tell you that the words have distinct meanings, and picking them apart is crucial to understand economic transaction. Suppose I am a carpenter and I make chairs:

• The cost of the chair is what it costs me to make it: raw materials, overheads, my own time, etc.
• The value of the chair is what it’s worth to you: how much it adds to your lifestyle.
• The price of the chair is how much you actually pay me for it.

In a functioning market, the value is more than the cost. Say it costs me £60 to make the chair, and it’s worth £100 to you. Then there is a £40 range in which the price could fall and we would both come out of the deal ahead. If you buy the chair for £75, then I have made £15 more than what it cost me to make, so I am happy; and you got it for £25 less than it was worth to you, so you’re happy, too.

(If the value is less than the cost, then there is no happy outcome. The best I can do is dump the product on the market at below cost, in the hope of making back at least some of my outlay.)

So far, so good.

Now let’s think about scientific publications.

There is a growing consensus that the cost of converting a scientific manuscript into a published paper — peer-reviewed, typeset, made machine-readable, references extracted, archived, indexed, sustainably hosted — is on the order of $500-$1000.

The value of a published paper to the world is incredibly hard to estimate, but let’s for now just say that it’s high. (We’ll see evidence of this in a moment.)

The price of a published paper is easier to calculate. According to the 2018 edition of the STM Report (which seems to be the most recent one available), “The annual revenues generated from English-language STM journal publishing are estimated at about $10 billion in 2017 […] collectively publishing over 3 million articles a year” (p5). So, bundling together subscription revenues, APCs, offsets deals and what have you, the average revenue accruing from a paper is $10,000,000,000/3,000,000 = $10,000/3 = $3,333.

(Given that these prices are paid, we can be confident that the value is at least as much, i.e. somewhere north of $3,333 — which is why I was happy earlier to characterise the value as “high”.)

Why is it possible for the price of a paper to be 3–7 times as high as its cost? One part of the answer is that the value is higher still. Were it not so, no-one would be paying. But that can’t be the whole reason.

Tune in next time to find out the exciting reason why the price of scholarly publishing is so much higher than the cost!