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Department of Economics

Investing in Basic Research


Interview with Markus Reinhardt, Managing Director NOMIS Foundation and Carlos Alós-Ferrer, NOMIS Professor for Decision and Neuroeconomic Theory on the importance of private funding for basic research.  




How did the NOMIS Foundation come to dedicate itself to promoting science?

MR: Over the last decades, we have been seeing a global trend in science funding: funds are moving away from knowledge-oriented basic research towards results-oriented applied research, from which a concrete application, e.g. a device or medical therapy, should emerge. Although we are spending more and more on research, a disproportionate amount is going into applied research and less and less into the basic research.

CAF: This trend is, of course, problematic in the long run. New findings from basic research feed result-oriented research.  If this trend continues, we run the risk of running out of basic knowledge necessary for researching new applications.

MR: We believe that investing in basic research creates long-term value for society. We want to give talented researchers the opportunity to carry out their research ideas and projects. It has become increasingly difficult for researchers to obtain financial support to pursue ideas that are not (yet) mainstream.

CAF: Our greatest challenge is that, in many European countries, academic structures are slow. As a new field develops, it can take decades to establish itself within academia. In many European universities, a key requirement to establish a new professorship is a demand for teaching on the subject. This means the area must have established itself to the degree that teach bachelor level courses can be taught, which can take years.

MR: Private foundations can accelerate this process and play an important role in pushing into new areas. With private support, universities can afford to establish expertise in a field of research without waiting for the topic to reach the mainstream.

CAF: A good example of the impact of such initial funding can be seen in Zurich: thanks to private donations, the Zurich Center for Neuroeconomics established itself in a relatively short period of time. Today it is one of the world's leading locations for neuroeconomics. There are very few institutions globally where a whole group of neuroeconomists can conduct their research within such an excellent infrastructure.  Thanks to another grant, we are already training the next generation of researchers in this young research area through the Marlene Porsche Graduate School of Neuroeconomics. This great achievement was only possible through the support of foundations and legacies.

RM: Basic research is a risky investment. It is reasonable that public funds want to be used more conservatively. We at NOMIS believe that private foundations can and should take such risks. If we don't do it, it won't happen. It boils down to this simple fact.

How do you ensure academic freedom?

CAF: It is simply not possible to commission basic research with a predefined outcome in mind. At the beginning of a research project, we never know what knowledge we will gain from it.

MR: And as a foundation, we are not interested in a concrete outcome. We support the scientist, i.e. the person, and not necessarily the field of research. Our only requirement is that the results obtained with our support are openly accessible so other scientists can use them.

CAF: This point is very important. Endowed professorships do not provide research funding for a lateral entry into science. They allow established scientists, who are appointed through the official procedure of the university, to step into a research position, which would not exist otherwise. Once established, endowed Professors apply for public funds and research credits, such as grants from the Swiss National Science Foundation, just as other scientists do and are subject to the same rigid requirements when applying for research projects. However, this kind of foundation support offers scientists the possibility to devote themselves to a certain field with increased freedom. That, I believe, is the crucial point.


Carlos Alós-Ferrer, how does a mathematician get to the topic of decisions and neuroeconomics?

CAF: In a way, my research life reflects the development of economics as a subject. I did my PhD in mathematical economics. I have to admit that, in the early stages of my career my economic models only inadequately represented the human component. 

However, human decision-making has always fascinated me. Every day we see that people do not always behave rationally and do not react to economic incentives as we might expect them to. As an economist, you have to talk to psychologists to understand their knowledge on concepts such as limited rationality. This conversation is the basis of behavioral economics. I then began to develop my own models of limited rationality and to refine them with experimental data and vice versa.

Neuroeconomics is the next natural step in the development of behavioral economics. Today the data we observe is not only the decision as an outcome as such, but also the related process data, such as reaction times or brain activity. The expertise of neuroscientists is needed to work with this kind of data. Observing brain processes not only means looking at which region is active, we also measure the intensity of conflict between different behavioral tendencies. This provides us with a wealth of additional data that allows us to provide answers to many questions that remain unanswered.

What led the NOMIS Foundation to support Neuroeconomics in Zurich?

MR: The great challenges of our time can only be solved jointly and within an interdisciplinary framework. We need to better understand our own species, the human animal, and neuroeconomics can show us the way. The NOMIS Foundation wants to contribute to this development.