  Scientific research funding is allocated largely through a system of
soliciting and ranking competitive grant proposals. In these competitions, the
proposals themselves are not the deliverables that the funder seeks, but
instead are used by the funder to screen for the most promising research ideas.
Consequently, some of the funding program's impact on science is squandered
because applying researchers must spend time writing proposals instead of doing
science. To what extent does the community's aggregate investment in proposal
preparation negate the scientific impact of the funding program? Are there
alternative mechanisms for awarding funds that advance science more
efficiently? We use the economic theory of contests to analyze how efficiently
grant proposal competitions advance science, and compare them with recently
proposed, partially randomized alternatives such as lotteries. We find that the
effort researchers waste in writing proposals may be comparable to the total
scientific value of the research that the funding supports, especially when
only a few proposals can be funded. Moreover, when professional pressures
motivate investigators to seek funding for reasons that extend beyond the value
of the proposed science (e.g., promotion, prestige), the entire program can
actually hamper scientific progress when the number of awards is small. We
suggest that lost efficiency may be restored either by partial lotteries for
funding, or by funding researchers based on past scientific success instead of
proposals for future work.
