  Scientific research requires taking risks, as the most cautious approaches
are unlikely to lead to the most rapid progress. Yet much funded scientific
research plays it safe and funding agencies bemoan the difficulty of attracting
high-risk, high-return research projects. Why don't the incentives for
scientific discovery adequately impel researchers toward such projects? Here we
adapt an economic contracting model to explore how the unobservability of risk
and effort discourages risky research. The model considers a hidden-action
problem, in which the scientific community must reward discoveries in a way
that encourages effort and risk-taking while simultaneously protecting
researchers' livelihoods against the vicissitudes of scientific chance. Its
challenge when doing so is that incentives to motivate effort clash with
incentives to motivate risk-taking, because a failed project may be evidence of
a risky undertaking but could also be the result of simple sloth. As a result,
the incentives needed to encourage effort actively discourage risk-taking.
Scientists respond by working on safe projects that generate evidence of effort
but that don't move science forward as rapidly as riskier projects would. A
social planner who prizes scientific productivity above researchers' well-being
could remedy the problem by rewarding major discoveries richly enough to induce
high-risk research, but scientists would be worse off for it. Because the
scientific community is approximately self-governing and constructs its own
reward schedule, the incentives that researchers are willing to impose on
themselves are inadequate to motivate the scientific risks that would best
expedite scientific progress.
