Illustration of the Difference Between Average and Marginal Effects of Research

Suppose, for the sake of illustration, that a type of research involves only new medical treatments, each of equal value to society. If 100 scientists work on this research, and they tend to discover 10 medications per year, then the "average effect" would be 1 medication per 10 scientists. If a society were generally pleased with this outcome, it may want to hire more scientists to obtain more medications per year.

Suppose it hired an additional 20 scientists, expecting to increase the number of medications per year by two. However, simply increasing the number of scientists by 20 percent may not increase output by 20 percent. Some of the additional scientists hired may not be as productive as those in the first 100, especially if there had been a tendency for organizations to hire the most qualified scientists first. Secondly, even if those additional 20 scientists are as qualified as the first ones, they may not be able to work in laboratories of the same quality or have access to the same resources. Thus, the output per scientist may be reduced.

The output produced by the second group of scientists would be a "marginal effect," not an "average effect." Suppose this second group produced only one additional medication per year instead of two. In this case, society's decision to expand the number of scientists from 100 to 120 should have involved a comparison between the "marginal cost" to society of employing 20 more scientists against the "marginal benefit" of one additional medication per year. This decision rule may seem obvious, but the rule itself could be overlooked by society if it overemphasizes the observation of average effects. For instance, a previous study might have demonstrated "an average return of 1 medication for every 10 scientists." People may mistakenly take this to mean that there will always be 1 medication for every 10 scientists, regardless of how many scientists are employed.


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