Science policy issues have recently joined technology issues in being acknowledged to have strategic
importance for national ‘competitiveness’ and ‘economic security’. The economics literature addressed
specifically to science and its interdependences with technological progress has been quite narrowly
focused and has lacked an overarching conceptual framework to guide empirical studies and public policy
discussions in this area. The emerging ‘new economics of science’, described by this paper, offers a way to
remedy these deficiencies. It makes use of insights from the theory of games of incomplete information to
synthesize the classic approach of Arrow and Nelson in examining the implications of the characteristics of
information for allocative efficiency in research activities, on the one hand, with the functionalist analysis of
institutional structures, reward systems and behavioral norms of ‘open science’ communities-associated
with the sociology of science in the tradition of Merton-on the other.
An analysis is presented of the gross features of the institutions and norms distinguishing open science from
other modes of organizing scientific research, which shows that the collegiate reputation-based reward
system functions rather well in satisfying the requirement of social efficiency in increasing the stock of
reliable knowledge. At a more fine-grain level of examination, however, the detailed workings of the system
based on the pursuit of priority are found to cause numerous inefficiencies in the allocation of basic and
applied science resources, both within given fields and programs and across time. Another major
conclusion, arrived at in the context of examining policy measures and institutional reforms proposed to
promote knowledge transfers between university-based open science and commercial R&D, is that there
are no economic forces that operate automatically to maintain dynamic efficiency in the interactions of
these two (organizational) spheres. Ill-considered institutional experiments, which destroy their distinctive
features if undertaken on a sufficient scale, may turn out to be very costly in terms of long-term economic
performance.