Is Academia Killing Capitalism?

Joseph Schumpeter may have been right to fear academia, but it was for the wrong reasons.

Joseph Schumpeter believed that academia would eventually kill capitalism. Writing in the early 1940s, the famous economist thought that academics’ radical opposition to capitalism would lead to its overthrow, leading to socialism. In retrospect, his fears seem misplaced, given academics’ current political weakness. Nonetheless, as will be seen here, it might be that Schumpeter was right, but for the wrong reasons. Academia does threaten capitalism today. It is just that the nature of the threat is quite different to the one that Schumpeter proposed.

Schumpeter’s Fear

Schumpeter feared academics as a class. “One of the most important features of the later stages of capitalist civilization,” Schumpeter (1942, 152) wrote, “is the vigorous expansion of the educational apparatus and particularly of the facilities for higher education.” The problem, as he saw it, was that the supply of educated people would outstrip the demand for them: “inasmuch as higher education thus increases the supply of services in professional, quasi-professional and in the end all ‘whitecollar’ lines beyond the point determined by cost-return considerations, it may create a particularly important case of sectional unemployment.” As a result, capitalism would produce a class of highly educated malcontents, who would be forced to find “employment in substandard work or at wages below those of the better-paid manual workers.” This class—the academic precariat—would then lead the opposition to capitalism, ultimately forcing it to give way to one form of socialism or another.

Looking at the context in which Schumpeter wrote, his fears were understandable. An Austrian who emigrated to the United States in 1932, he became a professor at Harvard University. Schumpeter had thereby entered a milieu in which a belief in socialism was rife. In the context of the New Deal, moreover, there was even support for some elements of socialism from the federal government. As J. Robert Oppenheimer explains to his interrogator in Christopher Nolan’s film, he was not a communist but just a “New Deal Democrat.” Schumpeter’s prognosis is therefore understandable.

In the postwar era, it seemed, moreover, that Schumpeter might be proved right. McCarthyism attempted to purge academia together with other American institutions, as dramatized in Oppenheimer. Furthermore, Nikita Khrushchev’s program of de-Stalinization made it easier to see the horrors that had occurred under actually existing socialism in Europe. Yet the expansion of higher education still brought about the rebellion against capitalism that Schumpeter had predicted. In the 1960s, radicals took over many university campuses. One of my favorite descriptions comes from Mark Naison, then a student at Columbia. In 1968, he took time out from the protests to defend his work in front of the history department’s orals board. Naison described how its members, who included Richard Hofstadter, the country’s most famous historian, “were not, as I expected, unusually hostile to me, but absolutely tickled pink at the prospect of keeping the institutional ritual alive amidst the surrounding chaos. They regarded themselves,” Naison continued, “as the carriers of the light of civilization among the depredations of the strange new barbarians who had somehow exploded into their lives” (in Novick 1988, 428–429).

In response to these protests, universities sought to placate the students by emphasizing their needs. Hence, in June 1968, a month after the protests at Columbia University had been violently suppressed by the police, Hofstadter gave a commencement address in which he deplored the radicals’ methods but admitted that their cause was just. In Hofstadter’s (1968, 587–588) words, “all our students are troubled today by two facts of the most fundamental consequence for all of us—the persistence at home of poverty and racial injustice, and abroad of the war in Vietnam.” These were the root causes of the discontent, according to Hofstadter, and the question became how the institutions of academia could respond to them. “Here at Columbia,” he continued, “we have suffered a disaster whose precise dimensions it is impossible to state, because the story is not yet finished, and the measure of our loss still depends upon what we do.” Reform, it seemed, was the only possible response. “Powers need to be redistributed,” Hofstadter explained. “Some new organs of decision and communication need to be created,” although students would, Hofstadter predicted, be repelled by “the arduous work, the sheer tedium, the high responsibilities that are always a part of administrative power.” A new kind of university administration that would be more responsive to the student experience would therefore be necessary. As Hofstadter put it, “what students need and should have is influence, not power; but they also need formal channels to assure them that their influence is in fact effective.” Only then would academia be able to prevent a recurrence of such unrest, thereby saving itself. Hofstadter thus saw a reorientation of the university administration toward improving the student experience as the best way of saving academia.

Ultimately, Hofstadter’s vision would prevail over Schumpeter’s fear. The radicalism on university campuses of the 1960s dissipated. Faculty members who had participated in the protests were slowly purged, while the administrations expanded, based on the logic that they were needed to improve the student experience. The federal government would then give them the tool to impose conformism.

The Origins of Conformism

In response to the 1960s’ radicalism, the federal government redirected research funding toward programs that it hoped would solve the problems that had inspired the unrest in the first place. Both Congress and the President, Richard Nixon, pushed for public funds to be used to make research more relevant to social problems. The National Science Foundation (NSF), most importantly, funded the Research Applied to National Needs (RANN) program, with the goal of directing academics’ research toward more practical ends. Funds were channeled especially toward the social sciences, which were supposed to find ways to address the nation’s ills.

Yet academics struggled to make themselves more relevant for society. The awarding of “silly grants” became a common critique. In 1970, a local newspaper in Indiana had derided the NSF for funding a project that it dubbed “The Study of the Sex Life of the Titmouse.”¹ By the mid-1970s, such objections had reached Congress. The RANN program was criticized for wasting public money. It seemed, moreover, unresponsive to what politicians wanted. Some were, for example, concerned about the effects on children of sex and violence on television and in 1974 asked the NSF to fund research on the issue. A year later, however, it seemed to the politicians that little progress had been made. The only research group that had bid for the project came from Harvard, where, the conservatives assumed, academics’ liberal values would lead them to conclude televised sex and violence cause no harm to the young. Indeed, they claimed, the NSF had a track record of undermining public morals, such as through its funding of “Man: A Course of Study” (MACOS) project, which was supposed to improve the teaching of humanities in schools. As an advert in the Washington Post complained in April 1975, this had entailed making “ten-year-olds” watch “films featuring such fare as the torture killing of a giraffe by tribesmen and a small child eating the raw eye of a deer” (in Solovey 2020, 160). In July, the Subcommittee on Science, Research, and Technology held hearings into how a faulty peer review system was making the NSF waste public money on such dubious projects.

Academia responded to these critiques by arguing that only peer review could be used to determine what was science. As Melinda Baldwin (2018) has documented, this was a new development. Only after the hearings into the NSF’s funding in 1975 was peer review elevated to its current status. The NSF’s administrators did so, Baldwin argues, to deflect the attacks from Congress. According to the administrators’ logic, politicians could not have oversight of the NSF because politicians were not qualified to pass judgement on knowledge—only academics could do that. In the words of the Subcommittee’s chair, “experts in a scientific field are best able to judge several important factors, e.g. design and importance of proposed work, and past performance of the proposer” (Symington and Kramer 1977, 20). From then on, peer review was held up as the gold standard for academia, legitimizing its independence from political oversight.

Crucially, the number of peer-reviewed articles published by academics became a simple metric that administrators could use to evaluate faculty. The two legacies of the 1960s’ radicalism—a rapidly expanding administrative apparatus and a rigid peer review system—then combined to transform the process of scientific discovery in the United States—and, by extension, the world. It would be a new era in which ever greater numbers of administrators prioritized students’ needs, while academics would see their career trajectories determined by how many peer reviewed articles they could write.

Even at the time, the risks of this response to the politicians were obvious. They were pointed out to the Subcommittee by a group of biologists who had been recommended by John Conlan, a conservative who had decried the Old Boy’s System, which saw NSF administrators “rely on trusted friends in the academic community to review the proposals. These friends recommend their friends as reviewers,” Conlan explained. The result was “an incestuous ‘buddy system’ that frequently stifles new ideas and scientific breakthroughs” (in Committee on Science and Technology 1975, 5). To illustrate this, Conlan introduced three biochemists who claimed to have been victims of this system. At their center was Gilbert N. Ling, the director of the Department of Molecular Biology at Pennsylvania Hospital. He claimed to have refuted the “sodium pump” hypothesis of how sodium ion was transported in cells. He found it increasingly difficult, however, to obtain funding for his own attempts to formulate an alternative hypothesis because his proposals were blocked by his rivals—the members of the in group who dominated Conlan’s Old Boy’s System.

The problem was that academics deviated in practice from the ideal type of the truth-seeking scientist. As famously described by Karl Popper (1959), scientists were supposed to recognize their own fallibility in the search for the truth, leading them to reject hypotheses once they were falsified. In practice, however, they often prioritized the maintenance of the paradigms upon which they built their careers. Hence, Ling’s colleague Carlton F. Hazlewood, an associate professor at Baylor College of Medicine, described how “the existing [peer review] system is built on the expectation that in judging others’ work, scientists, unlike common mortals, are ever willing to sacrifice their own interest for the sake of moral ideals” (in Committee on Science and Technology 1975, 863). But, in reality, scientists were as human as everyone else and would therefore tend to use peer review to block research that threatened their own positions in the academic hierarchy.

Consequently, the peer review system risked making scientific revolutions far more difficult. “[A]s Thomas Kuhn has pointed out,” Hazlewood continued, “major new ideas in science have rarely, if ever, been accepted readily by the peers of the proponents even when the ideas were proposed by such distinguished scientists as Copernicus, Galileo and so forth” (in ibid., 863). In his own testimony, Ling then reiterated this point. He pointed toward Louis Pasteur’s revolutionary idea that “diseases were indeed caused by bacteria or viruses.” His peers, on the other hand, “said that everybody agreed that there were four humors and now you come along with the idea of little bugs here or there, many of which one could not even see.” As a result, any article or funding application that Pasteur had submitted would have been “unquestionably turned down” by his peers (in ibid., 875). Charles Darwin, similarly, had proposed a revolutionary new idea that would have been rejected by peer review. Indeed, in The Origin of Species, Darwin (1936, 368) had noted that his ideas would also be rejected. “I by no means expect to convince experienced naturalists whose minds are stocked with a multitude of facts all viewed, during a long course of years, from a point of view directly opposite to mine.” Darwin’s ideas could nevertheless overcome this opposition, Ling told the Committee, because the peer review system was extremely loose in the nineteenth century: “the peers did not have enough weapons in their hand to stop these mavericks, Mr. Chairman.” But that had now changed. “I am sorry to tell you that in the last 30 years in the United States, we have evolved, quite inadvertently, but surely, just such an arsenal of weapons and place them squarely in the hands of peers.” The result, he warned, would be to stultify innovation in science due to “journal editors’ power to decide what papers will be published” and senior academics’ capacity to determine “who is to continue his or her research through funding agencies.” Young researchers, in particular, were affected because the peer review system had “coerced them to follow unquestionably and meekly a certain expected opinion and certain expected way of saying the right things” (in Committee on Science and Technology 1975, 876). Generalized conformism would be the result.

These warnings were not, of course, heeded. To protect itself from politicians such as Conlan, academia placed peer review on a pedestal, portraying it as an essential part of the process of scientific discovery. The rapidly multiplying army of administrators would use the number of peer reviewed articles published as the key metric by which to measure academics’ productivity. Those academics at the top of the food chain would then use their peer review system to impose conformity on those below. Evidence then mounted that Ling’s critique of peer review may have been well founded.²

Can Capitalism Survive?

In the early twenty-first century, economists began to find that there had been a substantial decline in researchers’ productivity. Tyler Cowen (2011) was among the first to sound the alarm in The Great Stagnation. “Meaningful innovation has become harder,” Cowen wrote in 2011, “and so we must spend more money to accomplish real innovations, which means a lower and declining rate of return on technology.” His explanation for this trend was, however, unconvincing. Cowen argued that the problem was a result of innovation becoming more “geared to private goods than to public goods.” Yet the great inventions of the second industrial revolution—electricity, automobiles, pharmaceuticals—were also developed as private goods. Indeed, if anything, the slowdown in the growth of “total factor productivity” coincided with the rise of public funding for research during and after the Second World War. As such, the cause of what Robert J. Gordon (2017) described as The Rise and Fall of American Growth remains a mystery. Another explanation for the slowing rate of innovation is necessary.³

The hypothesis presented here is that the radical reorientation of academia was the root cause. It was an institutional legacy of the wartime boom in public funding for science. Under the aegis of the NSF, peer review had been established as an integral part of scientific discovery. And even as the flow of public funds was reduced in the 1970s and 1980s, the new system remained. It allowed senior academics to prevent junior researchers from threatening their entrenched positions because something was not considered knowledge if it had not successfully passed through peer review. As a result, the Popperian ideal of scientific man—the selfless pursuer of truth—became ever harder to find; Kuhn’s (2012) “normal science” instead prevailed.

From this perspective, then, Schumpeter might have been right, but for the wrong reasons. His fear of academics’ political radicalism proved to be unfounded. Following the unrest of the 1960s, universities were reoriented by their growing administrations toward improving the student experience. To defend itself from political oversight, the NSF then placed peer review on a pedestal that it had not previously occupied. In doing so, it reinforced a system that was already beginning to impede scientific discovery. After the innovations of the Second Industrial Revolution had generated capitalism’s post-war “golden age,” the supply of new ideas began to dry up, and the rate of innovation slowed because groupthink became the norm. It became ever harder to find the free interplay of opposing ideas that Paul Feyerabend (1988) identified as being key to scientific discovery.⁴

The question then becomes whether capitalism can survive without a high rate of innovation and the growth that it brings. If not, it may have to liberate academia from the constraints imposed by administrators whose principal concern is treating students like consumers of a product that is supposed to make them feel good. Furthermore, the peer review system will also need to be reformed, if not abolished. It has performed poorly as form of quality control, as seen most clearly in the cases of academic fraud that occasionally come to light. Fraudsters can be published, but innovators often cannot. It is unsurprising, then, that much of capitalism’s recent innovations—most notably, the Internet and large language models—have largely been based on research done outside the peer review system that the NSF made the founding stone of academia.⁵ Innovation has tended to come despite the peer review system.

Capitalism’s problem is that it needs the free-thinking radicals who so scared Joseph Schumpeter. In the 1940s, the atomic bomb needed J. Robert Oppenheimer, despite him being a “New Deal Democrat.” The fear of such radicalism then fed the expansion of university administrations, which exercised greater control over faculty, including through the use of the peer review system. In academia today, researchers must produce peer reviewed articles, which is most easily done by not challenging the dominant paradigms espoused by senior professors. The dull conformism of academia then tends to stultify even the most brilliant minds, resulting in a lack of innovation. Maybe academia is killing capitalism after all.

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Nikola Tesla with his equipment, 1899

References

Bagatolli, Luis A., Agustín Mangiarotti, and Roberto P. Stock. 2021. “Cellular Metabolism and Colloids: Realistically Linking Physiology and Biological Physical Chemistry.” Progress in Biophysics and Molecular Biology 162 (July):79–88.

Baldwin, Melinda. 2018. “Scientific Autonomy, Public Accountability, and the Rise of ‘Peer Review’ in the Cold War United States.” Isis 109 (3): 538–558.

Bloom, Nicholas, Charles I. Jones, John Van Reenen, and Michael Webb. 2020. “Are Ideas Getting Harder to Find?” American Economic Review 110 (4): 1104–1144.

Committee on Science and Technology. 1975. “National Science Foundation Peer Review: Special Oversight Hearings: Hearings before the Subcommittee on Science, Research and Technology of the Committee on Science and Technology, U.S. House of Representatives, Ninety-Fourth Congress, First Session.” Washington: U.S. Government Printing Office.

Cowen, Tyler. 2011. The Great Stagnation: How America Ate All the Low-Hanging Fruit of Modern History, Got Sick, and Will (Eventually) Feel Better. New York: Dutton.

Darwin, Charles. 1936. The Origin of Species by Means of Natural Selection: Or, The Preservation of Favored Races in the Struggle for Life and The Descent of Man and Selection in Relation to Sex. New York: The Modern Library.

Feyerabend, Paul. 1988. Against Method. Rev. ed. London: Verso.

Gordon, Robert J. 2017. The Rise and Fall of American Growth: The U.S. Standard of Living since the Civil War. Princeton: Princeton University Press.

Hofstadter, Richard. 1968. “The 214th Columbia University Commencement Address.” American Scholar 37 (4): 583–589.

Jones, Benjamin F. 2010. “Age and Great Invention.” Review of Economics and Statistics 92 (1): 1–14.

Klein, Daniel B., and Charlotta Stern. 2009a. “By the Numbers: The Ideological Profile of Professors.” In The Politically Correct University: Problems, Scope, and Reforms, edited by Robert Maranto, Richard E. Redding, and Frederick M. Hess, 15–37. Washington, D.C.: AEI Press.

———. 2009b. “Groupthink in Academia: Majoritarian Departmental Politics and the Professional Pyramid.” In The Politically Correct University: Problems, Scope, and Reforms, edited by Robert Maranto, Richard E. Redding, and Frederick M. Hess, 79–98. Washington, D.C: AEI Press.

Kuhn, Thomas S. 2012. The Structure of Scientific Revolutions. 4th ed. Chicago: University of Chicago Press.

Novick, Peter. 1988. That Noble Dream: The “Objectivity Question” and the American Historical Profession. Cambridge: Cambridge University Press.

Offutt, George C. 1965. “Behavior of the Tufted Titmouse before and during the Nesting Season.” Wilson Bulletin 77 (4): 382–387.

Piore, Michael J., Phech Colatat, and Elisabeth Beck Reynolds. 2019. “NSF and DARPA as Models for Research Funding.” In The DARPA Model for Transformative Technologies, edited by William B. Bonavillian, Richard Van Atta, and Patrick Windham, 45–75. Cambridge: Open Book Publishers.

Popper, Karl R. 1959. The Logic of Scientific Discovery. New York: Basic Books.

Robinson, Joseph D. 1997. Moving Questions: A History of Membrane Transport and Bioenergetics. New York: Oxford University Press.

Schumpeter, Joseph A. 1942. Capitalism, Socialism, and Democracy. New York: Harper & Brothers.

Solovey, Mark. 2020. Social Science for What? Battles over Public Funding for the “Other Sciences” at the National Science Foundation. Cambridge, MA: MIT Press.

Symington, James W., and Thomas R. Kramer. 1977. “Does Peer Review Work? Hearings Held in July 1975 before a House Subcommittee Found Fundamental Soundness in NSF Peer Review Evaluation Systems.” American Scientist 65 (1): 17–20.

Vaswani, Ashish, Noam Shazeer, Niki Parmar, Jakob Uszkoreit, Llion Jones, Aidan N. Gomez, Lukasz Kaiser, and Illia Polosukhin. 2023. “Attention Is All You Need.” arXiv.

Wallerstein, Immanuel Maurice. 2011. The Modern World-System IV: Centrist Liberalism Triumphant, 1789–1914. Berkeley: University of California Press.

1. Star Press, February 12, 1970, 4. It appeared to be referring to Offutt (1965).

2. Ling himself lost all public funding for his research and became highly marginalized, leaving academia to work for a private foundation. This could be taken as evidence of peer review having the desired effect, given Ling’s dubious “Association-Induction” hypothesis (Robinson 1997, Ch. 13). On the other hand, there are still plausible calls for Ling’s ideas to be revived today, such as Bagatolli, Mangiarotti, and Stock (2021).

3. Jones (2010) offers an intriguing explanation for the productivity slow down. In his model, knowledge is cumulative. As such, training researchers takes longer as more things are discovered, eating into the years in which they can be productive. There are, however, two problems with this account. First, it assumes that researchers’ longer lifespans over the course of the twentieth century did not compensate for the extra time spent in training—Jones’ attempt to demonstrate that this empirically is dubious because he uses year of first major discovery to measure lifetime productivity. Second, it ignores how new technology should, in theory, have made researchers more productive after their training.

Bloom et al. (2020) provide another explanation based on the following equation from semi-endogenous growth theory: Át/At = αSt/At^β, where the growth rate of ideas (Át/At) is a function of a constant that captures the general productivity of the research process (α) and the research effort (St) relative to the increasing difficulty of finding new ideas as technology advances (At^β). In this way, they build on Cowen’s (2011) metaphor of scientists running out of low-hanging fruit to pick. This metaphor misses, however, the growth of bureaucracy, which lowers α, as well as the Kuhnian “paradigm shifts” that can make it easier to produce new ideas, reducing β. In effect, scientific discovery makes it possible to plant a new fruit tree.

4. As academia’s politics have congealed around a narrow left-of-center liberalism, the sharpest critiques of their tendency toward groupthink have come from so-called “classical liberals.” Klein and Stern’s (2009a; 2009b) critique, for instance, is particularly pointed. More mainstream academics, meanwhile, have focused more on how the ideas of Friedrich Hayek, Milton Friedman, and other “neoliberal” thinkers are supposed to dominate the world today. Academia thereby deflects attention from the centrist liberal ideas that, in their various forms, have long been capitalism’s dominant political ideology, as described by Wallerstein (2011).

5. The “Request for Comments” system, for example, facilitated the development the Internet; Tim Berners-Lee barely published in academic journals while working on the early World Wide Web; and arguably the most important paper on large language models, “Attention Is All You Need” by Ashish Vaswani et al. (2023), was uploaded to arXiv and subsequently revised multiple times—it is now in its seventh iteration. Other systems are therefore available and have been proved to work. For an interesting account of how “normal” and “revolutionary” science can be balanced, see Piore, Colatat, and Reynolds (2019).