Doing Economics

5.2 How Much Funding Do You Need?
The first question to ask yourself is “How much funding do I realistically
need?” Although we are trained from the very beginning as economists to
think that utility is increasing in money, and so your immediate answer to
this question might be “As much as possible!,” it is worth noting that
additional grant money always comes at a cost, that a grant is a contract
between the funding agency or donor (as principal) and you (as agent), and
to recall that in contract theory, the agent’s cost of effort is almost always
assumed increasing and convex in effort for a good reason. In other words,

---

the expected benefits you derive from grant funding should not exceed the
certain costs of getting that funding, starting with the considerable fixed
costs involved in preparing grant proposals. The variable costs include the
cost of doing the research, the opportunity cost of your time (which you can
sometimes cover with your grant, but only up to a point), the cost of
supervising grant personnel (sometimes across time zones, to the detriment
of a healthy sleep schedule), the cost of managing the grant,
5
 and finally the
cost of preparing the deliverables.
6
So how much funding do you actually need? Before applying for a grant,
it is worth asking yourself the following questions:
1. Are grants an input or an output in your research process? I have
alluded to this earlier in this chapter, but do you need to raise
funds as an explicit criterion for tenure or promotion (i.e., grants
as an output), or do you only need those funds for your research
(i.e., grants as an input)? In the former case, you will need more
grant funding (ideally both more grant dollars and more grants
from prestigious sources of funding) than in the latter case—at
least for tenure or promotion, if not for your actual research.
2. How excited are you about this particular research project? How
excited can you remain about it without working on it for a few
months? Not all research questions are created equal. You will be
so excited about some research projects that you will wake up in
the middle of the night wanting to work on them. Others merely
fulfill someone else’s need for an answer about something you are
knowledgeable about, but have no particular interest in. Choose
wisely, because although the payoff is uncertain (you may not get
the grant), you will bear the certain cost of applying for a grant.
7
3. Are there other ways to answer the research question at hand (or
a nearly identical one) which do not require grant funding? Or
are there other research questions you could answer instead? I
have done most on my research on a shoestring. Part of that
involved decisions at the extensive margin (i.e., “I will not work
on this question, because it would involve conducting an RCT,
which I do not have the human-resource management skills for”),
but some of it also involved decisions at the intensive margin (i.e.,

---

“Although it would be ideal to collect my own data on this, I can
get close enough using an existing data set.”) One of my PhD
students, for instance, wanted to look at the effect of output price
volatility on whether individuals exited the agricultural sector.
After we discussed it together, she realized that no survey of
agriculture recorded farm exits, and that any seeming exit could
also simply be sample attrition. So instead of getting into a costly
data collection effort, she decided instead to look at whether
output price volatility drove rural households to make one of
theirs migrate, presumably in search of wage work (Lee 2021).
4. How much do you (dis)like managing finances, human resources,
or both? Some institutions (e.g., R1 universities) will have better
administrative resources to help you with this, but getting grants
often involves no uncertain amount of financial and human
resource management skills. As Dean Yang noted in an interview
for the book Experimental Conversations (Ogden 2017), such
skills are not taught in graduate programs in economics or related
disciplines.
8
 If you are the kind of person who dreads doing his or
her own taxes, whose eyes glaze over when discussing the details
of a mortgage or of an investment strategy for retirement, who
dislikes having to tell a subordinate that they are not performing
well or, worse, that they are fired, you are better off not getting
into the grants game. In the same interview with Ogden (2017)
mentioned above, Dean Yang also added that although the skills
discussed here are not taught in graduate programs in economics,
they are not necessary to do good research. If there is one aspect
of a research career where it is helpful to play to your
comparative advantage, it is this one.
5. How much do you (dis)like managing people? This sounds the
same as managing human resources, but it is not. Managing
human resources refers to managing people who work for you.
Managing people refers to managing personalities, egos,
expectations, and so on of everyone involved in a grant, including
those who are not your subordinates or who may be your seniors.
Very often, writing grant proposals involves colleagues realizing
that there are considerable pay differentials between them, which
can lead to frustration with one’s employer. In some cases, a grant

---

team will involve people who dislike each other. If you tend to
avoid socially uncomfortable situations, it is useful to know what
you may be getting into.