SCIENCE AND ITS TRANSACTIONS COST: THE EMERGENCE OF INSTITUTIONALIZED SCIENCE

Cognitive obstacles to perception of novelty on the scientific frontier created obstacles to evaluating scientific work and recruiting scientific workers had to be overcome for the scientific enterprise to expand to the point where it could significantly affect factor productivity. The principal problems arise from the idiosyncracy of observations on the research frontier and the exceptional specificity of the human capital employed in identifying and validating scientific novelty. Resolution of these problems was by no means inevitable or predictable, as the scientific institutions which had emerged as the principal institutional support of ‘Open Science’ in the seventeenth and eighteenth century could not be efficiently scaled up to accommodate the requirements of a greatly expanded scientific enterprise. This paper recounts how in the second quarter of the nineteenth century the emergence of decentralized university-based research networks in Germany resolved the problem of scale, laying the foundations for the discoveries that powered the ‘Second Industrial Revolution’ of the late nineteenth and early twentieth century.