At TTU, where we hung together albeit briefly, the obsession was incredibly strong, particularly as the chair felt his job was to amplify whatever command came from on high (which explains the presence of Alberto Gonzalez).
Universities like profs to pursue grants for at least a couple of reasons: a) so that the professor can use the requested funds to engage in research; b) so that the funding agency provides funding for indirect costs that go to the university. These indirect costs are supposed to cover overhead like electricity, secretaries, paper, phones, whatever. Some of the indirect is often returned to the professor (a.k.a. principal investigator or p.i.) to do with as she/he pleases. This slush money can be quite handy for stuff that the grant does not fund and is less subject to accounting.
Universities like indirect money because it is essentially free money. They say it is for costs that are incurred by researchers, but these profs would be flipping most switches and doing the other costly stuff even if they did not get outside funding.
So, at the end of the day, the question can be asked: is this a scam? Or is this a clever way by which governments can fund university operations, which are collective goods that benefit the local and not so local communities?* One could ponder why one would need such a charade to have federal funding of universities, but then again, my Canada Research Chair is exactly that--a federal program to fund higher education despite that being the responsibility of the provinces (aka states). States, provinces and federal units are jealous of their domains, and often will take federal funding and either re-allocate it or re-allocate the stuff that is now financed by the feds. Just as lotteries really did not increase funding for education (they allowed states to either cut taxes or spend the money on other services/expenses), federal money can lead to states diverting money. Is that why indirect costs work as they do? Probably not. Is it a scam? Perhaps just a bit--that indirect costs do actually cover real university costs but perhaps not the additional cost of doing that hunk of research.
* The argument that universities provide collective goods is a pretty easy one so I will not spend much effort here. But to be clear, universities basically do three things:
- educate folks and that education benefits the society through greater productivity, perhaps even better citizenship although Coburn's education suggests otherwise;
- create knowledge. Whenever, I say this, I feel pompous, but the idea of research is to learn new stuff--that new stuff is new understanding, new products, etc. And this benefits society, mostly (one can debate about better weapons and the like).
- foster a more dynamic economy. Just check out the valleys around my old grad school--U of Cal, San Diego--chock full of software companies, biotech companies and more. Universities are local engines of growth as they provide jobs, serve as focal points for collaboration between public and private spheres and more.