Ever since Johannes Kepler traipsed over half of Europe wooing aristocratic patrons, scientists have grumbled about money. But their complaints these days go beyond the familiar griping about being underpaid and underappreciated. They amount to a powerful case that the system for funding science is broken—that it hinders scientific progress and fails to deliver the most bang for the buck. Fixing the system can no longer be put off.

Most scientists finance their laboratories (and often even their own salaries) by applying to government agencies and private foundations for grants. The process has become a major time sink. In 2007 a U.S. government study found that university faculty members spend about 40 percent of their research time navigating the bureaucratic labyrinth, and the situation is no better in Europe. An experimental physicist at Columbia University says he once calculated that some grants he was seeking had a net negative value: they would not even pay for the time that applicants and peer reviewers spent on them.

A vicious cycle has developed. With more and more people applying for each grant, an individual’s chances of winning decrease, so scientists must submit ever more proposals to stay even. Between 1997 and 2006 the National Science Foundation found that the average applicant had to submit 30 percent more proposals to garner the same number of awards. Younger scientists are especially hard-pressed: the success rate for first-time National Science Foundation applications fell from 22 percent in 2000 to 15 percent in 2006.

Not only does the current system make inefficient use of scientists’ time, it discourages precisely the kind of research that can most advance our knowledge. Many politicians go so far as to accuse scientists—particularly in politically contentious areas such as climate science—of cooking data to win government grants. They have yet to produce any evidence to support these claims, however. The real problem is more subtle. Inundated with proposals, agencies tend to favor worthy but incremental research over risky but potentially transformative work. Nobelist Mario R. Capecchi and other prominent scientists say they had trouble getting grants to make their breakthroughs. In 2009 a New York Times article quoted leading cancer researchers who said the war on cancer would make more progress if funders took more risks.

Funding agencies are well aware of these woes and have responded by, for example, tweaking the review process and the size of grants. That is not enough. They need to be experimenting more aggressively to find ways to fix the system. One especially promising idea is to fund people rather than projects.

That is the approach taken by the Howard Hughes Medical Institute, the largest private supporter of medical research in the U.S. It has selected some 330 researchers with a demonstrated track record of success, as well as 50 up-and-coming young scientists, and annually distributes about $500 million among them with a minimum of red tape. In 2009 three economists compared this system with the standard National Institutes of Health grant. The NIH grants last three years, end abruptly if they are not renewed and have very strict requirements—for instance, preventing scientists from shifting money from a project that is not working out to a more promising approach. Howard Hughes grants last for five years, are usually renewed, provide a grace period even if not continued and encourage reallocation of resources on the fly. The economists found that Howard Hughes grants led to higher-impact research, even when the researchers were compared with an equally elite sample of NIH applicants.

Another major private research foundation, the Wellcome Trust in the U.K., is now shifting to a similar system. The NIH started a Howard Hughes–like Pioneer Award program in 2004, but it is still tiny—only about a dozen scientists per year. Funding agencies should expand such programs considerably.

In certain cases, they might as well just give money to all qualified comers. As crazy as that sounds, the screening process does not always justify its cost. In 2009 two Canadian academics calculated that the country’s Natural Sciences and Engineering Research Council spent more than C$40 million administering its basic “discovery” grants. It would have been cheaper simply to award each applicant the average grant of C$30,000. Yet another idea is a lottery system, as the Foundational Questions Institute uses for its smaller grants. Many grants are so competitive that the choice is largely a lottery anyway.

Funders and universities also need to confront tough questions such as whether graduate programs are issuing too many Ph.D.s. If a professor has more than a few doctoral students over the course of his or her career, the number of researchers competing for grants will increase exponentially.

One thing is clear: the status quo is unsustainable. Budgets are tight, and the scientific questions the world faces are pressing. We cannot afford to be squandering money and minds.