DEFINITION of Peer Review
Peer review is the process by which one's colleagues assess the quality and accuracy of a scholar's research papers. Peer review is most frequently employed within academia, where professors evaluate each others' work before it is published in major academic research journals.
The system of peer review is used because, in much high-level academic work, there are relatively few experts in the world with sufficient knowledge to properly critique new research findings or theoretical developments. Along these lines, many theories in economics and finance are peer reviewed before they are published in journals and subsequently make their way to market practitioners and investors.
BREAKING DOWN Peer Review
Peer review is sometimes criticized where reviewers are perceived to be unfair in their assessments of manuscripts. Since review is most often anonymous for both the author(s) and reviewers - known as double blind peer review - there is little accountability for the reviewers. This can lead to problems where, for instance, reviewers may be biased against work which is not in accordance with mainstream theory or with their own personal ideologies or training.
In addition, peer review is often a slow and laborious process. Reviewing work does not bring prestige in the way that generating new research does. Thus, reviewing others' work is often a lower priority. Since peer review often goes through several rounds of revising, it may take several months or even years to complete the process. Even if reviewers suggest an article should be revised and resubmitted (an R&R), the updated paper may still meet rejection in the end.
Journal editors must find suitable peer reviewers (sometimes called referees) to appraise and assess the rigor and contribution of new research. The journal editor will solicit several scholars in the field who are likely to be familiar with the topic and methodology involved in the reviewed paper. Ideally more than reviewer agrees to review and submit a report to the author and editor. If the editor cannot find a suitable reviewer, it may take several weeks merely to assign peer reviewers. Then, the reviewers are given several weeks to read the manuscript and write a report that evaluates the research. Sometimes, different reviewers of the same paper will reach different conclusions as to its quality or worthiness for publication, at which point the editor or editorial board must make the ultimate decision to accept, suggest an R&R, or reject.
Since publishing in academia the key to job tenure and promotion, the peer review process is vital, if not flawed.