The Wages of Science

In the absence of efficient capital markets and adventuresome capitalists some developing countries have taken this propensity to extremes. In the Philippines close to 100 percent of all R&D is government-financed. The meltdown of foreign direct investment flows - they declined by nearly three fifths since 2000 - only rendered state involvement more indispensable. But this is not a universal trend. South Korea for instance effected a successful transition to private venture capital which now - even after the Asian turmoil of 1997 and the global downturn of 2001 - amounts to four fifths of all spending on R&D. Thus supporting ubiquitous government entanglement in science is overdoing it. Most applied R&D is still conducted by privately owned industrial outfits. Even pure science - unadulterated by greed and commerce - is sometimes bankrolled by private endowments and foundations. Moreover the conduits of government involvement in research the universities are only weakly correlated with growing prosperity. As Alison Wolf professor of education at the University of London elucidates in her seminal tome Does Education Matter? Myths about Education and Economic Growth published last year extra years of schooling and wider access to university do not necessarily translate to enhanced growth (though technological innovation clearly does). Terence Kealey a clinical biochemist vice-chancellor of the University of Buckingham in England and author of The Economic Laws of Scientific Research is one of a growing band of scholars who dispute the intuitive linkage between state-propped science and economic progress. In an interview published last week by Scientific American he recounted how he discovered that: Of all the lead industrial countries Japan - the country investing least in science - was growing fastest. Japanese science grew spectacularly under laissez-faire. Its science was actually purer than that of the U.K. or the U.S. The countries with the next least investment were France and Germany and were growing next fastest. And the countries with the maximum investment were the U.S. Canada and U.K. all of which were doing very badly at the time. The Economist concurs: it is hard for governments to pick winners in technology. Innovation and science sprout in - or migrate to - locations with tough laws regarding intellectual property rights a functioning financial system a culture of thinking outside the box and a tradition of excellence. Government can only remove obstacles - especially red tape and trade tariffs - and nudge things in the right direction by investing in infrastructure and institutions. Tax incentives are essential initially. But if the authorities meddle they are bound to ruin science and be rued by scientists. Still all forms of science funding - both public and private - are lacking. State largesse is ideologically constrained oft-misallocated inefficient and erratic. In the United States mega projects such as the Superconducting Super Collider with billions already sunk in have been abruptly discontinued as were numerous other defense-related schemes. Additionally some knowledge gleaned in government-funded research is barred from the public domain. But industrial money can be worse. It comes with strings attached. The commercially detrimental results of drug studies have been suppressed by corporate donors on more than one occasion for instance. Commercial entities are unlikely to support basic research as a public good ultimately made available to their competitors as a spillover benefit. This understandable reluctance stifles innovation. There is no lack of suggestions on how to square this circle. Quoted in the Philadelphia Business Journal Donald Drakeman CEO of the Princeton biotech company Medarex proposed last month to encourage pharmaceutical companies to shed technologies they have chosen to shelve: Just like you see little companies coming out of the research being conducted at Harvard and MIT in Massachusetts and Stanford and Berkley in California we could do it out of Johnson & Johnson and Merck. This would be the corporate equivalent of the Bayh-Dole Act of 1980. The statute made both academic institutions and researchers the owners of inventions or discoveries financed by government agencies. This unleashed a wave of unprecedented self-financing entrepreneurship. In the two decades that followed the number of patents registered to universities increased tenfold and they spun off more than 2200 firms to commercialize the fruits of research. In the process they generated $40 billion in gross national product and created 260 000 jobs. None of this was government financed - though according to The Economist''s Technology Quarterly $1 in research usually requires up to $10 000 in capital to get to market. This suggests a clear and mutually profitable division of labor - governments should picks up the tab for basic research private capital should do the rest stimulated by the transfer of intellectual property from state to entrepreneurs. But this raises a host of contentious issues. Such a scheme may condition industry to depend on the state for advances in pure science as a kind of hidden subsidy. Research priorities are bound to be politicized and lead to massive misallocation of scarce economic resources through pork barrel politics and the imposition of national goals. NASA with its let''s put a man on the moon (before the Soviets do) and the inane International Space Station is a sad manifestation of such dangers. Science is the only public good that is produced by individuals rather than collectives. This inner conflict is difficult to resolve. On the one hand why should the public purse enrich entrepreneurs? On the other hand profit-driven investors seek temporary monopolies in the form of intellectual property rights. Why would they share this cornucopia with others as pure scientists are compelled to do? The partnership between basic research and applied science has always been an uneasy one. It has grown more so as monetary returns on scientific insight have soared and as capital available for commercialization multiplied. The future of science itself is at stake. Were governments to exit the field basic research would likely crumble. Were they to micromanage it - applied science and entrepreneurship would suffer. It is a fine balancing act and judging by the state of both universities and startups a precarious one as well. The Wages of Science - Part II

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