Science Funding

Saturday, Oct 01, 2011

The British agricultural and industrial revolutions took place in the 18th and 19th centuries in the complete absence of the government funding of science. It simply wasn't government policy. The British government only started to fund science because of [World War I​]. The funding has increased heavily ever since, and there has been absolutely no improvement in our underlying rate of economic growth.

But the really fascinating example is the States, because it's so stunningly abrupt. Until 1940 it was American government policy not to fund science. Then, bang, the American government goes from funding something like $20 million of basic science to $3,000 million, over the space of 10 or 15 years. I mean, it's an unbelievable increase, which continues all the way to the present day. And underlying rates of economic growth in the States simply do not change. So these two historical bits of evidence are very, very powerful...

It's a myth that science is a public good. Science is constructed in "invisible colleges"--small groups of people who understand each individual discipline. So the number of people who can really understand the scientific papers is few. To become a member of this club, you have to pay a very high entrance fee. [The late] Ed Mansfield, an economist at the University of Pennsylvania, showed empirically that the average cost to one company of copying the science of another company is 70 percent. But it's worse than that because you've also got to pay for the costs of information. The company has got to have enough scientists out there to read the papers, to read the patents, to go to the conferences, so that you actually know what people are discovering, so you know how to copy it. Add that to the 70 percent, and add the premium you pay in the scientist's salary for all the training he's gone into, and the costs of copying and the costs of doing things originally come out exactly equal. That's in Mansfield, and others have shown this as well.

The Economics of Science: Interview with Terence Kealey, JR Minkel, March 3, 2003, http://www.scientificamerican.com/article.cfm?id=the-economics-of-science&print=true.

http://vimeo.com/12598733

http://www.youtube.com/watch?v=C_PVI6V6o-4

The big myth about scientific research is that government must fund it. The argument is that private companies will not fund science, especially pure science, for fear that their competitors will "capture" the fruits of that investment. Yet, in practice, companies fund pure science very generously, and government funding displaces private research money.

Without government funding of science, the United States overtook Britain around 1890 as the richest country in the world.

War changed everything. The National Academy of Sciences was created in 1863, at the height of the Civil War, to help build ironclads to beat the South. The Office of Scientific Research and Development, which ultimately spawned the National Science Foundation and the National Institutes of Health, was created in 1941.

Then the USSR launched Sputnik, the first artificial satellite, in 1957. The Soviets were going to destroy us from space! So in 1958 the National Aeronautics and Space Administration was created, and the U.S. Congress passed the National Defense Education Act to pour money into higher education and science. Yet, remarkably, U.S. economic growth was unaffected. The U.S. per capita gross domestic product has grown at around 2 percent a year since 1820, and the government largesse of the last 50 years has not altered that.

Further, government funding of university science is largely unproductive. When Edwin Mansfield surveyed 76 major American technology firms, he found that only around 3 percent of sales could not have been achieved "without substantial delay, in the absence of recent academic research." Thus some 97 percent of commercially useful industrial technological development is, in practice, generated by in-house R&D. Academic science is of relatively small economic importance, and by funding it in public universities, governments are largely subsidizing predatory foreign companies.

End Government Science Funding, Terence Kealey, April 11, 1997, http://www.cato.org/pubdisplay.php?pubid=6168.