may be of use to some people
Government and Science: a Dangerous Liaison?
William N. Butos and Thomas J. McQuade
With the rise of the modern state, governments have increasingly intervened in the funding and the direction of scientific activity.
It is not so much that governments try to exercise blatant and crude control over the content and direction of scientific inquiry but that there are side-effects of the seemingly benign and generous government funding of science that result from the structure and conduct of that funding that in the short run generate instabilities in scientific activity and in the longer run are corrosive with respect to the structure and adaptability of the system of science itself.
In the US government intervention has increased especially in times of war (War between the States, WWI and WWII). Most of the times the government intervention was largely dismantled after the war, but after WWII the Depression and War induced government intervention of science persisted and solidified.
Reasons for this policy then changed (see I think Bob Higgs’s “Crisis and Leviathan” for an analysis of shifting justifications for policies. KS) from solving the Depression and military application to things like “the improvement of national health, creation of enterprise bringing new jobs, and the betterment of the national standard of living.”
In 1945 the chairman of the Office of Scientific Research and Development Vannevar Bush released a rapport, Science – The Endless Frontier, in which he argued for a national policy for scientific R&D. He argued that material progress depends on new scientific knowledge which in turn depends on results in basic science.
In 1947 the President’s Scientific Research Board (directed by John Steelman) released Science and Public Policy: A Program for the Nation in which it was argued that governments should fund science in universities and industry because the private sector itself will underfund it while it is essential for economic prosperity and growth.
Since the 1950s the essential contours of government and science interactions in the US have followed the thrust of these two reports’ recommendations. Bush and Steelman were actually ‘moderates’ who won the battle against others who wanted governments not to just fund but to direct and plan scientific research.
Some figures to show post-WWII growth:
In 1964 federal spending on R&D was $65 billion, 13 times as high as it had been in 1949 (both measured in 2001 dollars). In 2001 it was $75, with now a relatively larger role for non-defense spending. Since the early 1970s federal spending on R&D has hovered at about 5% of the federal budget (it was about twice as much in the 1960s)
What are the official, theoretical justifications for government funding?
Science is a public good with positive external effects which without intervention will be produced in suboptimal quantities. So there is a “market failure”
This is wrong because:
A) Science is not a market because the major form of interaction in science (publication process and citation) does not a) involve property b) involve exchange c) economic calculation.
Science is not a firm either because in science a) there is no production process aimed at profitable generation of a specific good, b) there are no paying customers to court and maintain, c) there are no internal mechanisms to assess and incorporate responses to perceived user needs
B) Its empirical implications and predictions are called into serious question by the facts. Even if we see science as a market the idea of suboptimal funding is suspect. The idea consists of two tenets:
a) private firms are generally unable to bear the costs of basic science because of uninsurable risk and uncertainty
b) scientific knowledge once produced is freely available to all and so the benefits cannot be appropriated by producers themselves.
Against a) one can say that the empirical record shows that private sources do spend a substantial amount of money on R&D. In 2003 they spend about $8-10 billion on basic research per year (15-20 percent of total funding of basic science). Total industry R&D (not just basic science) currently almost doubles federally funded R&D (but does not include states, universities, etc.)
Against b) one can say that even though research may generate spillover effects it is not their magnitude that matters but the return on investment the firm is likely to yield from commercial application (and I would say from other factors, KS) and that it is not the case that scientific knowledge is just freely available for all to profit from. In order to profit from other people’s research you have to be able to understand and know how to use it. So you need scientists in the first place who have to keep up-to-date with the latest developments, who have networks. This all costs money too. (see also just below)
To the “Market failure” argument two things are often added: a): underproduction of basic science leads to less than optimal economic growth, and b) we can characterize this underproduction in terms of private returns to basic research being smaller than social returns.
Both are just silly because:
To a) one can say that although economic growth is driven by increased productivity which is increased by technological progress, technological progress on the other hand only stems from results in basic science to a very, very small extent. Most of it is driven by existing science and existing technology.
To b) one can say that basic science confers “first-mover advantages” on a company (further along the learning curve for example), but also “second-mover advantages” (companies applying results of already existing basic science) that can only be had by employing scientists who can understand and are up-to-date with the latest developments in science and who have a network. Such scientists will do this kind of work for the company in exchange for the company leaving them free to do the research they want to do. So first- and second-mover advantages are indissolubly linked and thus second-mover advantages (being able to quasi-free ride) are only available to companies who at least as a byproduct also invest in basic science.
Greenberg’s Science, Money and Politics (2001) describes in detail the increasing entanglement of science and politics post-WWII. Access to (government (although Greenberg seems more worried about market) funding has started to replace reputation as a motivating force.
- An Analysis of Science Interventionism
Many of the considerations that apply to centrally planned economic systems also apply in some degree to the ongoing arrangement between government and science.
In the absence of outside intervention science is a decentralized system of social interaction operating according to generally understood rules, the basis of which are the institutions of publication and citation. Power is (not necessarily evenly, but at least widely) distributed. The process of interaction constrained by these arrangements results in observable side-effects stabilized by negative feedback – body of scientific knowledge and reputation of scientists. These relatively stable side-effects (that are subject to some variation in response to environmental changes) confer benefits also to non-participants but also creative incentives for positive feedback on participants in the system.
Science is in this analysis treated as a distinguishable process, a regime that clearly does not involve monetary exchange and hence revenue. But differences in funding of science will have different effects on practice of science. And it is this that is considered in this analysis.
Funding, broadly speaking, may come from 1) donors 2) business 3) legislators. Only the latter are not so much constrained by actual results of science, but more by perception among voters that might benefit from the funding (this by itself is not true I think because donors and business may also want science for ‘extra-scientific’ reasons like reputation, justification, quirky personal convictions etc. The real problem is government’s large influence and its not being subject to a market test, its being able to just continue along a bad path. The authors do discuss aspects of these two points below though. KS)
Because government funding is then less constrained by availability of money (through taxes, debt, inflation) and by necessity of scientific success, and because government funding is done by small number of large bureaucracies four types of corrosive effects will emerge:
- Incentive effects: a) science is done for benefit of government bureaucracies (type of research being sponsored, institutional recipients and geographical allocation b) government funding creates a potentially powerful lobbying nexus whose interests are geared to sustaining and expanding government funding.
2) Big Player effects: government is a Big player in science whose behavior is capable of dominating the flow of signals guiding the direction and intensity of scientific research. It exposes science to self-reinforcing path dependent processes that may be analogous to herding and bubbles in financial markets. Because government funding is inextricably linked to political processes the basis for such funding likely is arbitrary and no more or less justifiable than any other use of taxpayer funds. Moreover, when the funding for a particular field stops (for political reasons for example) the field flounders. See 3)
3) Problem of Boom and Bust: Windfall funding for science is like artificially cheap credit for business. Investment (in higher-order production goods. KS) will grow and with a lag output as well. But since there is more funding now due to windfall funding the quality or interestingness of research will decrease and when governments stop funding a lot of investments (in people and equipment for example) will go to waste. So windfall funding fosters unstable growth.
4) Problems of bureaucracy: success measured by budget rather than results, unwillingness to take risks, concentration on areas that are politically popular
Knowledge problems
Underlying many of these effects is the classic “knowledge problem” which is a consequence of the fact that centralized institutional arrangements make it impossible for planners to adequately marshal relevant explicit and implicit dispersed and tacit knowledge, leaving them largely limited to their own personal knowledge in determining resource-allocation. All this knowledge in the free market also generates prices that make possible economic calculation (this may be confused. See Salerno’s “Mises as a Social Rationalist”. Calculation is the primary problem, not knowledge. But may it be different in science? Open question. KS)
Science is similar to a market in the following respects:
- Division of labor (knowledge)
- potentially, under right institutional setting, generating unplanned complexly organized order (again, this is confused. See Salerno’s “Mises as Social Rationalist”)
So to attempt to centrally plan science is to impose an unsuitable framework on it. The attempt is based on three flawed assumptions that we can analyze with the “knowledge problem” in mind:
- the planning board can somehow overcome the division of knowledge and so rationally plan and organize science
- in establishing specified goals for science and directing scientific activity towards those purposes the planning board subverts the inherent uncertain discovery process (Polanyi is excellent on this btw. KS)
- Imposing a centrally planned structure on the specific institutional arrangements (decentralized) that comprise science and govern interactions in it (and result in dynamic stability and adaptability) subverts its capacity to generate new knowledge. (not sure how this last point is different from the previous two. It’s more of a summary than a new point I think. KS)