©
2008 Karen Selick
An
edited version of this article first appeared in
the October 28, 2008
issue of the National
Post.
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you wish to reproduce this article, click
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Science Doesn't Need Government
Help
On
the same theme, Finance
minister Jim Flaherty recently reassured a meeting of the Association
of
Universities and Colleges of Canada that he was “on the same page” with
their
recent report touting the importance of government funding for
scientific
research to be performed at universities. Like many people, Harper and Flaherty apparently hold the view that scientific and technological research projects must be publicly funded or else they wouldn’t occur—or at least, not in amounts that would be optimal for the country. Enter Terence Kealey—bio-chemist,
vice-chancellor of the International
comparisons show a
clear positive correlation between a country’s R&D expenditures and
its
economic growth rate. However, when you refine the figures
further, a
more nuanced picture emerges. Business-produced R&D is what
actually
drives economic growth. Publicly financed R&D, on the other
hand,
correlates negatively with growth, as government funded projects “crowd
out”
privately funded endeavours. Kealey’s book
provides empirical
evidence, both ancient and modern, to support his thesis. In the
17th
and 18th centuries, for instance, English governments
refused to
fund science and technology. French governments, by contrast,
funded
myriad research laboratories, science journals and educational
institutions.
But it was in Nor can governments expect to trump the marketplace at picking winners. Governments lack the incentive—namely, the profit motive—that compels industry to be exquisitely sensitive to market signals. Instead, politicians are influenced by factors that are at best irrelevant and at worst counterproductive to good science—for instance, job creation. Kealey debunks the myth that MITI, Japan’s famous Ministry of International Trade and Industry, created that country’s meteoric post-war rise to prosperity, noting that “MITI had opposed the development of the very areas where Japan has been most successful: cars, electronics and cameras.” As for universities, Kealey points out that after Margaret Thatcher cut British universities’ research subsidies in the early 1980s, industry and medical charities doubled their financing for university-produced science, and soon more than made up the shortfall. In addition to historical arguments like these, Kealey’s book is filled with unorthodox and intriguing insights into eternal economic conundrums, sometimes resulting from his vantage point as a scientist himself. One such insight is a response to the “free rider” argument. Economists frequently argue that companies won’t spend money on research if they cannot reap the entire benefit themselves. But empirical evidence shows that companies don’t mind others benefiting from their R&D expenditures—sometimes even more than they benefit themselves—so long as they still profit more from their outlay than they would from any alternate use of that money (for instance, depositing it in the bank). For example, a seed company whose research improved crop yields for its customers captured only 6 percent of that benefit in terms of increased profits, while farmers and sales intermediaries captured 94 percent of the benefit of the higher yields. But that extra profit proved to be a 17 percent return on the company’s R&D expenditure—a higher rate than it could have earned from any other use of the money. So it was worthwhile for the company to pursue that research even though others got a huge free ride. Let’s hope that before proceeding with any grand spending sprees on science and technology, Mr. Harper and his policy advisors sit down and read Sex, Science and Profits - END - |
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November 16, 2008