Arnold Kling  

Government and Research

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In this essay, I argue that we should not fear losing our technology edge.


In doing the cost-benefit analysis on government funding of scientific research, one factor that should not be given weight is national competitiveness. I can see worrying about our ability to compete in military technology, but not in civilian research.

I really do not care if Japan "wins" in consumer electronics, or China "wins" in civilian space exploration, or South Korea "wins" in broadband connectivity. What I care about is earning a good return on investment in scientific research. If "winning" in one particular area requires spending money beyond the point where it is cost-effective to do so, then I would rather be the loser.


For Discussion. Is there a value to leadership in civilian technology that goes beyond what might be captured by analyzing return on investment?


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COMMENTS (8 to date)
Eric Krieg writes:

Our good friend Mats from Sweden argues in his blog that technical laggards like Europe actually benefit from their uncompetitiveness. He argues that Europeans can just sit back and let the Americans spend the money and the effort to develop new technology, and then just adopt the mature technology on the cheap at a later time.

http://blogofpandora.blogspot.com/2003_11_01_blogofpandora_archive.html#106802245371192625

There are examples of this dynamic playing out. For example, the US has been a laggard with respect to wireless phones. The Europeans for a long time had the lead. But now that the technology has matured, the US is adopting it on the cheap. Productivity is exploding as a result.

http://www.businessweek.com/technology/content/nov2003/tc20031111_5142_tc135.htm

Another example is the French adoption of nuclear power in the 1970s. They did so because of OPEC, but they were very smart in how they did it. They standardized on mature American technology, basically one reactor design. Thus, they waited until after the Americans did all the heavy lifting. Although it wasn't cutting edge technology at the time, their reactor design was well thought out, and they could apply economies of scale to make their nuclear power sysytem work for the lowest cost possible.

Lawrance George Lux writes:

Technology may or may not be translated into effective Production. It all depends upon the capitalization requirements v. benefits. Technological research can be placed in the same scenario. A prime example could be Canada. They receive every technological benefit of research in the U.S., but they pay little of the research cost. They get American Drug companies to sell to them so cheaply, that these Companies protest when the Canadians resell to Americans.

Being on the cutting edge of Technology is basically of Prestige value alone, Copyright infringement as used in Asia will always cancel any advantage; if the the value of the technology makes it worthwhile. lgl

Steve writes:

Well, Eric, if you're okay with 10% structural unemployment, zero entreprenural spirit, and nothing to hope for in the future, perhaps the "French way" to prosperity through waiting for someone else to create it for you IS the best way. Perhaps you're okay with 15,000 of your citizens dying from the heat because A/C and electrical generation is 20 years behind?

Some of us would rather produce our own milk than suck the spoiled milk from other countries.

SPENDING CREATES JOBS. More spending creates more jobs. More jobs begets more spending begets more jobs. It's a virtuous cycle that you supply siders need to learn about and get familiar with.

Monte writes:

“I can see worrying about our ability to compete in military technology, but not in civilian research.”

Technological breakthroughs in civilian research could easily be appropriated by despotic regimes and used against us to gain either a military or economic advantage. For this reason alone, it seems to me we should worry about maintaining our lead in science and technology.

If profit, rather than power, were as vitally important to the rest of the world as the U.S., there would be no real cause for concern (as ignoble as that may sound).

Bob Dobalina writes:

"SPENDING CREATES JOBS. More spending creates more jobs."

As long as people get to spend their own money on things they value, rather than bureaucrats getting to spend someone else's money on whatever strikes their fancies, then you and I (and probably Eric Krieg) are in total agreement!

Dave Sheridan writes:

There are probably certain defense technologies it makes sense for us to maintain over and above their commercial values. Other than that, the best thing government can do is to allow the environment for risk-taking and innovation to flourish in private hands. That means U.S. firms will be technology leaders in some areas, and adopters in others. I am very pessimistic about government's ability to pick winners, and to manage any kind of efficient "industrial policy."

Two posters mentioned France. I agree with Steve that, yes, France has saved on R&D by being an adopter, but really French industry has little choice. The rewards to innovation simply are not there. This should be a wake-up call to Congress. U.S. corporate taxes are now among the highest in the developed world. Our individual tax structure tilts heavily away from capital formation, investment and risk-taking.

Steve writes:

Bob and Dave--

I think the government was able to pick a winner when they poured billions into new streets, sewers, and electricity. People forget that the Internet itself was a "big-bad" government project.

Dave--

NOBODY has any reason to take risks anymore. Any time anyone gets a good idea, it just gets shipped off to India or China for development. Why the hell would anyone get a degree in engineering or Computer Science anymore? What we NEED is patent protection and pure, unabashed R&D protectionism. That's the only way this country will survive.

Kimon writes:

Arnold,
how can you figure out ROI before the research has actually produced new goods?
Estimates of ROI are likely to be wildly off the mark, and cannot be resonably used to "pick winners" among different promising technologies.

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