Alberto Mingardi  

Man, Economy, and Science

The Denunciation Deficit... How bad government policies ma...

The Mises Institute just published in book form a 1959 monograph by Murray Rothbard, "Science, Technology and Government." The manuscript was discovered among the Rothbard papers and first published on in 2004. Alas, I didn't read it back then --and I am very sorry I did not. This is Rothbard at his best: radical and logical. As David Gordon points out in his introduction, the book "contains an astonishing wealth of insights."

The circumstances in which Rothbard wrote this piece may seem radically different than ours. As Gordon puts it,

When Murray Rothbard wrote "Science, Technology, and Government" in 1959, supporters of the free market needed to confront a challenge that remains relevant today. In 1957, the Soviet Union launched its "Sputnik" satellite, thereby defeating the United States in the race between the two countries to be first into space. Did this victory show, or at least suggest, the superiority of Soviet centrally-planned science to the American market economy? Critics of the free enterprise system like John Kenneth Galbraith (one of Rothbard's least favorite economists) claimed that scientific research and development required government planning and control.
The idea that the market's decentralised decision making cannot make up for "greatness" (in this case, "greatness" in scientific research) is not new--and it is extremely resilient. Marianna Mazzucato, the author of "The Entrepreneurial State," made herself famous by arguing that markets have "no vision" (whatever that means) and that government R&D is the true source of ALL innovation, while private companies are just riding its coattails. See here her "Lunch with the FT" for a quick summary of her views. Note that the word "consumer" doesn't come up in the article, not even once.

Murray Rothbard2.jpgRothbard's text is a sobering read . It begins from a definition of the "economic problem":

The crucial economic question, and one of the most important social questions, is the allocation of resources: where should the various and numerous productive factors: land, labor, or capital, be allocated, and how much of each type to each use? This is the "economic problem," and all social questions must deal with it.

This is the proper setting to discuss investments in R&D. How can we make sure resources are properly allocated? This is a question worth asking both for applied and basic research. In the Soviet Union, Rothbard explains, "government planning of science, is bound to result in the politicisation of science." The politicisation of science means the substitution "of political goals and political criteria for scientific ones." Think about it in the quest to allocate resources to produce innovation. The consumer gets completely evicted from the picture: it is other goals that government investments are serving (which doesn't mean, of course, that they cannot yield byproducts or have unintended consequences).

Rothbard also deals with "military research by government" and he basically suggests to "buy" instead of "make" it. "The exact circumstances under which it was written have not yet come to light", writes Gordon, but in two instances Rothbard seems to be advising the Republican Party. Eisenhower was to give his "Military-Industrial Complex" speech the next year. He warned against the danger that "public policy could itself become the captive of a scientific technological elite," too. Eisenhower seemed nostalgic for "the solitary inventor, tinkering in his shop" who "has been overshadowed by task forces of scientists in laboratories and testing fields".

Building on research by John Jewkes and others, Rothbard wrote that "The worthy individual inventor is far from helpless in the modern world. He may, in a free enterprise system, become a free-lance consultant to industry, may work on inventions on outside grants, may sell his ideas to corporations, may form or be backed by a research association (both profit and non-profit), or may obtain aid from special private organisations that invest risk capital in small speculative inventions."

Was Rothbard too optimistic? Are innovations today coming mainly from big organisations? On the other hand, I wonder if the "user entrepreneurs," that is "individuals who create an innovative product or service because they need it for their own use and subsequently found a firm to commercialize their innovation" (see this) aren't but the grandsons of the inventors Rothbard had in mind.

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COMMENTS (6 to date)
AlexR writes:

Every principles text in economics starts essentially in this way, posing the question of how "we" (do or should) allocate resources. This has always struck me as a profoundly insidious way of framing the issue. Whatever the author's intent, the language implies a collective choice problem that "we" address in one way or another. It's wholly natural for a reader to take the "we" to refer to representative government. Among the options "we" then have is to leave it to the market. But, given the framing, this option naturally has the cast of a do-nothing approach. All the fallacies of modern liberalism (by which I mean favoring a do-something-anything approach) follow naturally. What "we" need is a big reset, in which the operation of markets regains it proper place as the starting point for analysis. Government action is a subset of market operations, involving the supply and demand for proposed action according to interest group pressures (demand) and self-interested office-holders (supply).

Roger Sweeny writes:

In 1957, there was no "race between the two countries to be first into space." Traditionally, national governments had been sovereign over the land within their borders, the land below it down to the center of the earth, and the air above it. International conventions made it clear that one could not fly a plane above a country without getting the permission of its government.

President Eisenhower would have loved to send reconnaissance satellites up to spy on the Soviet Union. They couldn't be shot down, unlike the high-altitude U-2 planes that the government was using (as indeed happened on May 1, 1960, quickly leading to an international incident and, perhaps, in November, to the defeat of vice president Nixon who was then running to succeed Eisenhower). Eisenhower was sure that the Russian government would call satellites over their "airspace" illegal--as would innumerable other actors. The U.S. government had two small rocket programs, neither of which got much funding and neither of which had plans to put up a satellite (though the people in them had dreams ...).

Sputnik changed all that. The Soviets had given up the chance to charge American spy satellites with "violating their airspace." Congress quickly created the National Aeronautics and Space Administration, giving it lots of money and the mission to do every thing the Soviets could and more. It was only at this point that the "space race" began. (And, yes, Eisenhower saw to it that spy satellites were developed.)

Martin writes:

"The crucial economic question" discussion smacks of Hayek's "The Use of Knowledge in Society"....think I might have to read this as it doesn't even cite him....I wonder if he just never got around to it since the book was never published during his lifetime?

LD Bottorff writes:

"the solitary inventor, tinkering in his shop"

This is a romantic notion that we all hold, but most inventions and developments are group efforts. Some of Thomas Edison's early patents may have been the result of his own efforts, but he had a staff to help him with his most important work. The Wright Brothers were well aware of other experimentation in the field of aircraft when they "invented" their airplane. It is unlikely that Samuel Morse could have invented the telegraph without Charles Thomas Jackson, Joseph Henry, and Alfred Vail.

Little, if anything is done in isolation. We are a collaborative species. This does not justify the government control of everything. Yes, the government can supply the vision that launches the space race, but it can also supply the vision for the Holocaust and the Holodomor.

Pajser writes:

I've read it ... I like Rothbard because he asks deeper questions than most of the advocates of capitalism. This time, it appears he doesn't address the externalities properly. As most of the economic progress is, I believe, externality of the production of information, he cannot say much. Also, I think comparison between Soviet and American economy cannot be done well without proper attention to fact that Russia before WWI was five times poorer (in terms of GDP/capita (PPP)) than USA.

AlexR - interesting criticism. If we (= people who discuss this issue) assume that state exists, market is really only one possible choice. The state can chose market economy or central plan, or something else - other alternatives at least theoretically exist. I like the idea that theory shouldn't assume that state exists. But even without that assumption, it is still not logical necessity that market exists.

Pajser writes:

AlexR - I was not exact enough; "market is really only one possible choice" is ambiguous. It should be "market is really only one of the few possible choices."

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