There is less need for government to fund science: Industry will do this itself.
[….] When you examine the history of innovation, you find, again and again, that scientific breakthroughs are the effect, not the cause, of technological change. It is no accident that astronomy blossomed in the wake of the age of exploration. The steam engine owed almost nothing to the science of thermodynamics, but the science of thermodynamics owed almost everything to the steam engine. The discovery of the structure of DNA depended heavily on X-ray crystallography of biological molecules, a technique developed in the wool industry to try to improve textiles.
Technological advances are driven by practical men who tinkered until they had better machines; abstract scientific rumination is the last thing they do. As Adam Smith, looking around the factories of 18th-century Scotland, reported in “The Wealth of Nations”: “A great part of the machines made use in manufactures…were originally the inventions of common workmen,” and many improvements had been made “by the ingenuity of the makers of the machines.”
It follows that there is less need for government to fund science: Industry will do this itself. Having made innovations, it will then pay for research into the principles behind them. Having invented the steam engine, it will pay for thermodynamics. This conclusion of Mr. Kealey’s is so heretical as to be incomprehensible to most economists, to say nothing of scientists themselves.
For more than a half century, it has been an article of faith that science would not get funded if government did not do it, and economic growth would not happen if science did not get funded by the taxpayer. It was the economist Robert Solow who demonstrated in 1957 that innovation in technology was the source of most economic growth—at least in societies that were not expanding their territory or growing their populations. It was his colleagues Richard Nelson and Kenneth Arrow who explained in 1959 and 1962, respectively, that government funding of science was necessary, because it is cheaper to copy others than to do original research.
“The problem with the papers of Nelson and Arrow,” writes Mr. Kealey, “was that they were theoretical, and one or two troublesome souls, on peering out of their economists’ aeries, noted that in the real world, there did seem to be some privately funded research happening.” He argues that there is still no empirical demonstration of the need for public funding of research and that the historical record suggests the opposite.
After all, in the late 19th and early 20th centuries, the U.S. and Britain made huge contributions to science with negligible public funding, while Germany and France, with hefty public funding, achieved no greater results either in science or in economics. After World War II, the U.S. and Britain began to fund science heavily from the public purse. With the success of war science and of Soviet state funding that led to Sputnik, it seemed obvious that state funding must make a difference.
The true lesson—that Sputnik relied heavily on Robert Goddard’s work, which had been funded by the Guggenheims—could have gone the other way. Yet there was no growth dividend for Britain and America from this science-funding rush. Their economies grew no faster than they had before.
In 2003, the Organization for Economic Cooperation and Development published a paper on the “sources of economic growth in OECD countries” between 1971 and 1998 and found, to its surprise, that whereas privately funded research and development stimulated economic growth, publicly funded research had no economic impact whatsoever. None. This earthshaking result has never been challenged or debunked. It is so inconvenient to the argument that science needs public funding that it is ignored.
In 2007, the economist Leo Sveikauskas of the U.S. Bureau of Labor Statistics concluded that returns from many forms of publicly financed R&D are near zero and that “many elements of university and government research have very low returns, overwhelmingly contribute to economic growth only indirectly, if at all.”
As the economist Walter Park of American University in Washington, D.C., concluded, the explanation for this discrepancy is that public funding of research almost certainly crowds out private funding. That is to say, if the government spends money on the wrong kind of science, it tends to stop researchers from working on the right kind of science.
To most people, the argument for public funding of science rests on a list of the discoveries made with public funds, from the Internet (defense science in the U.S.) to the Higgs boson (particle physics at CERN in Switzerland). But that is highly misleading. Given that government has funded science munificently from its huge tax take, it would be odd if it had not found out something. This tells us nothing about what would have been discovered by alternative funding arrangements.
And we can never know what discoveries were not made because government funding crowded out philanthropic and commercial funding, which might have had different priorities. In such an alternative world, it is highly unlikely that the great questions about life, the universe and the mind would have been neglected in favor of, say, how to clone rich people’s pets.
The perpetual-innovation machine that feeds economic growth and generates prosperity is not the result of deliberate policy at all, except in a negative sense. Governments cannot dictate either discovery or invention; they can only make sure that they don’t hinder it. Innovation emerges unbidden from the way that human beings freely interact if allowed. Deep scientific insights are the fruits that fall from the tree of technological change.