| In the United States, Congress approved, last month, | | | | endowments and foundations.Moreover, the conduits |
| increases in the 2003 budgets of both the National | | | | of government involvement in research, the universities, |
| Institutes of Health and National Science Foundation. | | | | are only weakly correlated with growing prosperity. As |
| America is not alone in - vainly - trying to compensate | | | | Alison Wolf, professor of education at the University |
| for imploding capital markets and risk-averse | | | | of London elucidates in her seminal tome "Does |
| financiers.In 1999, chancellor Gordon Brown inaugurated | | | | Education Matter? Myths about Education and |
| a $1.6 billion program of "upgrading British science" and | | | | Economic Growth", published last year, extra years of |
| commercializing its products. This was on top of $1 | | | | schooling and wider access to university do not |
| billion invested between 1998-2002. The budgets of the | | | | necessarily translate to enhanced growth (though |
| Medical Research Council and the Biotechnology and | | | | technological innovation clearly does).Terence Kealey, |
| Biological Sciences Research Council were quadrupled | | | | a clinical biochemist, vice-chancellor of the University of |
| overnight.The University Challenge Fund was set to | | | | Buckingham in England and author of "The Economic |
| provide $100 million in seed money to cover costs | | | | Laws of Scientific Research", is one of a growing |
| related to the hiring of managerial skills, securing | | | | band of scholars who dispute the intuitive linkage |
| intellectual property, constructing a prototype or | | | | between state-propped science and economic |
| preparing a business plan. Another $30 million went to | | | | progress. In an interview published last week by |
| start-up funding of high-tech, high-risk companies in the | | | | Scientific American, he recounted how he discovered |
| UK.According to the United Nations Development | | | | that:"Of all the lead industrial countries, Japan - the |
| Programme (UNDP), the top 29 industrialized nations | | | | country investing least in science - was growing |
| invest in R&D more than $600 billion a year. The bulk | | | | fastest. Japanese science grew spectacularly under |
| of this capital is provided by the private sector. In the | | | | laissez-faire. Its science was actually purer than that of |
| United Kingdom, for instance, government funds are | | | | the U.K. or the U.S. The countries with the next least |
| dwarfed by private financing, according to the British | | | | investment were France and Germany, and were |
| Venture Capital Association. More than $80 billion have | | | | growing next fastest. And the countries with the |
| been ploughed into 23,000 companies since 1983, | | | | maximum investment were the U.S., Canada and U.K., |
| about half of them in the hi-tech sector. Three million | | | | all of which were doing very badly at the time."The |
| people are employed in these firms. Investments | | | | Economist concurs: "it is hard for governments to pick |
| surged by 36 percent in 2001 to $18 billion.But this | | | | winners in technology." Innovation and science sprout in |
| British exuberance is a global exception.Even the - | | | | - or migrate to - locations with tough laws regarding |
| white hot - life sciences field suffered an 11 percent | | | | intellectual property rights, a functioning financial system, |
| drop in venture capital investments last year, reports | | | | a culture of "thinking outside the box" and a tradition of |
| the MoneyTree Survey. According to the Ernst & | | | | excellence.Government can only remove obstacles - |
| Young 2002 Alberta Technology Report released on | | | | especially red tape and trade tariffs - and nudge things |
| Wednesday, the Canadian hi-tech sector is languishing | | | | in the right direction by investing in infrastructure and |
| with less than $3 billion invested in 2002 in seed capital | | | | institutions. Tax incentives are essential initially. But if the |
| - this despite generous matching funds and tax credits | | | | authorities meddle, they are bound to ruin science and |
| proffered by many of the provinces as well as the | | | | be rued by scientists.Still, all forms of science funding - |
| federal government.In Israel, venture capital plunged to | | | | both public and private - are lacking.State largesse is |
| $600 million last year - one fifth its level in 2000. Aware | | | | ideologically constrained, oft-misallocated, inefficient and |
| of this cataclysmic reversal in investor sentiment, the | | | | erratic. In the United States, mega projects, such as |
| Israeli government set up 24 hi-tech incubators. But | | | | the Superconducting Super Collider, with billions already |
| these are able merely to partly cater to the pecuniary | | | | sunk in, have been abruptly discontinued as were |
| needs of less than 20 percent of the projects | | | | numerous other defense-related schemes. Additionally, |
| submitted.As governments pick up the monumental | | | | some knowledge gleaned in government-funded |
| slack created by the withdrawal of private funding, | | | | research is barred from the public domain.But industrial |
| they attempt to rationalize and economize.The New | | | | money can be worse. It comes with strings attached. |
| Jersey Commission of Health Science Education and | | | | The commercially detrimental results of drug studies |
| Training recently proposed to merge the state's three | | | | have been suppressed by corporate donors on more |
| public research universities. Soaring federal and state | | | | than one occasion, for instance. Commercial entities |
| budget deficits are likely to exert added pressure on | | | | are unlikely to support basic research as a public good, |
| the already strained relationship between academe | | | | ultimately made available to their competitors as a |
| and state - especially with regards to research | | | | "spillover benefit". This understandable reluctance stifles |
| priorities and the allocation of ever-scarcer | | | | innovation.There is no lack of suggestions on how to |
| resources.This friction is inevitable because the | | | | square this circle.Quoted in the Philadelphia Business |
| interaction between technology and science is | | | | Journal, Donald Drakeman, CEO of the Princeton |
| complex and ill-understood. Some technological | | | | biotech company Medarex, proposed last month to |
| advances spawn new scientific fields - the steel | | | | encourage pharmaceutical companies to shed |
| industry gave birth to metallurgy, computers to | | | | technologies they have chosen to shelve: "Just like you |
| computer science and the transistor to solid state | | | | see little companies coming out of the research being |
| physics. The discoveries of science also lead, though | | | | conducted at Harvard and MIT in Massachusetts and |
| usually circuitously, to technological breakthroughs - | | | | Stanford and Berkley in California, we could do it out of |
| consider the examples of semiconductors and | | | | Johnson & Johnson and Merck."This would be the |
| biotechnology.Thus, it is safe to generalize and say that | | | | corporate equivalent of the Bayh-Dole Act of 1980. |
| the technology sector is only the more visible and | | | | The statute made both academic institutions and |
| alluring tip of the drabber iceberg of research and | | | | researchers the owners of inventions or discoveries |
| development. The military, universities, institutes and | | | | financed by government agencies. This unleashed a |
| industry all over the world plough hundreds of billions | | | | wave of unprecedented self-financing |
| annually into both basic and applied studies. But | | | | entrepreneurship.In the two decades that followed, the |
| governments are the most important sponsors of pure | | | | number of patents registered to universities increased |
| scientific pursuits by a long shot.Science is widely | | | | tenfold and they spun off more than 2200 firms to |
| perceived as a public good - its benefits are shared. | | | | commercialize the fruits of research. In the process, |
| Rational individuals would do well to sit back and copy | | | | they generated $40 billion in gross national product and |
| the outcomes of research - rather than produce | | | | created 260,000 jobs.None of this was government |
| widely replicated discoveries themselves. The | | | | financed - though, according to The Economist's |
| government has to step in to provide them with | | | | Technology Quarterly, $1 in research usually requires |
| incentives to innovate.Thus, in the minds of most | | | | up to $10,000 in capital to get to market. This suggests |
| laymen and many economists, science is associated | | | | a clear and mutually profitable division of labor - |
| exclusively with publicly-funded universities and the | | | | governments should picks up the tab for basic |
| defense establishment. Inventions such as the jet | | | | research, private capital should do the rest, stimulated |
| aircraft and the Internet are often touted as examples | | | | by the transfer of intellectual property from state to |
| of the civilian benefits of publicly funded military | | | | entrepreneurs.But this raises a host of contentious |
| research. The pharmaceutical, biomedical, information | | | | issues.Such a scheme may condition industry to |
| technology and space industries, for instance - though | | | | depend on the state for advances in pure science, as |
| largely private - rely heavily on the fruits of nonrivalrous | | | | a kind of hidden subsidy. Research priorities are bound |
| (i.e. public domain) science sponsored by the state.The | | | | to be politicized and lead to massive misallocation of |
| majority of 501 corporations surveyed by the | | | | scarce economic resources through pork barrel politics |
| Department of Finance and Revenue Canada in | | | | and the imposition of "national goals". NASA, with its |
| 1995-6 reported that government funding improved | | | | "let's put a man on the moon (before the Soviets do)" |
| their internal cash flow - an important consideration in | | | | and the inane International Space Station is a sad |
| the decision to undertake research and development. | | | | manifestation of such dangers.Science is the only |
| Most beneficiaries claimed the tax incentives for seven | | | | public good that is produced by individuals rather than |
| years and recorded employment growth.In the | | | | collectives. This inner conflict is difficult to resolve. On |
| absence of efficient capital markets and | | | | the one hand, why should the public purse enrich |
| adventuresome capitalists, some developing countries | | | | entrepreneurs? On the other hand, profit-driven |
| have taken this propensity to extremes. In the | | | | investors seek temporary monopolies in the form of |
| Philippines, close to 100 percent of all R&D is | | | | intellectual property rights. Why would they share this |
| government-financed. The meltdown of foreign direct | | | | cornucopia with others, as pure scientists are |
| investment flows - they declined by nearly three fifths | | | | compelled to do?The partnership between basic |
| since 2000 - only rendered state involvement more | | | | research and applied science has always been an |
| indispensable.But this is not a universal trend. South | | | | uneasy one. It has grown more so as monetary |
| Korea, for instance, effected a successful transition to | | | | returns on scientific insight have soared and as capital |
| private venture capital which now - even after the | | | | available for commercialization multiplied. The future of |
| Asian turmoil of 1997 and the global downturn of 2001 - | | | | science itself is at stake.Were governments to exit the |
| amounts to four fifths of all spending on R&D.Thus, | | | | field, basic research would likely crumble. Were they to |
| supporting ubiquitous government entanglement in | | | | micromanage it - applied science and entrepreneurship |
| science is overdoing it. Most applied R&D is still | | | | would suffer. It is a fine balancing act and, judging by |
| conducted by privately owned industrial outfits. Even | | | | the state of both universities and startups, a precarious |
| "pure" science - unadulterated by greed and | | | | one as well. |
| commerce - is sometimes bankrolled by private | | | | |