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