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