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Terence Kealey, vice-chancellor of the University of Buckingham, has challenged the almost universally accepted idea that publicly funded research and development is a public good.
It’s true, he says, that an OECD(Organization for Economic Co-operation and Development ) study, in 2003, shows that the only consistent correlation with economic growth in any country is the amount spent on research and development, but the correlation only exists with research and development funded by the private sector. Public funded research and development was discovered to actually push private sector investment out of the market.
For every dollar of public money spent on research, the private sector invests $1.25 less, he said.
The US has had 200 years of steady economic growth, much of that time with no public funding of research. The US and other countries only decided governments should fund research in 1914 as a result of concern about eugenics – the idea that the genes of “undesirable” peoples were diluting the quality of the human race. Since then the US government has become the biggest funder of research and development, with no discernable impact on the economy, except to disproportionately crowd out private sector investment. “. . . no systematic economic historical data supports the suggestion that science is actually a public good, that requires public funding,” said Kealey.
So why do people cling to the belief that there is benefit despite all the evidence to the contrary? Primarily because of anecdotal evidence that is cumbersome to refute. People typically point to some innovation – often “technology whose time was undoubtedly coming” — and claim it wouldn’t have happened without the pubic funding. Kealy said “you have to ask yourself” what would have happened if this “exceptionally expensive project” hadn’t been funded by the government and the money was left in the private sector? “All of American productivity and creativity before 1940 was produced by the private sector… no one ever says ‘thank God the private sector produces all this R & D.’”?
Studies have also discredited the idea that it is more costly to innovate than to apply a new idea. In practice – “to access [a new technology], costs as much as to produce it in the first place.”
Kealy said, “Science is almost perfect in the way it works: The inventor has a monopoly. This monopoly encourages him or her to exploit the discovery profitably, but with time, the monopoly is lost… because the competitors catch up… Though it costs them a lot of money to get there, when they do catch up, you are no longer the monopoly and society benefits… and the time scales seem to work almost perfectly,” explained Kealy. The timing is so perfect, said Kealy, “If you really want proof of the existence of God, it’s the perfect nature by which knowledge is distributed in a free market, because only God could have gotten it just so perfectly right.”
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