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Wednesday, January 21, 2009


From a Financial Post review of Sex, Science & Profits, by British Academic Terence Kealey:

The book deals with the nature of science, the history of technology and the role of governments in promoting economic growth. It provides a devastating critique of states' failure to fund economically useful knowledge, and suggests that all spending on "technologies of the future" is likely to wind up down the drain.

Professor Kealey is not promoting some off-the-wall, right-wing economic theory. A comprehensive 2003 study by the Organization for Economic Co-operation and Development titled "The Sources of Economic Growth in OECD Countries," found that the only useful R&D came from private sources and that public R&D funding tended to have negative consequences.

Professor Kealey provides the history and psychology behind this inconvenient truth, and sets out to explode the pervasive notion -- first propounded by the prototypical 17th-century English policy wonk, Sir Francis Bacon -- that science is a "public good" that needs to be promoted by governments.

In a sweeping analysis, Professor Kealey notes that advances in both science and technology have -- from the steam engine to radio astronomy -- come overwhelmingly from the private sector. "Powerful" states, from Egypt through China to modern Russia, have held up technological advance rather than promoted it. (why I am against the EU & possibly even for dissolving the United States) The vast U. S. expenditure on research in the wake of the Sputnik scare in the 1950s managed to put a man on the moon, but has (strategic considerations to one side) done little or nothing for the well-being of the average American.

Professor Kealey supports the wisdom of Adam Smith, the 18th-century Scottish economist, who suggested that technological advance was a natural consequence of market specialization which could not be improved by governments.

The Industrial Revolution in Britain was promoted by the political freedom's emerging from the "Glorious Revolution" of 1688. Its agents were eminently practical private tinkerers who had little or nothing to do with government or the educational institutions of the day. France, by contrast, was dripping with state-funded organizations to promote agriculture and science, but lagged Britain severely.

Professor Kealey explodes the notion of private "underinvestment" in R&D, which is based on flawed economic theory rather than industrial fact. He also highlights the counterproductive-ness of government technological promotion, using two prominent British examples. Before he became Prime Minister, Harold Wilson, in the early 1960s, promoted the "White Heat" of technological revolution, using the Soviet Union as a model. His Labour government greatly increased public R&D spending, which yielded the first commercial nuclear reactor, the first jet passenger aircraft, the first commercial computer and (half of) the first supersonic commercial aircraft. But what all these "achievements" had in common was that they were financial disasters, and accompanied a precipitous decline in the British economy.

Margaret Thatcher, by contrast, was castigated for cutting government R&D, but her cuts were more than compensated for by private spending, suggesting that government R&D merely "crowds out" the private version. Government R&D also tends to be counterproductive because it emphasizes political priorities and corrals companies into failing consortia.

One of Professor Kealey's most fascinating revelations is the astonishing success of promoters of publicly-funded science and technology in bending history to suit their prejudices (an example of Pournelle's Iron Law). The advance of privately-funded British science has for two hundred years gone hand in hand with constant predictions of decline. The experience of post-war Japan was comprehensively falsified. In fact, Japanese government support for R&D has almost everywhere proved counterproductive. State agencies opposed the development of cars, electronics and cameras, while government promotion of "fifth generation" computers, and the space and nuclear industries have been a bust. To the extent that Japan was successful, it was due to private R&D.

Again, Germany's post-war success was not due to government but to the state's abandonment of so-called "Rhenish capitalism," with its cartels, tariffs and subsidies, and the adoption of the "Ordoliberalism" of Ludwig Erhard, who established an independent central bank, reduced government controls and liberalized trade.

Professor Kealey notes that government funding tends to corrupt science, but unfortunately does not go into the currently most dangerous example: that of state-funded "climate science" -- although he does refer to the establishment pogrom against the environmental skepticism of Bjorn Lomborg.
I have elsewhere shown how British science funding is in the hands of a dishonest warming alarmist.

I wouldn't automatically credit an OECD report on the effectiveness of government but the rule is that no organisation, no matter how biased lies in a manner to its disadvantage. (The only slight exception to this is when the villain talking before a similarly inclined audience exaggerates his own cunning.) So if a big government organisation says big government is crap at organising research you can bet on it.

This has a slightly equivocal effect on X-Prizes. On the one hand it makes prizes infinitely more useful than conventional research grants. On the other hand it supports those libertarians who say even that much government involvement is wasteful. I think that patent rights do not & probably cannot, fully reflect the value added to society by successful research so X-Prizes simply slightly level the playing field.

As in the example of Tesla having to give up the rights to AC generation for a pittance.

During the financial panic of 1907, the Westinghouse Co. was caught in a takeover bid from financier J.P. Morgan. Westinghouse's company was financially weakened, and he had to rescind on the royalty contract he had signed with Tesla.

Westinghouse explained that his company would not survive if it had to pay Tesla his full royalties, so he persuaded Tesla to accept a buyout of his patents for $216,000. This was much less than the $12 million the patents were worth at the time.

Agreed. The UK's R&D tax credit is mathematically much the same as exempting researchers' salaries from Employer's NI, so why not just exempt researchers' salaries from Employer's NI in the first place and have done with it? OR even better, scrap Employer's NI? (it's the Second Worst Tax).
In the end Westinghouse went down the tubes anyway.

(why I am against the EU & possibly even for dissolving the United States)

The real problem over here is that the government and its' political enablers won't abide by the constitution. If the feds did obey the constitution we would have a government that is much smaller.
I agree - those powers not listed are "reserved to the states or the people". A movement to dissolve the Union if that section of the Constitution wasn't kept too would certainly concentrate minds & be on very strong constitutional grounds.
The Civil War was just such a movement and they failed. It is worth noting that after the fall of Reconstruction the North left the South alone to deal with its' own problems. The real problem is that so many people vote for the party of Big Government because they are idiots. We have a people problem, not a government problem.
Big government can promise spending tergeted at voting groups - an extra hundred pounds for pensioners, students, families, people living alone etc etc. These attract the attention far more than amorphous theoretical, though correct, statements that we would ALL be better off without such tokens. Any election leaflet contains some photos of the candidate & such promises.
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