How to Stop Wasting Money on Science

In Thursday's Wall Street Journal, former Energy Secretary (and Stanford professor) Steven Chu and his colleague Thomas R. Cech penned an opinion piece entitled How to Stop Winning Nobel Prizes in Science, in which they argue for better long-term planning and consistency in the public funding of science. Cato adjunct scholar Dr. Terence Kealey agrees, suggesting the right amount would be consistently $0.

In August, 2013, Kealey wrote precisely about this in that month’s edition of Cato Unbound. Since then, he has stepped down after a long and successful tenure as vice-chancellor (the equivalent of college president in the U.S.) of the University of Buckingham in the United Kingdom.

First, Kealey considers the notion that science is a “public good,” i.e., something that should rightly be funded by government because scientific developments would otherwise be underprovided from the perspective of society as a whole.  

The myth [that Science is a public good] may be the longest-surviving intellectual error in western academic thought, having started in 1605 when a corrupt English lawyer and politician, Sir Francis Bacon, published his Advancement of Learning.

Kealey went on to document that there is no evidence the public good model (as opposed to laissez faire) is more efficient at providing for the betterment of the public:

The world’s leading nation during the 20th century was the United States, and it too was laissez faire, particularly in science. As late as 1940, fifty years after its GDP per capita had overtaken the UK’s, the U.S. total annual budget for research and development (R&D) was $346 million, of which no less than $265 million was privately funded (including $31 million for university or foundation science). Of the federal and state governments’ R&D budgets, moreover, over $29 million was for agriculture (to address—remember—the United States’ chronic problem of agricultural over productivity) and $26 million was for defence (which is of trivial economic benefit.) America, therefore, produced its industrial leadership, as well as its Edisons, Wrights, Bells, and Teslas, under research laissez faire.

Meanwhile the governments in France and Germany poured money into R&D, and though they produced good science, during the 19th century their economies failed even to converge on the UK’s, let alone overtake it as did the U.S.’s. For the 19th and first half of the 20th centuries, the empirical evidence is clear: the industrial nations whose governments invested least in science did best economically—and they didn’t do so badly in science either.

What happened thereafter? War. It was the First World War that persuaded the UK government to fund science, and it was the Second World War that persuaded the U.S. government to follow suit. But it was the Cold War that sustained those governments’ commitment to funding science, and today those governments’ budgets for academic science dwarf those from the private sector; and the effect of this largesse on those nations’ long-term rates of economic growth has been … zero. The long-term rates of economic growth since 1830 for the UK or the United States show no deflections coinciding with the inauguration of significant government money for research (indeed, the rates show few if any deflections in the long-term; the long-term rate of economic growth in the lead industrialized nations has been steady at approximately 2 percent per year for nearly two centuries now, with short-term booms and busts canceling each other out in the long term.)

The contemporary economic evidence, moreover, confirms that the government funding of R&D has no economic benefit. Thus in 2003 the OECD (Organization of Economic Cooperation and Development—the industrialized nations’ economic research agency) published its Sources of Economic Growth in OECD Countries, which reviewed all the major measurable factors that might explain the different rates of growth of the 21 leading world economies between 1971 and 1998. And it found that whereas privately funded R&D stimulated economic growth, publicly funded R&D had no impact.

The authors of the report were disconcerted by their own findings. “The negative results for public R&D are surprising,” they wrote. They speculated that publicly funded R&D might crowd out privately funded R&D, which, if true, suggests that publicly funded R&D might actually damage economic growth. Certainly both I and Walter Park of the American University had already reported that the OECD data showed that government funding for R&D does indeed crowd out private funding, to the detriment of economic growth. In Park’s words, “the direct effect of public research is weakly negative, as might be the case if public research spending has crowding-out effects which adversely affect private output growth.”

For more on the history of the failure of publicly funded science, from Francis Bacon to the modern era, read Kealey's The Case against Public Science at Cato Unbound.