Why Philanthropy Comes Up Short

I am certainly pleased to not be categorically wrong, as Professor Kealey allows.  The challenge now is to understand to what extent philanthropic research support might be able to replace public research expenditures.  I am not aware of what evidence for crowding out might exist, but I would hazard to say that any such evidence would be stronger in Professor Kealey’s United Kingdom, where there might be real competition between the research councils of the UK and philanthropic giants like The Wellcome Trust and the Leverhulme Trust.  In the US, however, the story is otherwise.

Historically, there were virtually no large philanthropies capable of supporting scientific research until the end of the age of the robber barons.  So the support of research by the U.S. federal government that I chronicled in my opening response could not have been crowding out anything.  This observation leads to an important claim:  The kind of scientific work that it is important and legitimate for a government to sponsor is dependent on the nature and state of economic and social development in the country, rather than on some argument about public goods or other economic abstractions.  It would not make much sense for the U.S. federal government to spend money in the 21st century on the kinds of infrastructural knowledge projects (mapping the coasts and interior) that occupied a large portion of its 19th century concern, but it probably does make sense for it to do other infrastructural work (e.g., the Internet in the recent past, GPS in the more recent past, perhaps the “Internet of things” in the future) and continue with others, for example, with high-quality weather observation, because such observation requires expensive satellites for which there is currently no complete private capacity to design, build, and safely launch.  When such a capacity exists, and NASA is working closely with the private sector on building its launch capacity currently, it might – just might – make sense to spin such activities off to the private sector.

Moreover, private philanthropies – and certainly those at a large enough scale to foster any significant research enterprises – are themselves creatures of the state.  Their creation and the policies governing their payouts are determined (historically and functionally) by the tax code and related public laws (many of which many libertarians probably find anathema).  Thus, it is utterly unclear to me that in a coherent libertarian state, there actually would be philanthropies like the Carnegie Corporation of New York, the Sloan Foundation, the Ford Foundation, the Gates Foundation, and the relatively small number of large foundations having the wherewithal to support scientific research.  I am willing to concede that there would be robust corporate philanthropy, but since Professor Kealey has conceded that the private sector cannot be entrusted to support scientific research in its entirety, and since there is no suggestion that corporate philanthropy is anything more than self-serving, I think this can safely be neglected.

Even if such philanthropies existed in the libertarian state, at what scale might they actually operate?  In the United States in 2012, according to “Giving USA 2013,” the total of charitable giving was roughly $316 billion.  Most of these contributions came from individuals, and most of them went to religious institutions—again supported by a tax credit whose very existence might be jeopardized.  Foundations provided about $47 billion of these funds and corporations about $19 billion, not all of either of course devoted to research.  On short notice I’m having trouble finding out precisely what share of philanthropic and corporate giving goes to scientific research rather than, say human and social services, education, the arts, etc.  But one hint is the amount that foundations provide to universities, which in 2010 was according to the AAAS R&D budget project no more than $4.3 billion (this is the “other” category – other than the federal government, state and local governments, corporations, and universities themselves, and is dominated but is not exclusively constituted by foundations).  Given that most research well-enough established to attract philanthropic attention occurs in universities, it is reasonable to estimate that perhaps 10% of what private philanthropies spend goes to scientific research.

In 2012, the U.S. federal government spent roughly $62 billion on civilian nondefense research.  So in order to believe that they would make up for what the government stopped doing, philanthropies would have to increase their spending on research more than tenfold.  Now it might be possible that this $62 billion is inflated, and that it would be reasonable to fund less research in addition to funding it differently.  But the gap between about $4 billion and more than $60 billion strikes me as too large fill on a supposition.

Finally, there is the question of whether it is desirable to have private philanthropies take over the role of government in funding scientific research.  As I argued in the original posting, the character of research varies among patrons and performers.  While I suspect that foundation funding is closer to government funding in its quality than corporate funding (and here I don’t necessarily mean “scientific quality” but rather in terms of pressure for results, freedom to publish, longer time horizons, willingness to support students, etc.), there are real differences.  The federal government in the United States pays the indirect as well as the direct costs of research performed on grants—meaning averaged estimates of the additional increments of libraries, physical plant, administration, utilities, etc., required to conduct the research.  Foundations often insist on lower or no such “overhead” on their research grants, putting greater financial stress on universities.  Foundations’ payout is also determined by income from endowment (usually averaged over three years), and so as was the case in the recent Great Recession, when endowments performed poorly, payouts shrank as well, and even many large foundations cancelled existing commitments and stopped making grants altogether.  As with corporate funding, the most desirable way to fund research is not to be caught in the business cycle.

Also from This Issue

Lead Essay

  • The Case against Public Science by Terence Kealey

    Terence Kealey argues that we don’t need public funding for science. Not only are many of the common historical examples of the benefits of public funding false, the economic model of publicly funded scientific research is fundamentally flawed. Empirically, public R&D appears to have a negligible effect on economic growth. Private science is likely to be more responsive to consumers’ needs, and the costs of duplicating it are often high enough that we need not worry about free riders on the discoveries of others.

Response Essays

  • History Supports Government Funding for Public Health by Victoria Harden

    Victoria Harden offers several historical examples of successful funding for public health initiatives. These programs, including the prevention of cholera, basic research on chemical warfare agents and cancer, and the identification of the virus that causes AIDS, might conceivably have happened under purely private auspices. But she finds it implausible that private actors would have responded as quickly or effectively.

  • State-Funded Science: It’s Worse Than You Think! by Patrick J. Michaels

    Patrick J. Michaels discusses the public choice aspects of scientific funding, which introduce systematic bias into research: Scientists need grant money to advance in their careers, and only the government provides it in sufficient quantities. Yet the government’s agenda is never neutral, and the scientists’ agendas tend strongly to fall into line. The result is a consensus built not on scientific fact, but on the alignment of personal interests.

  • The State Will Always Need Science by David Guston

    David Guston rejects the public goods argument for scientific research. He nonetheless argues that it is essential for any government to conduct such research. Governments are constantly called upon to regulate and adjudicate disputes among scientifically and technologically savvy actors. They are obliged to make laws that take into account scientific laws. Indeed, no one would want to live under a state that predictably failed in these respects.

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