Replies on Public Goods and Crowding Out

I thank everyone for their responses to my essay. Let me in turn respond to them. 
Victoria Harden makes a strong defence for the public funding of health research, yet the improvements in health we have seen in the industrialized world have been occurring for nearly 200 years now, and when a person charts those improvements against the initiation of significant government funding of health research (which in the UK, for example, was launched in 1913 with the creation of the Medical Research Council) one simply does not see any deflection in the long-term trends in morbidity and mortality. So much health research continues to be supported by independent foundations (Wellcome Trust, Bill and Melinda Gates etc) to say nothing of that funded by private companies (the drug companies have huge budgets for R&D) that a person is forced to conclude that in aggregate there simply is no evidence that public research money has made any impact. After all, it is interesting how little benefit the former Soviet bloc’s generously funded research programs yielded in terms of health care. I don’t think that the sort of anecdotal approach that a historian like Victoria Harden may be forced to take can show anything short of crowding out (but see below.)
Patrick Michaels makes the point that government funding has introduced perverse incentives and has damaged the intellectual autonomy of the universities. On both points he is so obviously right that I can only invoke historical evidence to support him. So, for example, one of the godfathers of the federal support of research was Henry Wallace (one of FDR’s Vice Presidents and, unexpectedly, Marxist in his sympathies) and he complained that the greatest opposition to his plans came from the scientists themselves, who wanted to protect their autonomy. “In the past,” he wrote, “most scientists were trained in laissez faire classical economics” so he found them “a handicap rather than a help” in his campaigns for government funding. Meanwhile, the universities were so determined to protect their autonomy that they delayed for five years the launching of the National Science Foundation, from 1945 to 1950.
David Guston makes a different set of points: he says in effect that, okay, perhaps in narrow economic terms science may not be a public good, but there are nonetheless good national reasons other than defence why a democratic government might legitimately want or need to fund science, particularly in support of particular, perhaps infrastructural, missions. In this he was adumbrated by Victoria Harden who made the point that drug companies’ published clinical trials cannot always be trusted. On these issues it is hard to say categorically that Harden and Guston are wrong. I believe that under laissez faire, philanthropic and foundation sectors would indeed meet all our research needs (so, for example, in his 1876 Report to the Franklin Institute, William Sellers explained that no government in America need set technical standards because “the government of France has always been in the habit of interfering with the private habits of people but the American concept of government [is that the setting of technical standards such as screw threads could safely be entrusted to a free people].” Nonetheless I do agree that we can’t leave research solely to the for-profit sector and so, if for whatever reason the philanthropic sector fails to provide, then government would have to intervene, but the problem is that there is good evidence for the government funding of philanthropic research crowding out private philanthropic research, so public research even if philanthropically orientated should not be entered into lightly.
So let me conclude thus: I believe the evidence is clear that in narrow economic terms government-funded research is not a public good, and I agree that it cannot be entrusted solely to the for-profit sector, but I also believe that foundations and charities can be entrusted with most if not all of society’s needs for philanthropic research, so if governments choose under a democratic mandate to fund science, they must be careful not to simply crowd out the private philanthropic money that would otherwise have arisen.

Also from this issue

Lead Essay

  • 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

  • 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.

  • 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.

  • 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.