Part of the case for government intervention to create mandated intellectual property (monopoly) rights, or for government science, rests on the ‘copycat’ risk. The case for intervention might go like this: An innovator spends time and money to create a new science or product, which is then swiftly copied by somebody else for a mere fraction of the cost. Now because everybody is scared that someone will ‘copycat’ them, they won’t have as much incentive to try and innovate and dream up new products, services and technologies. The argument then goes that society on the whole is poorer without IP laws, or without government science.
But is this what actually happens in the real world? Terence Kealey presents a counter to the above argument in his book, The Economic Laws of Scientific Research under the section “The Costs of Second-Mover Research” page 228:
The biggest myth in science funding is that published science is freely available. It is not. Access to it is extremely expensive. Consider an analogy with the law. No one assumes that legal knowledge is freely available. Anyone could, if they wished, consult the law books and journals to defend themselves in court, but it would take years to master the law and the court-room lore that is never published, so people employ lawyers and pay them for their accumulated expertise. So it is with science. It takes years of training before a scientist can read research papers properly and understand their implication for the future. It takes hours, every week, to read all the new research papers, to assimilate them and to integrate them into a future research strategy. As discussed above, so important is the collection and integration of scientific data, that successful companies see it as the prime role of their scientists. And the accumulated expertise that enables scientists to collect and interpret data does not come cheap.
Also relevant is this journal article version, see Modelling science as a contribution good.
Part of the argument that government science is necessary is that private firms or other donors will not fund basic science. But this isn’t true! See Terence Kealey’s The Economic Laws of Scientific Research, page 225:
Unfortunately for the theories of Nelson and Arrow, companies do, in practice, fund basic science comprehensively. Moreover, they find it highly profitable. Two major surveys by Mansfield and Griliches have shown that the more basic science a company performs, the more likely it is to grow and to outperform its competitors. Mansfield studied 16 major American oil and chemical companies for the years 1960-76, and he showed that all those firms invested in pure science; crucially, the more a firm invested in basic science, the greater its productivity grew.
So while new technology is obviously important to improving human quality of life, the argument about whether government should fund (or even do science itself) hinges on whether new technology comes from academic research. After all, if new technology doesn’t come from academic research, then surely there’s less reason for government to be involved.
See Terence Kealey from page 216 of The Economic Laws of Scientific Research:
Mansfield surveyed 76 major American firms, which, collectively, accounted for one-third of all sales in seven crucial manufacturing industries – information processing, electrical equipment, chemicals, instruments, drugs, metals and oil. He discovered that, for the period 1975-85: ‘about 11% of new products and about 9% of new processes could not have been developed, without substantial delay, in the absence of recent academic research’. An earlier survey of American industry by Gellman Associates also showed that around 10 per cent of industrial advances were attributable to recent academic research. These findings represent, therefore a gaping flaw in the linear model: only 10 per cent of new technology emerges from academic research. Ninety per cent of new technology arises from the industrial development of pre-existing technology, not from academic science.
Terence Kealey goes on:
Indeed, the implications for the linear model are even grimmer than these statistics show. Mansfield may have found that around 10 per cent of new products or processes arose from the industrial development of academic research; but these innovations tended to be economically marginal: they only accounted for 3 per cent of sales and 1 per cent of the savings that industry made through innovation.
These studies, therefore, show that 90 cent of industrial innovation, and well over 95 per cent of industry’s profits through innovation, arise in-house from the industrial development of pre-existing technology.
Listening to technocrats and other people who believe that government should subsidise science, I get the impression they’re unaware of the other requisites for a productive society. See page 205 of The Economic Laws of Scientific Research by Terence Kealey:
Thus non-capitalists will not create commercially-useful technology – witness the old USSR. In the absence of the appropriate culture, technological objects will assume no greater economical importance than objects d’art; when non-capitalists are offered other people’s technology, they fail to exploit it – witness the rusting tractors that litter vast tracts of the Third World.
So the point here is, without other aspects such as education, training, and the vital information of prices – we couldn’t have all these nice things. We need the price system to guide what amount of our scarce resources we should invest into which things, and at which times, and in which ways.
To extend the example above, consider what would happen if you parachuted all this nice capital equipment down into a poor nation. Think of all the other things required:
- Infrastructure to keep that equipment maintained such as machinery repair.
- A market in equipment parts to use in the repairs and maintenance.
- Entrepreneurial skill to seek out or create profitable opportunities to use that tractor.
Technology is one thing, but putting that technology to productive use requires commercialisation.
Fantastic book here by Don Boudreaux: The Essential Hayek, published by the Fraser Institute.
This is a short book which introduces the reader to some of Hayek’s key ideas, and the concepts are deftly explained. Hayek can be hard to read, so if you lack the patience, give this short book a try. I really like the analogy in Chapter 2: Knowledge and prices. Don runs through an analogy with putting a puzzle together, as a way of demonstrating the importance of prices and of free market collaboration rather than central planning.
I’m a big fan of Cafe Hayek where Don regularly blogs, I highly recommend you subscribe to the posts. Get The Essential Hayek here, note they have a free PDF version if you don’t want to spend money.
This post is directed at the people who were sharing/liking the Obama worship videos e.g. this video, that basically attempted to play him up as some cool, bad ass guy (for this, and some other things). But all politicians really do is chase the polls of public opinion and modify their position to match.
Want to see a breakdown of this change in position over time? Facebook page Unbiased America has put together a nifty graph on this:
What’s the moral of the story? If you want to create change, focus on the social aspect of it, and stop worshipping politicians. They don’t deserve the credit.
Main image from Matt Bors
A mindset to be wary of is victim mentality. Fundamentally, free will underlies the libertarian view of the world, implying the ability for us to do things to change or influence outcomes. The view of the ‘anointed’ tends to run counter to this.
In The Vision of the Anointed, Thomas Sowell explains this with an interesting example on page 53/54:
As part of that vision, explanations which exempt the individual from personal responsibility for unhappy circumstances in his life are consistently favored over explanations in which the individual’s own actions are a major ingredient in unfortunate outcomes. Thus, the correlation between lack of prenatal care and high infant mortality rates was blamed by the media on society’s failure to provide enough prenatal care to poor women, rather than blaming those women’s failure to behave responsibly – whether in seeking prenatal care, avoiding drugs and alcohol during pregnancy, or in many other evidences of deficient parental responsibility. The fact that there is no such correlation between a lack of prenatal care and high infant mortality rates in groups which traditionally take more care of their children is simply ignored.
A study making comparisons within the black community in Washington found that there was indeed a correlation between prenatal care and low birth weight among infants – but the mothers who failed to get prenatal care were also smokers twice as often as the others and alcohol users six times as often…. Failure to seek prenatal care was a symptom, rather than a cause…. However, this study going completely against the vision of the anointed was almost completely ignored in the national media.