Science and the Free Market: How Government Distorts Scientific Research Through Public Funding

0:00Well, by way of introduction, as he said, my name is Norman Horne from the Department of Chemical Engineering at the University of Texas at Austin. I'll do a little shameless self-promotion. One of my projects is that I edit the website libertarianchristians.com, so if you'd like to check that out, feel free. Again, my topic is science and the free market. We're going to talk a little bit about government distortion of scientific research through public funding. Well, generally speaking, you write these presentations, you find out you're going to go way too long. So what I'm going to do is I'm going to front load and tell you, I think, the main message that I want to get across first. Basically, you know, everybody knows that science makes our lives better. Through research and industry, we improve our well-being.

0:46And so this, to me, tells me something very important. Science is basically the good guy's way to get back at the government. Science shows again and again that the government is basically unnecessary for either our survival or our productivity. And I think that's why the government endeavors so much to control science so badly. Good science is their enemy, and so they have to dupe citizens into thinking that they need to support science so that we can be productive and prosperous. Okay, so if you don't get anything else out of this, remember that. Okay, so first off, we're gonna talk a little bit about why does the government say that they need to be involved in science?

1:32Well, we kinda just said they have to dupe us into thinking that they're necessary in order to make us productive. In other words, they wanna tell us that there's insufficient incentives to do scientific research from the market because they want profits, not progress. And so the basic research, The most basic stuff in chemistry and physics and biology is just, oh, well the market's not going to provide for that, so that constitutes to them a market failure to provide for the public and thus the economy is going to be operating at a sub-optimal level, so they got to get in there, they got to do the funding and get it done. Well what's so wrong with this? Well, the nature of the state-sponsored science that we see all throughout the economy itself is problematic at best, and I think it's outright deceptive at worst, and we'll talk a little about how that happens and there's basically the problem of socialism and then there's other problems that kind of enter into the equation. After that what I'm going to do

2:26is I'm going to talk about a free market model for scientific research and kind of explain why their argument that there are no incentives and that the market's not going to do it is just flat wrong. And so we'll talk a little bit about how science actually advances and then give you a little bit of a model for how scientific research progresses. Now everybody Hayek here is pretty familiar with Mises and Rothbard and Hayek, and so you know what I'm going to say about socialism, that there are no rational means of economic calculation. That's the calculation problem. And Hayek had talked about how knowledge is distributed in a society. It's not centralized into the state apparatus. And so you could expect that they're not going to be able to make very good decisions about such things. Now, mind you, I'm not saying that what's going to happen is that all science that comes is flawed and wrong in terms of correctness. There will be correct science that will come,

3:19but there will be distortions. When we apply these critiques of socialism to science itself, we can come up with a few conclusions. First, there are no rational means that the government has to actually figure out what research needs to be done. They just don't have the capacity to make that decision. Now they can make guesses, but they're probably, they might be right a few times, but they're not going to be able to be efficient about it. And there's also no rational means to figure out how much resources they need to commit to any research program. So at best, we have to say that the central planners are going to be taking market signals, which begs the question, why are they necessary? Or at worst, they're just stabbing in the air. Okay, so the fundamental problem that leads from this is that the government is is effectively the controller of what is researched. So, this is a big abridgment of academic freedom, which if you're familiar with the concept of academic freedom, it just says that we

4:18in academia need to basically be free from outside influence in order to pursue knowledge to the best of our ability. Now, that's not entirely accurate. They're never going to be free from influence. We'll talk about that later. But basically, the power of the purse The course that the government holds over scientists has a great influence on how things are going to work. And it's naive to just assume that the government is going to be a neutral third party to the situation. I mean, it isn't like they're neutral in anything else, right? Well, another thing that's going to happen is that in government-sponsored science, you're just going to get poorly conducted research. This is just a natural consequence of the type of decision-making that they do. It takes money away from the people who can make right decisions and put it into the hands of people who make poor decisions.

5:04So, for a big example, this is NASA. We all know that, yes, there are some benefits that we've received from that, but they're a massive, colossal waste, and have been since the beginning. Well, and this also constitutes an artificial increase in demand for scientific research, and this is going to drive up the prices for it. And this is why there's a ton of money in what they're doing. I think also that you end up with some practical property rights issues here, and they get exacerbated a whole lot when you just start throwing government money or actually public money into it. You know, so who owns it? It's kind of strange. I mean, I don't really want to get into intellectual property issues per se, although, like I say here, the intellectual property laws exacerbate all these problems.

5:50But really, who profits from the research? Who gets to? The public? The federal government? Society? The world? Who knows? We just don't really know because there's no private property involved. Okay, and I think most of all, and this goes back to who controls the research, you also get a lot of agenda-based research. Science is used initially as a basis for fear and then for control. The example of this is environmental science. In the 80s we were all worried about global cooling. Now we're worried about global warming. And under the precincts of science, this has now been changed to climate change. And nobody really knows what's true and what's not. It's a big mess. This is not going to be solved until the government gets out of it.

6:36In fact, I just recently published a paper in a peer-reviewed journal on what I presented last year at this conference on the problem of transportation pollution and how that cannot be solved when the government is doing all its work, trying to fund all these projects and trying to get everything done like that. It's not going to work. And furthermore, you have this really interesting phenomena of the government sponsoring research just to find out how necessary they are to sponsor research. This happens continually, The reality of scientific advancement. How does science actually proceed along the free market?

7:27If you look through history, what you realize is that science moves forward when individuals are allowed to exercise their minds in freedom. Perfect examples of this are people like Copernicus and Galileo and Newton. Can you imagine what the change would have been like if Copernicus and Galileo had been sponsored by the state church and the state government at the time? Do you think they would have been able to stand against those people who were basically oppressing them for their ideas? I doubt it. If they were funded by the government, I mean, you know that that is another conflict of In the Industrial Revolution, how much state-sponsored science was there? As far as I can tell, and I haven't seen a lot of work on this, but there was very little.

8:13In fact, I would say it's pretty close to zero. And yet, we're supposed to believe that the only way we're going to have progress is through government funding. Okay, that seems a little dubious. In the 20th century, we have a whole lot of other instances of ways that science has progressed without any interference from government whatsoever. Albert Einstein published his four major papers that literally changed physics itself while he was working at a patent office. He did it on the side. You know, that's how science advances. It's by people who are interested in a particular subject, exercising their mind. And in my field, I work in polymer science in the Department of Chemical Engineering. The bulk of the early research and development in Polymer Science occurred via private industry.

9:04Without people like Wallace Carruthers at DuPont and Dow Chemical and whatnot, we would not have polymers and you wouldn't be wearing them, which everybody uses polymers every day, and even if they don't know it. And so we find even now that in polymer science, the bulk of innovation comes from private industry. If you just take a look at the funding statistics, This is not my graph. I got it from Boudos and McQuade in one of their articles from 2006. You see that really what the industry still funds basic research at an alarming rate. And in fact, it's only been in more recent years when the government has just kind of, that big black mark on there, shows the government funding.

9:50And you see, wow, it's really nearly doubled in the last few years alone. and it actually gives you kind of an indication that this might be a bubble. Oh wow, novel thought there. And a lot of that goes actually into medical science industry and you've seen how the government is continually taking control over the medical industry over time. Okay, so let's talk a little bit about how science proceeds on the free market and there's two ways this is going to happen. It's going to happen through industry and it's going to happen in academia and I'm kind of ignoring just people doing it in the comfort of their own home Okay, but how does research proceed in industry? Well, scientific research creates more roundabout production. And so what we could say is that the inevitable outcome of more roundabout production being demanded is going to be a demand for more basic research. Any production process that is science-based is based on sound scientific theory. And thus, if we expect

10:51to maintain roundabout production, we have to invest in research, so the free market will eventually demand research, it's gonna happen. Now there's also more benefit to this than just meets the eye, there's a so-called first mover benefit, those who are the first to achieve a certain scientific process will benefit first from this and then they actually have the capacity then to market this, they They have the first reinvestable profits. They can then take their research and, provided that they can show people that it's useful, they can even use their science to make even more money. So there's research, there are incentives to doing research and marketing it that the government seems to just ignore in their analysis of why they need to be funding it. Now, research can be kept internal, we could call that a trade secret, but there There are advantages to being more open, and as I already mentioned a little bit, let's talk a little bit about that.

11:50Advantages to openness. Scientific contributions are an enhancement to a firm's public image. Three minutes? Okay, great. All right, we'll have to jump in a little faster. So they're just like charitable donations, and it is going to attract the goodwill of consumers and scientists, and it will attract top talent for their company. Because if a firm is open and people see that, if students see that, they're going to come and work for them. Okay, there also will be new business opportunities because implementation of research is a different thing than the research itself. And they may have the ability to implement research that goes beyond that which the research alone has. So there are things like that. There's also a very interesting phenomenon that we've seen in research consortium development, and a good example of this is the Semitech Corporation in Texas, where we have 14 corporations, The biggest semiconductor companies in the world are joining together voluntarily and doing research together for their mutual benefit.

12:47Okay, jumping quickly to academia, and we'll summarize after this. There are a lot of different funding sources that can go into research. I'm going to talk specifically about the final two that you see on this slide, business donations and contracted projects. What are the business incentives to donating to science? Well, first of all, there's, again, charity and public image. That is almost like direct advertising to them. There could also be tax breaks for university donations, and so that could actually be a good thing that government could do, get rid of taxes on university donations. And then also it's gonna attract talented students to them because that's, and they do this all the time already. And also I think a bigger idea was the idea of just contracted projects. Researchers are then free to negotiate terms on contracted projects.

13:36So for instance, Richard could come to me and say, hey, I got this problem and I need you to solve it, and so you can pay me to solve that research project, and then you get the benefits of the research, I get the benefits of profits retained. And so that's an enhancement of the division of labor. And what's really cool about this is that you could say that this rewards success and not publications. A lot of you may hear the term publisher perish. That's sort of the mantra in academia a lot. And this rewards success, not publications. I guess I'm going to skip this. Well, I'll just briefly touch on this slide. Ultimately, what I'm trying to get across here is that when we go with this free market model, where I'm only receiving donations that are private or that I'm doing research for other companies in order to produce something of value for them, and then I retain the profits to do my own personally interested research,

14:31Research, I'm in control of the research program and not the government. Everything done is voluntary. So that's a big thing for me. And so I would like to just really emphasize that, that I control the research program, not the government. And so we get out of this idea that the government is the ultimate in control. So here's the conclusions. Publicly funded research is socialistic in nature, should be eliminated, rah rah. The free market is fully capable of supporting research. And And then I've just proposed to you a model for scientific research in industry and academia. And so finally I just want you to remember again why government wants to control science. If they control it, they have a means of controlling everyone, because science is very integral to our society.

15:19And with that I will leave it up to questions, so thank you.