1. Skip to navigation
  2. Skip to content
  3. Skip to sidebar
Source link: http://archive.mises.org/5439/free-market-science-vs-government-science/

Free-Market Science vs. Government Science

August 8, 2006 by

In a free market, science originates in the minds of individual scientists, who have studied and thought about problems that interest them and who from time to time arrive at new insights, which they develop further and verify. In the course of their work and in the dissemination of its results, they often need more funds than they can personally provide. In such cases, inspired by the value they see in their work, they attempt to obtain the necessary funds from those other individuals whom they can persuade to share their understanding of their work and its value.

In a free market, the main source of funds would be wealthy businessmen and wealthy heirs. In a free market, there would be no income or inheritance taxes, both of which are a violation of the freedom of the individual to spend his own wealth as he chooses. And because there would be no income or inheritance taxes, there would be no need for the establishment of foundations and trusts as means of avoiding these taxes, nor for the appointment of trustees or anyone else with power to determine the use of one’s funds. There would thus simply be wealthy businessmen and heirs in full control of their own funds. And a businessman would not have to worry about running afoul of any regulatory agency that might use its power to harm his business in retaliation for his supporting research that was unpopular.

The possession of substantial wealth by single individuals, with full power to determine its use, is of vital importance. This is because not only do new ideas originate in the minds just of single individuals, who necessarily must set out completely alone in any quest to change the understanding of the rest of mankind, but the change in other people’s understanding, which must subsequently be brought about, also proceeds just one mind at a time.

For an individual to understand something that is new and significant is not an easy or automatic task even in the best of circumstances. For the original discoverer it must be somewhat daunting to think that there is a significant truth that as yet, in the entire world and in the entire history of the world, he alone understands. Such an individual needs to have considerable confidence in the power and reliability of his mind. Galileo, Newton, Pasteur, Edison—all the great innovators in science and invention have necessarily been in this position.

The first people to be persuaded of the truth and significance of a new discovery, after the discoverer himself, must also have considerable confidence in the power and reliability of their minds as well. Their situation is that as yet only they and the discoverer understand this truth and its value. They must be prepared to proceed on the basis of no foundation but that of their own, independent judgment that the discovery is in fact true and valuable.

In this connection, it should be realized that even the utmost obviousness of a truth is never a guarantee of its acceptance by an individual. There are many people so doubtful of their own capacity to judge the truth, so fearful of the possible need to defend it in a conflict with others, who they expect will disagree, that their response even to an extremely obvious but not yet generally recognized truth is, in effect, that it need not be true because if it were, it would already be generally recognized and accepted. For such people, the ability to recognize the truth melts away without the assurance that practically everyone else is prepared to confirm the truth as true. Only then can acceptance of a truth be sufficiently separated from the possibility of conflict with others that it can take place without being blocked by fear.

Consider, for example, how the great mass of people could once go on believing, century after century, that the world was flat. Certainly that was how the world appeared to them any time they looked out at a broad expanse of land in front of them. But some people in this period knew that the world was round and that its appearance of flatness could easily be reconciled with the fact of its roundness.

The conclusion that the world was round was an obvious inference to be drawn from such facts as the tops of the masts of sailing vessels appearing on the horizon first, followed by more and more of the masts, and then by the body of the vessels, as they came closer. It was an obvious inference to be drawn from the knowledge that while one could see only so far when one looked out at the land in front of one, the limit of one’s field of vision was not the limit of the extent of the earth, which went further. Curvature of the earth was the obvious explanation in both cases.

While some people undoubtedly did understood this much at the time, most people could not be persuaded of it for many centuries. They were essentially immune to this knowledge. Whether is was simply out of fear of conflict with others to whom they might have to explain it in the face of resistance and possible derision, or simply a matter of intellectual laziness on their part, or both, the essential fact is that here was a very simple truth that the great majority of mankind could not be gotten to accept for a very long time. And even today, when virtually everyone finally does acknowledge that the earth is round, it is probably the case that a large proportion of the people who now do so, have no better reason for doing so than that this is what they know the great majority of people believe and is thus what they are expected to believe.

Intellectually inert and fearful people continue to be extremely numerous. They are to be found at all levels of educational attainment. Those with higher levels of education simply know more about what most people supposedly believe and that they are thus expected to believe. They hold their knowledge virtually as a collection of public opinion polls. Very little if any of their ostensible knowledge is solidly grounded. They have little or no basis for forming an independent judgment of the truth or falsity of new knowledge.

Such people are so numerous that even in relatively small groups one or more of them can be expected to be found. This is what makes it so important that the power to make decisions rests in the hands of single individuals, not groups, committees, or boards of any kind. To the extent that it is groups, committees, or boards that decide, the likely presence of such people and their mutual reinforcement of each other constitutes a major obstacle in the way of a valuable new idea going forward.

The advancement of science depends on a free market, because the free market and its vesting of decision-making power in the hands of single individuals rather than groups is able to shunt aside those who lack the power of independent judgment. They are relegated to the sidelines, where they can enjoy all the benefits of scientific and economic progress but not get in its way.

Now let us turn to science under the tutelage of the state.

State control of science is the attempt to combine opposites. In essence, science is mind; the state is physical force. Science makes its way by means of the voluntary assent of the individual human mind to its recognition of truth. In contrast, the state and what the state sponsors makes its way by means of the use of physical force and the threat of physical force. There is no law, regulation, ruling, edict, or decree made by the state that is not backed by the threat of physical force to compel obedience to it. The state does not say to the individual do or do not do this because of its reasonableness or lack of reasonableness, and take as long as you like before coming around to our position. No. It says, do this or do not do this if you want to stay out of jail and avoid being injured or killed in resisting.

Any financial support the state may provide to science is by means of taxes collected at the point of a gun, from people who know that they will be imprisoned if they do not pay the taxes and injured or killed if they resist being imprisoned. This is a remarkable foundation for the progress of science, much like a purported construction of a laboratory by gorillas.

Thus, the starting point of state-sponsored science is the exact opposite of the starting point of actual science: it is physical force not the voluntary assent of the individual mind.

There is another important difference in starting point. Science begins in the mind of the individual scientist seeking important truth not previously identified. State-sponsored science in contrast typically begins with an already established consensus concerning the subject to be pursued. This is because the existence of a consensus increases the likelihood of being able to obtain political support for the project.

Of course, not all state-sponsored science requires an existing consensus. Stalin did not need a consensus when he decided to promote the career of the biologist Lysenko, because of the latter’s support for the theory of acquired characteristics.

The example of Stalin and Lysenko sheds light on the kind of scientific quest that any politician or government official will initiate if he can. Because the primary concern of such a person is always the maintenance and enhancement of his power, the projects he initiates will be projects designed to increase his power and prestige. Any connection with scientific truth is likely to be merely coincidental. Thus in the case of Stalin and Lysenko, the objective was not the promotion of the science of biology, but support, wrung at the expense of the science of biology, for the Marxist doctrine that life under Communist rule could change human nature by virtue of a succession of generations acquiring characteristics that would then be genetically transmitted to later generations.

Whether state-sponsored science rests on an existing consensus or on the initiative of an individual politician, it differs radically from genuine science in yet another respect. This concerns the relationship between science and money. In a free market, it is the truth and importance of the science that drives the raising of money. Money is raised in order to facilitate the development and dissemination of the science. Money is the means; science is the end. With state-sponsored science, this relationship is largely reversed.

The state, in effect, offers pots of money in the form of “grants” for the study of matters selected by politicians and their appointees, and then scientists must choose areas of investigation that are most likely to secure them some of that money. The “scientists” gather around the pots of money, like bees around pots of honey, eagerly seeking as best they can to slurp up some of the money by means of writing whatever kind of grant proposals they think will promote the agenda of whichever officials have the power to determine the award of the grants.

The meaning of this state of affairs is that the initiative for science passes from scientists to the state, i.e., to politicians and their appointees. And instead of money serving science, science now serves money, and, it must be stressed, not ordinary money, but money collected at the point of a gun, and made available on conditions determined by politicians and the appointees of politicians.

In a free market, of course, applied science serves money. There are companies that want to develop specific products and they employ scientists to help develop them. But the funds are raised voluntarily and the applied science must be true, or the products will not work. There are also companies and wealthy individuals in a free market who may be interested in the exploration of various fields of basic science and who offer monetary incentives to scientists to pursue such research. Again, at the very least, the relationship is strictly voluntary.

What is crucial is that in a free market, there is room for independent scientists, scientists who themselves take the initiative in their work and who, thanks largely to the existence of a substantial number of wealthy businessmen and heirs, have a real chance of obtaining the funds they need in order to pursue their work and disseminate its results. Indeed, in a free market, without income taxes, there might well be significant financial support for independent science extending deep into the ranks of the middle class.

State-sponsored science comes into existence on a large scale in an environment in which the foundations of genuine basic science are already largely undercut by the existence of progressive income and inheritance taxes and an accompanying collectivization even of private decision making: i.e. the replacement of individual decision making with decision making by groups of various kinds, notably boards and committees.

Once state support of science comes into existence, there is little prospect of major advances in science gaining any support from it. A major advance in science represents the radically new and different. However true it may be, its truth as yet lacks adherents. And precisely for this reason, it is almost certain to be rejected by those whose standard of truth is acceptance by others. It does not yet and cannot yet have this acceptance because of its very newness. If it is to be accepted, it must be accepted on the basis of independent judgment and nothing else. But the exercise of independent judgment virtually cries out for the foundation of the ownership of independent wealth. Independent, i.e., privately owned, wealth, can be used in support of the radically new and different. In that case if the judgment is wrong, the loss is that of the person who made it. But when the wealth being used is publicly owned, then whoever makes the judgment concerning its use, must above all be sure that he can prove that he did absolutely nothing out of the ordinary with it. Only in that way, can he avoid blame for any loss.

State-funded science is necessarily a swamp of mediocrity. It is the domain of peer-reviewed journal articles and of statistical studies. In peer-reviewed journals, nothing is considered worthy of publication unless deemed to be so by “peers.” What this means is that in order for a radical new idea to be accepted for publication, it must immediately gain the support of those who hold the opposing, now outmoded ideas that it shows to be in error, or else it cannot be published. Such an arrangement is tantamount to requiring that before Galileo can publish, his ideas must have the endorsement of astronomers who up to the moment of reading him have adhered to the Ptolemaic system of astronomy. It is tantamount to requiring that before Louis Pasteur can publish on the subject of the germ theory of disease, he must have the assent of those who deny the very existence of germs.

State-funded science is very much at home with statistical studies. This is because they can all be made to fit easily specified criteria with respect to such matters as sample size, confidence intervals, and confidence levels. They are thus a very good way for large numbers of “scientists” to be kept employed attempting to establish or deny the likelihood of a relationship existing between practically any two things in the universe. Provided the “scientist” can verify that he has followed the rules of such a study, he can rely on keeping his government grant check and go on to the next “study” and the next government grant.

Perhaps some may find the most telling criticism of state-funded science the simple visualization of the faces of various politicians and government officials, coupled with the realization that it is they who are now in charge of science. Even though our President, his Cabinet officers, and our legislators do not personally award government grant money, they might as well do so. This is because it is still their judgment, such as it is, that determines the appointment of those who do award the grants, or the appointment of those who whose further job it is to make such appointments. And in the same way, with whatever intervening layers of appointees that there may be, it is their judgment that ultimately underlies the choice of all members of the government’s panels of science advisors.

There is first of all the very great problem of the ability of our politicians and officials to make any kind of sound appointments. Who are they, after all? What is it that they actually know about science, or about anything for that matter? What qualifies them to determine the qualifications of an appointee? And then there is the further problem of who is it that seeks out such jobs as determining the award of government grant money? Who is it who seeks appointment to the government’s advisory panels of scientists?

Serious scientists are concerned with the pursuit of science, not the politics of science. It is not likely that they will be interested in obtaining such positions. Such positions are sought precisely by the opposite kind of “scientists,” namely, those for whom it is the politics of science that counts, and not the actual substance of science. These are the kind of people who actually enjoy being members of committees. And it is these people, several rungs down in the bureaucratic hierarchy, who are now the masters of science on a day-to-day basis.

State-sponsored science is the destroyer of science. If science is to live, government funding of science must end.

This article is copyright © 2006, by George Reisman. Permission is hereby granted to reproduce and distribute it electronically and in print, other than as part of a book and provided that mention of the author’s web site www.capitalism.net is included. (Email notification is requested.) All other rights reserved. George Reisman is the author of Capitalism: A Treatise on Economics (Ottawa, Illinois: Jameson Books, 1996) and is Pepperdine University Professor Emeritus of Economics.

{ 20 comments }

Don August 8, 2006 at 1:39 am

Once again, brilliant insights from Prof. Reisman.
I can’t wait to read how people are going to attempt to distort this article, particularly the part about statistics. (Note: read it carefully, what Reisman is saying really is the truth.)

Roger M August 8, 2006 at 8:35 am

I recently did some research into the effect of hundreds of billions of dollars spent by DOE and the federal government on energy research since the 70′s. The purported goal was energy security. But when investigated by Congress in 2000, even they had to admit that the money had been virtually wasted.

N. Joseph Potts August 8, 2006 at 10:21 am

Roger M, WHO had to admit that it had been wasted? DOE? Congress? I certainly agree that it has been wasted (and knew beforehand that it would be), but I wonder: (a) who admitted it had been wasted; and (b) how much they admitted had been wasted.

A link or citation would be lovely!

Roger M August 8, 2006 at 11:49 am

Joe, Congress admitted it after their investigation into the spending in 2000. Here’s the links: Energy Research at DOE: Was it worth it? Energy Efficiency and Fossil Energy Research 1978 to 2000, Committee on Benefits of DOE R&D on Energy Efficiency and Fossil Energy, National Research Council http://darwin.nap.edu/books/0309074487/html/R1.html, page 63
AND
Tax Incentives for Petroleum and Ethanol Fuels, United States General Accounting Office : http://www.gao.gov/archive/2000/rc00301r.pdf, page 25.

W L Morgan August 8, 2006 at 1:26 pm

Two things from the article struck me as ringing hollow. 1) The polemic does little to actually prove that science as such is improved by shifting the onus of decision making from one body to the other. It asserts it, and lets the claim rest on the basic assumption that free markets are always better. 2) Herr Reisman is not a scientist, has not gone through the process of attaining a grant, or even doing scientific research, and as such has very little credibility when it comes to describing the ills of government beurocracy with regards to securing a research grant.

As for the arguments themselves, there is little other the rhetoric clothed with scant substance. For instance, Herr Reisman does not address the issue that the bargaining power rests soley with the ‘wealthy business men, and heirs’ who will then use their power to wrest sole ownership of the ideas which their paid scientists come up with. We can find this already in corporate America where large corporations act in lieu of the actors Reisman lists. Nor do we see the issue of the business men or heirs knowing little or nothing of science, and thus knowing little to nothing about which ideas they should fund. They will come to rely on the same scientists which ostensibly the state does. In essence then all that Resiman’s changes would have society do is to change the ownership of the ideas away from the collective, and into the already powerful few of his utopia, leaving the ‘true’ scientists out in the cold forced to accept (still) whatever is handed to them.

Tell me then, how this does any good to science? Quite simply it doesn’t.

~WLMorgan

Vince Daliessio August 8, 2006 at 2:00 pm

WLMorgan said;

“1) The polemic does little to actually prove that science as such is improved by shifting the onus of decision making from one body to the other.”

Actually Reisman is NOT advocating shifting decision making from one “body” to another, but rather devolving decisionmaking to the smallest possible unit – the individual. “The Market” is not a body, but rather the sum total of freely-trading individuals maximizing their own personal utility, kind of like the internet.

“Herr Reisman does not address the issue that the bargaining power rests soley with the ‘wealthy business men, and heirs’ who will then use their power to wrest sole ownership of the ideas which their paid scientists come up with.”

This doesn’t make sense. Are you saying that the only thing standing between civilization and intellectual barbarism is Federal control of science? (As an aside, many Austrians oppose intellectual property, a position which if it became fact would evaporate this argument).

“In essence then all that Resiman’s changes would have society do is to change the ownership of the ideas away from the collective, and into the already powerful few of his utopia, leaving the ‘true’ scientists out in the cold forced to accept (still) whatever is handed to them.”

Ridiculous. A true libertarian order in science would be MORE democratic and diffuse, not less. As an example, show me ONE current capitalistic R&D operation that has the influence and monopsony power over its area of operation that NASA or DOD does. There aren’t any – only government can, by use / threat of force, put together such stupendous (and wasteful) enterprises that destroy all competing enterprises. Ironically, an argument many pro-government-science people use to support their position is that private enterprise can’t put together such large-scale enterprises.

“Tell me then, how this does any good to science? Quite simply it doesn’t.”

The argument is that politicized science is bad for everyone, scientist and non-scientist alike. The market reflects the information and decisions of millions of free people. The current federalized science apparatus reflects the personal interests of a relative handful of people.

TGGP August 8, 2006 at 11:03 pm

While I agree with him on this issue and many others, Reisman comes off as polemical and would be more convincing if he were not.

It would be nice if a scientist contributed. If Kinsella can rail against patents, and professors in state universities can do likewise with regards to public education, someone in the scientific trenches can surely do likewise for federal grants.

Vince Daliessio August 9, 2006 at 12:23 pm

TGGP said;

“If Kinsella can rail against patents…someone in the scientific trenches can surely do likewise for federal grants.”

Although completely unneccessary (since the failures and waste inherent in government science are manifest for anyone who cares to look, see Space Shuttle and the horrifying pollution of the nuclear weapons complex for two), sure, let’s hear it from some veteran grant-getters – how bad is it in Federal grant land?

(WARNING: The previous sentance contains subtle sarcasm)

Adem Kupi August 9, 2006 at 3:48 pm

“A true libertarian order in science would be MORE democratic and diffuse, not less. As an example, show me ONE current capitalistic R&D operation that has the influence and monopsony power over its area of operation that NASA or DOD does. There aren’t any – only government can, by use / threat of force, put together such stupendous (and wasteful) enterprises that destroy all competing enterprises. Ironically, an argument many pro-government-science people use to support their position is that private enterprise can’t put together such large-scale enterprises.”

Well put, Vince.

My only argument really against Prof. Reisman’s essay here is that he assumes that the majority of funds for privatized science would come from the wealthy.
While this I suppose might be true, if the only change made to the existing political structure were the elimination of government science money, in a free market society, it seems more likely that there would be broad support for science among many different types of people who had an interest in whatever a particular scientist was working on.
In general, I disagree with Reisman that a free market society would have greater concentrations of wealth than the currently existing society.

WLMorgan August 9, 2006 at 3:50 pm

My argument’s power rests on on basic point. Government and Private are essentially more elastic in their desire to fund research than the scientists themselves seeking funding. As such, as with the case of all supply and demand he who is more elastic reaps larger profit; profit being in this case the rights to the intellectual property produced. This then is manifested as ownership, and ultimately the changes do nothing Infor science, only for those who fund it.

You do bring up one point I’d like to address specifically however. “There aren’t any – only government can, by use / threat of force, put together such stupendous (and wasteful) enterprises that destroy all competing enterprises.” This is, if discussing government funding, completely ridiculous. Nothing prevents private firms from researching to their hearts content, in competition with government funded projects. I’d refer you to the human genome sequencing project. What you are instead talking about is government prohibitions on research which have nothing to do with economic conditions, but are social in nature and a completely different argument which serves no other purpose than to confuse the issue.

“Ridiculous. A true libertarian order in science would be MORE democratic and diffuse, not less. As an example, show me…”

See above where I provide you with an economic argument, now show me yours. The burden of proof isn’t on me to disprove your theory, its for you to prove it. I’ve demonstrated how the proposed changes does little to establish the ‘true libertarian order in science’, whereby I suspect you mean the idealized free market.

~WLMorgan

PS – Two things for a postscript. Firstly, a truly idealized market would have the suppliers of funding be completely equal and indistinguishable from one another, the construct of the entire argument violates that basic assumption. A market imbalance is inherent to the proposed system, and as such doesn’t always yield a first best scenario pareto optimality, which is what theoretically free markets lead to. I’d reference you to the Lipsey Lancaster article on the General Theory of Second best for a much better explanation of what I mean. http://links.jstor.org/sici?sici=0034-6527%281956%2F1957%2924%3A1%3C11%3ATGTOSB%3E2.0.CO%3B2-2

Second, it doesn’t matter if we mince words whether the market can be considered a single body, or a collection of multiple individuals (though, if you’ve ever derived a demand or supply curve you’ll know it doesn’t matter that they’re individuals).

Vince Daliessio August 9, 2006 at 9:16 pm

WLMorgan said;

“My argument’s power rests on on basic point. Government and Private are essentially more elastic in their desire to fund research than the scientists themselves seeking funding.”

Pardon me if I’m being dense here, but just what exactly the hell do you mean by this statement? It is a generality in the extreme, completely without meaning.

“with the case of all supply and demand he who is more elastic reaps larger profit; profit being in this case the rights to the intellectual property produced.”

…which would be totally irrelevant in the absence of IP, which this sounds like an argument in favor of. In the absence of IP, the knowledge would diffuse even more rapidly throughout.

“Nothing prevents private firms from researching to their hearts content, in competition with government funded projects…What you are instead talking about is government prohibitions on research which have nothing to do with economic conditions, but are social in nature and a completely different argument which serves no other purpose than to confuse the issue.”

Who’s confusing the issue here – you or me? Where are the significant private markets in space or defense, and why haven’t they emerged to compete over the last 50 years or so? “Social” restrictions aside, the federal government so tightly co-opts and restricts science in these areas that the social restrictions are also economic restrictions, as well as the fact that they forcibly suck capital out of the pockets of the populace. The whole enterprise is an economic drain, social restrictions or no. I’ll leave out your strawmen of perfect competition.

“See above where I provide you with an economic argument, now show me yours.”

I fail to see where you made an economic argument.

Here’s mine;

1) Government (socialism) suffers from a calculation problem. It does not know what anything it “produces” (actually consumes) should cost, because it doesn’t operate in a market. It doesn;t know what to produce, or how much. It usually resorts to creating demand through regulations or scaremongering. This is inefficient, or in your terms “Pareto sub-optimal”. It cannot be otherwise.

2) By its size and force, government massively shifts resources and efforts to areas of research that suit its own purposes. (Unprincipled) scientists simply follow the money.

You have failed utterly to demonstrate how the massive destruction of property and liberty is in any way compensated by some theoretical protection of innovation from some cabal of evil rich guys.

Andy August 10, 2006 at 2:59 am

Vince,

I’m not sure if this is exactly what you are looking for, and it certainly wasn’t written with Austrian economics in mind, but it is detailed and somewhat interesting:

What it’s like to work at UIC

Vince Daliessio August 10, 2006 at 8:58 am

My GOD Andy – it’s even worse than I thought!

To WLMorgan – read the FIRST link on the page. You won’t get three paragraphs before you are confronted with the smoking wreck of your argument, and the shining vindication of mine.

Government-grant-research is basically just one massive multiplayer swindle.

David August 10, 2006 at 9:37 am

‘course, the true spirit of scientific research is served by neither government nor market: government will only fund what it percieves as being useful for advancement of the prime government agenda – its own consolidation of power. And private-sector funding through the market requires the prospect of a return on investment to make financial sense for the business funding it.

And outside these material imperatives, the pursuit of science merely for the sake of uncovering new truths, the blue sky stuff, in the absence of any anticipated or even concievable use to which the discovery can be put, is hard pressed to get any funding at all – except in so far as universities themselves allocate little stipends to nutty professors from the state funding and donations pool they do have access to.

It is probably fair to say that the biggest breakthroughs in human understanding occured through discoveries whose usefulness and potential returns only emerged well after their implications were better understood. WHich is to say, far too late to motivate a research grant before the discovery is even made!

Much of the impetus given to the huge advances in scientific discovery in the nineteenth century came from ‘amateur’ scientists – men of private means who could pursue their interests without concern for keeping body and soul together, or from patrons whose funding motive was pure curiosity – In either case, the funding was not contingent on a particular research outcome consistent with the vested interests du jour.

WLMorgan August 10, 2006 at 10:05 am

“”My argument’s power rests on on basic point. Government and Private are essentially more elastic in their desire to fund research than the scientists themselves seeking funding.”

Pardon me if I’m being dense here, but just what exactly the hell do you mean by this statement? It is a generality in the extreme, completely without meaning.”

Elasticity, the term and measure of someone’s willingness to substitute one thing for another. In the case of the government/private firms it’d be spending money on scientific research or on something else. For the scientist it’s their willingness to accept money from one of the above, or not research and do something else. I’m not making a statement, I’m simply taking it from the Author of the article. It’s right there in the first paragraph. ‘In such cases, inspired by the value they see in their [,the scientists,] work, they attempt to obtain the necessary funds from those other individuals whom they can persuade to share their understanding of their work and its value.’ The fact that they are willing to try and convince someone else to fund their research shows that they are more inelastic than the funders (meaning effectively that they have less bargaining power in the exchange). If you still don’t know what I mean pickup a book on microeconomics and read up on the chapter.

“”with the case of all supply and demand he who is more elastic reaps larger profit; profit being in this case the rights to the intellectual property produced.”

…which would be totally irrelevant in the absence of IP, which this sounds like an argument in favor of. In the absence of IP, the knowledge would diffuse even more rapidly throughout.”

I have not seen any mention of removing IP rights except by you. I have been operating under the assumption that they still exist. If the government is the one who ends up funding the research, then it is often society, which the government is acting on the behalf of, who is the owner of the rights to the knowledge gained.

“Who’s confusing the issue here – you or me? Where are the significant private markets in space or defense, and why haven’t they emerged to compete over the last 50 years or so? “Social” restrictions aside, the federal government so tightly co-opts and restricts science in these areas that the social restrictions are also economic restrictions, as well as the fact that they forcibly suck capital out of the pockets of the populace.”

Obviously the private markets don’t see a profit in funding such research. That in and of itself, contrary to what some believe, does not mean that it isn’t worth funding in some fashion.

“I’ll leave out your strawmen of perfect competition.”

How can you simply ignore the fact that one of the basic assumption/premise of an argument is violated by the argument itself? That isn’t a strawman, it’s a fact. If you can prove that it doesn’t matter, then I’ll say fine Ockham’s razor the assumption wasn’t necessary, and move on, but as it stands simply ignoring the elephant in the room doesn’t negate the fact that it’s there.

“I fail to see where you made an economic argument.”

Economics isn’t principles, it’s a set of theories and hypotheses based on assumptions and definitions. Above I’ve argued that shifting the funding away from government and towards private firms and individuals does nothing other than alter who owns the intellectual property. If you actually do read the article on the General Theory of Second best you’ll find that you can’t know before hand if removing government from the equation is more efficient, or makes it even worse off. Ideologically you might oppose government taxation, or interference with the markets, but making categorical statements that government is bad and should be avoided is patently false in the empirical studies of economics.

“1) Government (socialism) suffers from a calculation problem. It does not know what anything it “produces” (actually consumes) should cost, because it doesn’t operate in a market. It doesn;t know what to produce, or how much. It usually resorts to creating demand through regulations or scaremongering. This is inefficient, or in your terms “Pareto sub-optimal”. It cannot be otherwise.”

The government suffers no such calculation problem. They operate just like any corporation, they might be less efficient at it (read measurement errrors). Monopolies, oligopolies, they’re all inefficient as well, perhaps we should eliminate their dead weight loss too.

“2) By its size and force, government massively shifts resources and efforts to areas of research that suit its own purposes. (Unprincipled) scientists simply follow the money.”

And private firms do the same. I see absolutely no difference. Firms who use the indirect threat of force against those who need medicines or will die, use their bargaining power to force people to accept lower wages etc. are the same as the government who uses as you say, the direct threat of force. The threat is real in either case, just on the one hand you sit back and let people starve, or waste away. I feel very little pity for them.

“You have failed utterly to demonstrate how the massive destruction of property and liberty is in any way compensated by some theoretical protection of innovation from some cabal of evil rich guys.”

I never said that the article was wrong at the outset, I just did not see that it had any economic merits. It is a political piece, and to say it is otherwise is patently false.

~WLMorgan

Dan Coleman August 10, 2006 at 10:48 am

Firms who use the indirect threat of force against those who need medicines or will die, use their bargaining power to force people to accept lower wages etc. are the same as the government who uses as you say, the direct threat of force. The threat is real in either case, just on the one hand you sit back and let people starve, or waste away. I feel very little pity for them.

And just what are these “indirect threat[s] of force against those who need medicines or will die”? A threat of force is a threat of force; a threat of inaction (i.e. of withdrawing from voluntary agreements) is nothing of the sort.

It is also noteworthy that your argument is going to rest on a few things:
a.) intellectual property rights (already discussed)
b.) the proliferation of monopolies to enact “indirect threats” without fear of competition, which is something that only the government can support
c.) the government does not suffer from an economic calculation problem

All of these things will be denied by Austrians. If you want the meat of their arguments, quick searches on this website will give you ample resources to deal with the issues at hand.

Vince Daliessio August 10, 2006 at 1:48 pm

WLMorgan quoted me;

“”2) By its size and force, government massively shifts resources and efforts to areas of research that suit its own purposes. (Unprincipled) scientists simply follow the money.”

And private firms do the same. I see absolutely no difference.”

Firms must first earn the money profits to spend on research. They do this by satisfying customers.

On the other hand, Governments steal money from their subjects and are completely immune from such market discipline. It does not matter how bad an investment is, it will almost never be defunded for non-performance.

As an example, look at the Space Shuttle. The design brief basically was for an inexpensive, re-useable, safe launch vehicle for scientific and commercial payloads. It has failed in every way possible. The costs of the thing are monstrous, its re-useability a joke (more properly re-cyclability). And it has rather spectacularly killed over a dozen astronauts and destroyed hundreds of billions of dollars worth of economic productivity. Yet NASA and the Shuttle continue to be funded as if nothing ever happened.

If you see no difference, then you don’t know the first thing about Austrian-School economics, and we are wasting each other’s time.

Brent August 11, 2006 at 3:01 am

WLMorgan appears to be trying to give a standard neoclassical explanation of the way the world works. There is no difference between government and the private sector, except that the government is more likely to spend money on things, which gives it an inherent advantage in a game of trying to achieve the highest quantitative statistics. Unfortunately, with the lack of a qualitative description (an understanding) of the nature of private property and private commerce vis-a-vie government taxation, spending, regulation, and ownership of the means of production, we are going to be talking past one another for a long time.

Furthermore, economics professors apply for university, local, state, and national grants all the time. I have seen psychologists (working in government health bureaus) apply for grants, too. Indeed, a large portion of the curriculum of public administration is focused on the grant-getting process. The grant process is ridiculous, time-consuming, and generally wasteful in every conceivable way.

Lachy July 26, 2009 at 2:51 am

There’s no doubting the power of the market in science. Just look at the biotechnology industry for huge private sector scientific breakthroughs.

My only criticism of this article in the section about peer-reviewed articles. While I think everyone should have the right to publish their articles, peer-reviewing will still be required to enhance credibility (for the work and its author). Also on the same topic, if we had private-sector research, wouldn’t the governing structure within research companies be the same? Companies only have so much revenue that, like the state, they have to divvy up between different programs (i.e. the “grants” would take a different form, but be virtually intact).

Kevin Breslin April 27, 2011 at 3:24 am

The markets work both ways, market forces can destroy critical science research and steal money from R&D to plug up liabilities, hedonism and waste. We’ve seen institutions like Thoughtful House, other homeopathic enterprises and so many other corporate snake oil salespeople make up their own science for corporate effect.

Quite often biotechnology and semiconductor innovation has been boosted by state aid, particularly the universities, the problem happens when venture capitalists with no science interests or delusions of a science interest try to turn these companies into investment banks rather than viable industries and quite often the scientific expertise is damaged.

The money, the resources and the expertise are all devalued.

Comments on this entry are closed.

{ 1 trackback }

Previous post:

Next post: