[ExI] Private and government R&D

[Dan]

--- On Wed, 7/1/09, Mirco Romanato <painlord2k at libero.it> wrote:
> Eschatoon Magic ha scritto:
>> Instead of making a religion war of this, how about
>> simply
>> acknowledging that both private and public R&D
>> funding have their roles?
> 
> Rothbard supported that the public funds are better used to
> purchase of
> research done by private actors, not to organize the
> research done by
> public employees.
> 
> So, if a government want the research done, the best way to
> obtain it is
> to pay for the results of the research, not to hire
> scientists,
> technicians, clerks and so on and organize them as
> ministerial clerks in a hierarchical way.

But isn't this the model, mostly, in the US and many other countries?  Yes, they do have public agencies carrying out research, but a lot of research is carried out by public funds being doled out to private firms that actually do the research.

> Better again, I would support, is to reduce the taxes paid
> by an entity
> if it expend them for scientific and technological
> R&D.
> If IBM spend 10 Billons in research this year, IBM will pay
> 10 Billion
> less in taxes next year.
> Research would bloom as much as it would be minimally
> profitable.

While that would be good, I think such tax savings should be increased until there are no taxes.  Why should anyone be penalized because she or he doesn't do research?

> The problem with public funding is that the governments
> have different
> priorities than the governed. They will fund what is useful
> for the
> politicians to keep their power and will refuse to fund (if
> they don't
> prohibit them) the researches that could damage them.

It's not just that they have different agendas.  That's the public choice problem -- viz., government officials are no better than anyone else and tend to act out of self-interest too.  But that's only part of the problem.  The other part is there is no clear way for people in government, even were they blessed with pure hearts and only acted from the noblest motives, to know the priorities of the governed.  There is no clear way for them to assess just what the governed want or what's good for society or in the public interest.  (The one way to find out what these are is to allow the governed to actually make the choices themselves.  But even on this list, there are people who don't want this; they, apparently, believe they know better and have no qualms about using force to get what they believe is the correct outcome.)
 
> Private entities have not this problem, they don't owe
> nothing to the
> majority of the voters; they try to satisfy their clients
> because their
> life is linked to their client's welfare.
> 
> The Prohibitionism (both alcohol and drugs) show exactly
> this.
> The politicians continue to support damaging politics
> because they must
> stick to the politics they supported in the past. There is
> not "We did a
> mistake, let change course". The find, near always, a way
> to shift the
> costs and the blame of their mistakes.

I don't think it's that politicians are constituted so as never ever to admit a mistake.  The problem is rather than the cost of mistakes in public policy are not visited on those who make the decisions or reap the benefits.  Thus, the incentive mechanism decouples costs from benefits, so that mistakes are only noticed long after they're made and usually only when they caused lots of damage -- not to mention that the beneficiaries of a bad policy often have a vested interest in the policy continuing.  (Often what happens is benefits are concentrated to a small, organized, and highly vocal group while costs are distributed over the rest of society -- who are large but disorganized.  You know, if I give you $1,000 but only tax the rest of the population of, say, 100,000 at a rate of $0.02 -- viz., I keep $1,000 for myself and give $1,000 to you -- then you have a much stronger incentive to fight to keep your $1,000 than any of the 100,000 have to keep
 their $0.01.)

There are also the Mises calculation problem and the Hayekian knowledge problem over and above the incentive issue.  Without a market price system for factor prices, government officials, even if they could overcome the incentive problem, would be hard pressed to guess whether their policies were working and working efficiently.  (Of course, governments can play market and contract out some services, but even these would be distorted prices -- meaning more distorted than if the consumers of the services actually voluntarily paid for the services.)

Regards,

Dan