Our Daily Bleg: How to Justify Long-Term Scientific Research?

In response to our bleg request, Rafe Petty of the University of Chicago chemistry department wrote in with the following question(s). Let him know what you think in the comments section, and send future blegs to: bleg@freakonomics.com.

I was recently at a lecture by George Whitesides, one of the most well-known living chemists. He gave a very interesting lecture at the University of Chicago outlining some of the most pressing problems that we as chemists face in the near future.

A very interesting problem that he focused on was the difficulty in justifying long-term research funding in a capitalist economy, which recognizes financial return — not social return — thereby assigning little value to long-term research.

My question centers around if it is possible to “fix” this problem.

Is there an economic model that justifies long-term research spending? Whitesides mentioned in passing something about option theory. Is this the only model that works? Or are there other ways of encouraging/promoting long-term research spending?

Thank you for your insight. This is an important question for any number of scientific disciplines, and of particular interest to young scientists who will be soon entering their respective fields.


Rob

Bell Labs - terible example. AT&T at the time was a regulared utility, a monopoly. And as such it could, and probably was expected to do research. Did you no notice its fading away. As did Xerox (which once had a monopoly)

infopractical

Public opinion is important because it drives opinions of policy makers. Public opinion about the value of science is planted largely at the school level. But high school history books downplay the importance of science to economic progress. Unless this problem is fixed, increasing awareness will be expensive than funding the science itself.

Debra Smith

Can a capitalist economy be sustained without scientific research and, for that matter, without nurturing the arts and humanities? It is my feeble understanding, but I was led to believe that our markets will shrink into extinction if we cannot come up with innovations to buy and sell to each other. I'm not a fan of allowing the market to value everything (even Mastercard commercials give a nod to the "priceless") but even allowing the market to define the "Good" will inevitably require it to embrace long-term investments in endeavors that might not pay off: in other words--science. The market might not label it "Good," but surely self-preservation is in its self-interest.

Eliza

We have a solution--it's called Government. I realize it's not an economic model in and of itself, but it's a piece of making the capitalism model work.
It's not perfect (it is government, after all, and therefore somewhat subject to the whims of politicians) but it does allow for long term research projects to get done: From NASA doing climate research to DARPA thinking about the cutting edge of the cutting edge, these organizations Do think long term. And frankly, they've been at least partly successful. DARPA created the computer mouse and was part of creating the internet, for instance.

Government is not the most elegant solution--but as government is not (or shouldn't be, at least) motivated by money and is motivated by our longterm good, it is probably the most workable solution.

Kent

I think the problem you really want to ask is how do we justify the cost of "pure" research (versus "applied" research), especially in a returns-oriented context.

The simplest way to explain this is present as a high-risk/high-return venture.

Applied scientists are good at solving highly defined problems (not to be confused with "unimportant", but the return from solving such problem is generally quite limited.

But the most lucrative scientific discoveries often come unexpectedly, and such happy accidents are most common during pure research -- research for knowledge's sake and not profit.

For instance, urea (a key fertilizer ingredient), pennicilin, helium, rayon, and X-rays were all accidental discoveries that arose during the course of pure research.

And while Teflon, cellophane, Viagara, Nutrasweet, inkjet printers, the Internet and microwave ovens were all invented in applied/industrial research settings, they were all also byproducts and/or accidents.

While not disputing the results of the venerated Bell Labs, I do not believe business/corporations should be in the business of funding pure research. But that the government, in its efforts to advance society, should actively try to encourage situations in which such "happy accidents" occur--that is to say, pure research in an academic setting.

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Nuclear Mom

Hey, George Whitesides! He and his wife and son were at my wedding (he was my husband's research director at MIT 30 years ago).

I am actually pretty sanguine about long-term research for a couple of reasons. First, many brilliant discoveries about the nature of the universe AND many amazing inventions have flowed from short-term, let's-get-this-done projects (for example, the space program, the atomic bomb project). The serendipity in scientific discovery is just as favored - or perhaps even more favored - by focused projects than by pie-in-the-sky, open-ended projects.

Second, I'm comfortable with the capitalistic, private-enterprise approach to funding research. Because of our patent system, the fruits of research inure to those who develop it. Also, we now have large, well-funded corporations who have replaced the European monarchies as entities who can afford the luxury of funding enormous research facilities. True, the harsh whip of the stock market in forcing quarterly profits acts in the opposite direction, but think of the money being spent in research not just by big pharma, but by software companies, hardware companies, companies hoping to develop green energy solutions, nanotech companies, etc.

I believe that all data added to the repository of human knowledge is or will be useful, and while some people may not get some projects funded, there is still plenty of basic research going on.

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Rick

Just to play devil's advocate for a minute Kavan, why does an increase in the chances of human survival justify any economic cost? To what end? Is survival for the sake of survival the ultimate moral end?

Surely we should avoid driving ourselves to our deaths, but there must be a balance between marginal, unquantifiable increases in humanity's continued existence and the quality of said existence.

I think Capitalism has shown quite clearly that it's participants may choose to place value on whatever they want. There are many things we choose to value despite their lack of direct economic benefit. Now, this isn't to say we can't use our government to encourage such behavior, but it's important to remember that qualitative societal demands can impact the market.

B

Dr. Barry Bozeman at the University of Georgia, Dept. of Public Administration, has been working on this issue with a theory of public values (with a particular focus on S&T/R&D). You may want to look there for one approach.

Walter Wimberly

The thing I noticed about a lot of research I saw in college was that it was mainly theory and little on application. Many of the researcher professors saw application of their work as "beneath" them. (And its in quotes because I actually heard it from a research professor.)

Research for the sake of research, such as clipping birds' wings to see if they can still fly to see at what point it becomes effective, doesn't add to either the social standing or capital funding of anyone.

Researchers, be it chemist, physicist, computer scientist, et all. must do 2 things: 1 ) they have to find a way to be relevant. The easiest way is in knowing how to break down the largest of problems into smaller immediate problems that can be solved faster and show a return on their work so they can continue on to the large sections. 2) they need to not be afraid of showing how to apply their research to real life.

While this is harder in some fields than others, they have to provide a relevancy to their work, unless they wish to be on essentially a well-paid form of social welfare - which in our given economy doesn't bode well for being sustainable.

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Nathan

What's wrong with the basic externality solution (tax the bad, subsidize the good) applying and having government fund the research? (assuming that finding the Higgs boson will have any benefit to society)

Or in theory you could extend the patent system to include results of basic research and if there was really a benefit to society to the research you'd be able to recover your costs. But if we do that, I have the patent for combustion, so I'll take $5 everytime you start your car.

Mike D, Chemist

I think we need to get away from being reliant on the government to fund research. I think back to the days of Bell Labs. We got lots of really cool stuff out of there because AT&T recognized that they need to know all kinds of science even if it wasn't directly related to telecom. Now we have this silly pattern where researcher need to basically beg the government for grants. What we need are large companies like the old AT&T (although maybe not quite so evil as the old AT&T) who just fund research because every once in a while something great comes out of it. When you're tied to the government, you need to justify everything because the government likes to make it look like it's not wasting money (when really that's the only thing it's good at).

Kavan Wolfe

Capitalism has failed to provide human happiness just as conclusively as communism failed. We need a new system. Furthermore, economics should always take a back seat to morality. If something increases the likelihood of humanity's survival, we need to do it regardless of the economic consequences.

One other thing: self-preservation is not inherent to capitalism because people who have not yet been born can't bid on products and services.

Colleen

As a medical student learning the art and science of practicing medicine, it seems absolutely clear that long term research should be economically viable...while I am not an economist, I can easily see how it would be worthwhile for biotech companies to invest long term in elucidating, for example, molecular signaling pathways, for later use in the development of pharmaceutical agents or screening tests for particular diseases. But of course, one can see direct conflicts with the short-term, capitalist economic model we use in this country - people want good results, fast. But they also want things (such as discoveries found through translational research) to be safe an effective - and often, the two are at odds with one another. The unfortunate results of this are seen with drugs like Vioxx and subequent lawsuits against companies like Merck, who are so pressed to post a profit that they withhold or suppress key research findings. This paradox is expressly the reason why it is so important that we continue to provide government funded grants for long term research, because we can't (and as capitalism would have it, shouldn't) expect benevolence from the market.

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Ed

Yes, just cure greed.

Rick

So long as the eventual product can be monetized, should there be sufficient payout in the end. If there's not, it would seem the reward simply isn't worth it. And if society doesn't recognize that future value, that's a marketing problem, not a core economic one.

With patent law centered around maintaining sufficient economic incentive to justify investment in innovation, I don't see the gap. It just takes an investor with patience.

What is social return exactly anyways and what cannot it not be converted to monetary return? You just have to align the incentives properly, no?

Cris

This is an important issue not only relevant for chemists, but also crucial for other disciplines including physics, biology and many other. Not related particularly with an economic model but a reason for this issue may be the lack of effective communication between scientist and the general public.

C. Grizwald, Chemist (food additives)

The answer is no.

Jacques René Giguere

Why needs scientific research if you can $3 billions/year as a hedge fund manager like John Paulson?
Isn't capitalism great or what?
Or bankrupting Iceland like these guys at Bear Sterns?
http://krugman.blogs.nytimes.com/2008/04/09/the-plot-against-iceland/

Chris

I'm an engineer at a big pharma company. One of the ways my company (and my department specifically) recruits and retains scientists and engineers is to allow us some fraction of our time to pursue projects/technologies we find interesting.

Google is probably most famous for this approach, and people often point to gmail as an example of the type of output that such projects can produce. However, that example overlooks the important point that getting and retaining talented people is easier if they have intellectual freedom. In essence, the timeresources I can spend developing "pie-in-sky" technology is a form of compensation that helps retain me.

Ray

I think you could probably justify government funding for research on the grounds that the research is of great long term value to society, but that the benefits tend to be realized over such a long timescale, and so diffuse, that the private property model for them tends to be inadequate.

Let us consider some of the fundamental theoretical advances of the last 100 years (the list is biased in favor of things I know, sorry -- no slight is intended to other branches of science): quantum mechanics, information theory and signal processing, computer algorithms for fundamental tasks like searching and sorting under a variety of different models, etc.

The greatest value of these discoveries tends to be realized a good time after the initial groundbreaking discoveries were made. In the case of quantum mechanics, the transistor (first major, non-nucelar practical application) was invented over 30 years after the initial theory was written up, and computer didn't really hit the "revolutionary" stage of development til the 1980s or so. A good chunk of the math behind quantum mechanics (the theory of integral operators, etc), dates to European mathematicians of the Imperial era (1890s-1910s).

How do you stimulate work like that? You can't tie it to the practical payoff that may or may not come -- people tend not to be profoundly motivated by material outcomes they will not live to see. Nor is it in the interests of corporations to fund it. Arguably, the greatest discoveries benefit humanity, and outlive the very civilizations that created them.

Sure, Ma Bell funded a lot of the fundamental discoveries behind computer networking. The corpses of office buildings littering northern New Jersey and the number of former computer scientists now employed as restauranteurs speak eloquently to the material reward AT&T and specifically Bell Labs (later spun off to Lucent, which was bought for pennies per share by Alcatel) reaped for their work.

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