11 Sep 2012

Is government better at R & D?

Research and development are the twin drivers of the innovation that improves our lives, pushes out the productive frontier and delivers profits to those with the foresight, luck and perseverance required to bring better mousetraps to market.

What role should government play in this process?
I drove past Solyndra's Fremont, CA plant a few weeks ago.
It was for sale, but taxpayers will not get their money back
In general, I think that government is useful in promoting (but not necessarily providing) education from kindergarten through to PhD and funding basic research. I do NOT think that government needs to be involved in developing research ideas into marketable products and processes.* For-profit companies can do that quite well -- especially when they are subject to competitive pressures.**

This preamble leads us to the question of whether government should take credit for the fracking revolution that is currently seen as a "good thing." Alex Trembath and his colleagues at the Breakthrough Institute think so, but I disagree, and here's the comment I left on their site:
I continue to see flaws in the claims that (1) "public support for fracking" made the difference in its development and (2) public R&D money is well spent.

On (1) see Philpy's comment in the article, i.e., " I think your article overstates the role that the Federal Government played in the Barnett Shale development."

On (2) one must measure success not by a single case (even that's debatable) but by comparing Gov't spending against ALL returns on that spending (while controlling for non-Federal financing and personnel).

From what I've found on the interwebs, federal funding has been found to (a) increase salaries but not effort and (b) not be more efficient than spending in other rich countries, even if it has won awards [pdf] in areas where research may have been done -- or not -- without DoE/Federal interference/crowding out.

In short, Breakthrough has provided evidence that "government investment in innovation can, over time, commercialize and deploy technologies that make yesterday's less-efficient, dirtier, and more expensive technologies obsolete," but it has provided NO evidence that "can" means "must." The government, in other words, is sometimes useful but not necessary for research. Breakthrough needs to work harder or make more realistic claims.
Bottom Line: Government should stick with activities that the private sector cannot execute, not displace private sector activities by pursuing politically popular programs (case-in-point).
* Development agencies drilling deep wells for drinking water in Bangladesh were so enthusiastic that they drilled thousands of wells before realizing that the water had harmful levels of arsenic. Now it's too late to go back and millions are being poisoned by their only water supplies.

** Businesses can screw up, as American Airlines found out when passengers used its "lifetime first class" pass to the limit. AA, sadly, tried to void their agreement rather than keep their word.

H/T to JW