Art Carden of the Mises blog links to Arnold Kling’s post on science funding. Kling’s suggestion is:

If I could affect government science policy, I would distribute some portion of the government research budget through venture capital firms.

To which Carden correctly notes:

The implicit—and I believe false—assumption is that we can design a set of coercive mechanisms that will generate the precisely correct trade-offs between scientific output and all other possible goals and, therefore, a net increase in social welfare.

This reminds me of an episode of NPR’s On Point last fall in which the “conservative” “budget-cutter” was AEI fellow Steven Hayward. Hayward’s opening remarks had all the right rhetoric, but, later, when he elaborated on his scheme, it was clear that this was just another interventionist who just knew that if only people would listen to him, he could fix it.

I guess I’m a fixer, too — but of the non-interventionist ilk — so I won’t recommend a tweak to the current system (such as using venture capitalists instead of peer-review study sections). Why? Kling tells us (although he misses it at the same time):

I would not think that one could use dollar profit as if they were funding business start-ups, because we are talking about research that could be a long way from leading to any practical implementation. Instead, we would need some other metrics.

Money profits are the only way for an organization to rationally rank two non-identical things, such as research projects.

The worry is that if we rely on profits to decide on research projects 1) basic science will not be funded and 2) without basic science we will not see technological innovation (and sometimes 3) we have to beat the Chinese in science and technology). What I’d really like to know is how something such as the Industrial Revolution was possible without the NIH, NSF, DOE, DOD, NIST, CDC, etc. The answer is that if a technological innovation will make an industry more productive, then there is a profit to by made in the industry and talented entrepreneurs and scientists will be drawn to the industry. If basic science is necessary to achieve this profitable technological innovation, then the industry will invest in the basic science. Indeed, even in our heavily subsidized scientific industries, private companies do engage in basic science research. (Oh, and the international division of labor is a good thing and, even if we are worse than the Chinese at everything, we can still engage in mutually beneficial trade.)

The Best of Kathryn Muratore