The kind of subsidies Larry Summers likes

Larry Summers doesn't trust the judgment of the market, and thinks the government should step in to intervene – by throwing money into R&D related to the life sciences:

In today's economy, an outstanding graduate of a leading business school earns a substantially higher salary than a potential Nobel Prize winner graduating with a doctorate in biology. Several years after graduation, the differences are even more pronounced. It should not be a surprise that more talented young people are not headed toward careers in basic research in the life sciences.

Michael Mandel doesn't trust the judgment of the market, and thinks the government should step in to intervene – by throwing money into R&D related to energy and the environment:

I won't believe that the U.S. is serious about global warming until I see the feds start throwing real money into R&D into energy and environment-related R&D. After all, no matter what your political views, everyone can agree that more R&D in energy and the environment can only be a good thing.

Isn't interesting how Davos Man is perfectly happy with the idea of government subsidies in the realm of scientific research, while being very, very uncomfortable with the idea of government subsidies for, say, agriculture?

I'm not saying that either Summers or Mandel is wrong. But all this does strike me a little bit as the overeducated shilling on behalf of the overeducated. When the elected representative of an agricultural community asks for more life-science research, or when the former president of the world's foremost research university asks for more agricultural subsidies, then I think we might be moving towards consensus. But for the time being, I'm tempted to conclude that no one has quite as much objectivity as they like to think they do.

Posted by Felix at 22:50 EST

Comments

You may be right, and it really is ordinary lobbying, but there is still the economic rationale of the externalities inherent to scientific research, that would by definition lead the market to underspend in it...

Posted by: Avinash Goldfish at 23:42 EST, February 07, 2007

The most uniformly (other) shared characteristic of the hyperintelligent is excessive faith in the value of intelligence. (If the market doesn't make the smartest the richest just because they're the smartest, the market is obviously broken....)

Posted by: dWj at 23:56 EST, February 07, 2007

"In today's economy, an outstanding graduate of a leading business school earns a substantially higher salary than a potential Nobel Prize winner graduating with a doctorate in biology"

Plus ca change....Who in reality would expect it to be any other way? Also, is Summers saying that throwing government money at R&D would lead higher salaries and per se better research? Seems like a big logic leap to me. The incentives for undertaking scientific research are almost never monetary.

Posted by: Tom at 4:37 EST, February 08, 2007

I agree with the post completely !

(I hope I answered the antispam question correctly...)

Posted by: a at 6:52 EST, February 08, 2007

Felix --

The Reagan Administration changed US Science policy with the development of what have been termed RDLPs (Research and Development Limited Partnerships) -- basically the shift was to encourage funding of major scientific research by the private sector removing the role of the state.

While I am not sure if that itself has encouraged the underfunding of scientific research it definetly cut the governments' R&D role down severely, and it created an additional set of severe problems in the sciences -- that the finance folks will be very familiar -- conflicts of interest and principle-agent issues.

A nice little graph that Bob Ostergard and I have in our paper illustrating the percentage of federally financed R&D for a few different scientific sectors is available in this PDF: Stealing from the Past. The data is from NSF and tracks the changes from 1973 - 1997. Udated funding data is probably directly available from the NSF website.

As for the conflicts of interest I was referring to -- Summers' Harvard and elsewhere have been successful at filling in a lot of the gap with corporate monies for research, and this was necessary and has generated positives for the University. However, there has been negative externalities associated with this funding change like those mentioned above. In a Tufts study from the early 1980s, it was documented that the increased role of private financing had unintended effects -- peer review norms broke down substantially because confidentiality agreements that individual academics and their research teams signed made it impossible for them to have lunch with a colleague and talk shop, and even harder to publish results in peer reviwed journals. The implications for this type of information blockage can be severe not just for the development of a competitive advantage in the life sciences and hence the long-term viability of the US economy alla Summers' argument, but in regards to medicine and related fields it can present perverted incentives for disclosure about life threatening issues related for exapmle to drug development.

Posted by: M. Tubin at 8:54 EST, February 08, 2007

Who thinks the “market” is the good guy?

Picture a world where all scientists devoted to the study of medicine worked for the pharmaceutical industry.

Picture a world where all scientists investigating global warming worked for Exxon Mobil.

In such a world our species would not have long to live.

Posted by: Bupa at 13:00 EST, February 08, 2007

Bupa --

Well, luckily we do not live in either world you are postulating, and there are many positives that one should not discount regarding the role of the private sector in academic research communities, not least of which is a vast source of money that goes too places that are drastically in need of funds (for example public universities). The question is really just about excesses.

Posted by: M. Tubin at 20:19 EST, February 08, 2007

Hi Felix

My main point is that there's been a sharp decline in government funding for energy and environment-related R&D, measured as a share of GDP, just when you'd expect it to increase. Hard to believe, really, when you look at the charts.

http://www.businessweek.com/the_thread/economicsunbound/archives/2007/02/the_budget_not.html

Posted by: Mike Mandel at 14:57 EST, February 12, 2007