David Brodwin is a cofounder and board member of American Sustainable Business Council. Follow him on Twitter at @davidbrodwin.
Politicians and business leaders debate whether government should invest in advanced scientific research, or leave this investment to the private sector. Opponents of government support cite Solyndra's collapse a year ago last week. Proponents cite successful government investment for the Internet and other important technologies.
Last week, proponents of government-sponsored research chalked up a major new win: the ENCODE Project, a major decade-long investigation into human genetics. The success of ENCODE underscores two important points: why we need government investment to complete certain kinds of large scale research, and how such research should be structured so it works.
The Breakthrough of ENCODE
Last week, researchers of the ENCODE project announced a major discovery in human genetics. Scientists have unlocked the secret of our "Dark DNA"—all the extra bits of DNA on our chromosomes, between and around our genes. Until now, this DNA was considered unimportant, just filler. Now, scientists have learned that this Dark DNA controls how genes work. This discovery will help the fight against cancer and other diseases.
The ENCODE project is a major, long-term investment in basic research. The project (which stands for ENCyclopedia Of DNA Elements) started in 2003. It involves 440 scientists working in 32 laboratories at leading U.S. universities: Harvard, MIT, Duke, Stanford, University of California, University of Chicago, and others. More than 1,648 experiments have been completed. Last week, 30 scientific papers were published in a coordinated world-wide release of the research. Nearly $300 million has been invested and more will be spent as the research continues.
ENCODE is more than a scientific breakthrough. It will bring substantial benefits to our economy. The project will lead to growth and job creation in the pharmaceutical and healthcare industries. It will strengthen the research institutions that supply trained research personnel ready to these industries. It will extend people's productive working lives. And it has the potential to reduce healthcare costs (if some sanity can be restored to the pricing of new drugs.)
Projects Like ENCODE Depend on Government Support
Rarely can research like this be financed entirely with private sector resources.The amount of time and money required would exhaust all but the largest companies.
Because this type of research involves basic science, no one can predict at the start what commercial products are likely to emerge. As a result, this type of research can rarely survive the typical corporate investment review. Basic research like this usually gets squeezed out by small, short-term projects that promise an incremental improvement or patent extension to an existing product line.
In theory, several companies could pool their resources for this kind of research, but in practice this is very difficult. The companies that would naturally benefit from sharing the cost of basic research usually compete fiercely with each other. Their mutual suspicion makes collaboration difficult. Even if they could get past their mutual suspicion, anti-trust law could prevent them from pooling resources and sharing results.
How to Structure Government Research Projects so They Work
Not all government investments in promising technologies pay off. Although ENCODE delivered results and is poised for further success, investments in ethanol were losers and Solyndra has called the entire renewables sector into question.
We must not draw the wrong lesson from the failures. The failed investments—alongside the successes—do not prove that government investment doesn't work. They prove that the investment must be structured correctly in order to have a good chance of success.
Frankly, the lessons of how government should (and should not) invest in promising technologies are not all that complicated. (See, for example, Ken Flamm's analysis of government support at the dawn of the computer industry. It details why U.S. government support for our own computer industry was successful, while other governments failed dismally in their efforts to promote national computer companies.) Sadly, we keep losing sight of what works. We can greatly improve the odds for any government investment in advanced technology if we stick to a few basic rules:
- Focus government funding on research in promising technologies that the private sector is unable to fund because of the high cost, long duration, lack of commercial products, or other factors.
- Limit government funding to research that can be used by all the companies in an industry, and avoid funding research tied to proprietary products of a single company. (This is called "precompetitive" research.) Preserve competition among the companies that seek to commercialize the research. This makes all the companies in the target industry stronger, and it keeps government from playing favorites and trying to guess winners.
- Make sure that the research that taxpayers sponsor becomes publicly available, or is licensable at a commercially reasonable price. This will ensure that start-ups, which drive most of the important innovation, have access to it.
- Keep resource allocation decisions out of the hands of elected officials and others with turf to protect and pork to procure. Let the scientific peer review process judge grant applications and monitor progress of research work
Focus on the "How" Questions
Government investment in advanced science and promising new technologies should not be a partisan issue. Our history offers many examples of technologies that the United States dominated largely because of effective government support early on. At the same time, simply throwing money around is not the answer, particularly when the money is handed to an individual company, through a politicized process. To have a world class economy, and maintain leadership in the technologies that matter, we must invest. But we must invest in smart and effective ways.
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