At Financial Times Martin Wolf reviews a book on the “entrepeneurial state”:
Mazzucato notes that “75 per cent of the new molecular entities [approved by the Food and Drug Administration between 1993 and 2004] trace their research … to publicly funded National Institutes of Health (NIH) labs in the US”. The UK’s Medical Research Council discovered monoclonal antibodies, which are the foundation of biotechnology. Such discoveries are then handed cheaply to private companies that reap huge profits.
A perhaps even more potent example is the information and communications revolution. The US National Science Foundation funded the algorithm that drove Google’s search engine. Early funding for Apple came from the US government’s Small Business Investment Company. Moreover, “All the technologies which make the iPhone ‘smart’ are also state-funded … the internet, wireless networks, the global positioning system, microelectronics, touchscreen displays and the latest voice-activated SIRI personal assistant.” Apple put this together, brilliantly. But it was gathering the fruit of seven decades of state-supported innovation.
Why is the state’s role so important? The answer lies in the huge uncertainties, time spans and costs associated with fundamental, science-based innovation. Private companies cannot and will not bear these costs, partly because they cannot be sure to reap the fruits and partly because these fruits lie so far in the future.
I think there are some things that the state is good at, some not so good, and some very bad.
I think the state is good at mass engineering projects. Boulder Dam. The power facilities of the Tennessee Valley Authority. The space program. Much as I despise it, the interstate highway system. These have all paid for themselves many times over and in ways that were impossible to foresee.
Although I supported it for many years, I think the evidence now suggests that the investment the federal government has done for so long in pre-school education for normally developing kids has been wasted. To my eye it appears the jury is still out on medical research. We’ve spent an enormous amount and I’m not sure if we had known the actual results in advance we would have made the investment. I think the space program probably did more for medicine and biotechnology than all of the federal government’s investment in medical research.
I think the areas in which government is especially useful are large scale, long term projects with clear deliverables.
There’s something in which I think I may disagree with a lot of those who support federal infrastructure spending. Just because a bridge is good doesn’t mean that two bridges are necessarily better. Sometimes that’s just money wasted.
I guess I should look at the bright side. At least we’re not building empty cities. On a more sobering note, we already have plenty of them.