I think that it’s clear from the plantive column from David Leonhardt in the New York Times on the things that might be bought with the $60 billion in revenue that the “Bush tax cuts” for the uppermost income bracket represents that he’s never heard of deadweight loss. Deadweight loss insures that, with the exception of deficit reduction, reducing the corporate income tax, or an across the board reduction in income taxes (question: is it good public policy to increase the percentage of Americans who pay no income taxes?) none of his ensuing calculations on spending alternatives come out quite right. You’d think that an economics reporter for the New York Times might know about such things but apparently not.
Additionally, isn’t there a difference between “could” and “would”? Additional money could be used for the various good things he catalogs but experience suggests that it would be used where it would do the most political good for incumbents.
Don’t get me wrong. I don’t think that the “Bush tax cuts” should be extended for anybody. However, I do think that, insofar as it would be imprudent to increase taxes (failing to extend a tax cut is a de facto tax increase) with the economy in the fragile condition in which we find it, we would be much better off replacing those tax cuts with reductions in business income taxes or for a payroll tax holiday. At least those things have some choice of creating additional jobs.
I have another question for the economists or would-be economists out there. Would the relative inelasticity of labor in medical research mean that tripling the funding for medical research could actually result in less research being done in the long run? Doesn’t a short term increase in funding under those conditions just mean that you’ll pay more for the research that’s already being done?
Or. . . we could give the 60 billion to me. I would spend it on those most in need. Minus, let’s say, a 10% commission.
Michael,
How about we split it? And I promise to only keep 1%.
“Would the relative inelasticity of labor in medical research mean that tripling the funding for medical research could actually result in less research being done in the long run?”
I would expect some money to go to existing research, but there is a lot of research that never gets funded. A lot more research would get done. If you tripled funding, some more research might be done outside of the major research institutions. That maY or may not be good.
Steve
For that to be true either there’s got to be a lot of unused capacity in medical research or the elasticity of supply in medical researchers must be very high. I don’t think either of those things is true.
I do. The major research labs are always looking for more money to do more projects. The second tier universities have lots of people who dont get their projects funded. There are plenty of grad students and undergrads around. You could redo the RAND study and that alone would chew up a lot of those dollars.
The better question is if you would get three times your money’s worth. That I dont know. There are valid reasons for why some research does not get funded. Maybe some crappy research would get funded. OTOH, medicine is beset with fads just like all areas of science. the extra money might go to someone not engaged in groupthink.
Steve
What about directing government research funding towards “debunking” medicine. I’ve repeatedly picked-up and put-down, and ultimately misplaced the Atlantic article on Dr. John Ioannidis, so I may not have the specifics right. But what I came away with is that a lot medical advances have not withstood scientific testing, or at least to the extent initially claimed. That would seem to be an area of market failure; there is not going to be a lot of money spent researching the limitations of some body else’s patent? Not very sexy though.
As Steve suggests, it’s about supply.
FWIW, I borrow the term “Fully Subscribed” to describe a research area in which all reasonable projects are funded, and at which point extra money thrown brings little if any benefit.
People wish for better batteries (for electric cars) and want money spent. I fear that research is fully subscribed.
According to the Bureau of Labor Statistics the unemployment rate among medical scientists is essentially zero. Unless there are medical scientists being carried on full salary while sitting around doing crossword puzzles that doesn’t suggest a lot of excess capacity in the field and creating a new medical scientist takes time. Attracting those currently employed in other areas of medicine into research would have the perverse effect of raising the cost of healthcare.
Is it possible that tripling the funding for medical research would triple the amount of medical research being done? Yes. But it’s also possible that tripling the amount of medical research funding would result in less than three times as much research and increase the cost per researcher. That’s what happens in an auction in which there’s a limit on supply.
It all depends on the elasticity of labor in medical research not on whether there continue to be worthwhile projects to do.
John Personna:
The problem is there is no Moore’s Law for batteries. We may already have reached the point of severely decreasing returns to scale in research in the field. It’s possible we’ve run up against a wall.
And we haven’t even begun to discuss how much in the way of results a substantial increase in medical research funding would achieve. It’s possible to increase the amount of research without increasing the rate at which results are achieved.
If its true that medical researchers are occupied, the game would be to find and fund supporting technologies.
FWIW, I developed medical electronics, but per the degree I am only a “chemist.”
oh! 😉
And I realize that NOW you want those engineering degrees, Dave
Seriously, maybe part of this $60B in play money could go to graduating some.
Let me refine this for you Dave. If by research you mean basic science, that would be more difficult to triple. That will be done by a lead researcher with a team of PhDs and some grad students. If you triple their funding, they would use more grad students and post docs. They would buy better gear. Where you might also pick up increased output is from someone who is mixing clinical and research work, like several guys I work with. If they get more grant money, they will spend more time in the lab and less in the clinic.
In the area of clinical research, it would be easy to triple research. A lot of clinical research is data collection. That is often done by research assistants, nurses, residents and grad students. Not that hard to add those workers. There are any number of studies that would be useful, but never get done because they cost too much. As I said, a modern version of the RAND study would, IMO, be useful but is not being done because large scale longitudinal studies are expensive due to the manpower issues, most of whom do not need to be MDs or PhDs. Cost effectiveness research would be easy to increase as it is largely setting up prospective studies that , once written, do not need a lot of input from the lead researchers.
Steve
Really? Again it goes back to the elasticity issue. I’m thinking you wont get nearly the bang for your buck you are thinking.
I love all this: lets spend the money this way and viola, wonderful things happen. It is a temptation that is very hard to resist. Tom Friedman can’t that is why he is in love with the authoritarian system in China. It seems so sensible, we’ll force this spending and get a really keen result. Problem is that I think more often than not result is not all that keen.
Oh sure there are pretty obvious cases, such as public roads. There the benefit for some level of public supply is pretty obvious and the private provision will almost surely be below the optimal amount. But in talking about medical research the belief is that these things scale linearly when it is far from clear we are dealing with a linear system. A little bit of non-linearity in the form of decreasing returns to scale could throw all the beautiful calculations off. And note I have yet to invoked the specter of deadweight loss yet. To really get an idea is spending $60 billion on this or that is a good idea you need to calculate the losses associated with deadweight loss and then the benefits associated with what you want to spend the money on.
Presumably we’ll create scholarship programs to help college students pay for these engineering degrees. But you better not open it up to foreign students otherwise you could end up subsidizing the growth of engineers in India or Korea. And you are assuming that there are enough native born college students who can handle the course work to get an engineering or whatever other scientific type degree they have in mind. Now we run into the issue of minimum requirements/standards. You’ll need to have taken physics, computer science (there goes 25% to 30% of your students), and you’ll need calculus and not the slightly easier version for business majors, but the one for science types complete with trigonometric functions and multiple integrals (say good-bye to another 40% right there if not more). So you have all this money in scholarships for native born students (oh that will play well on college campuses I bet) but will you have applicants that meet the minimum requirements? Could be a few years before this program has some kind of positive secondary effect on the types of courses kids are taking in high school and the amount of work effort they are putting into learning the things they need to learn. Most kids will likely be sitting in their classrooms thinking, “Jesus, I’ll never need to know the quadratic formula in real life, this is such a stupid waste of time….man Nancy looks hot….”
Yeah, fling money at it…its worked so well in the past. In fact, lets fling lots of money at it, lower standards, and ensure everyone can have a college education. Why, that is sure to produce wonderful result of a bunch of fresh faced highly trained young engineers eager to bring the U.S. up to speed in terms of new technological advancements.
Hmmm, I doubt it will result in less research, but if there is this kind of elasticity in the short to medium run it probably wont mean triple the results. The best thing would likely result in a longer term increase in such work, but it comes at a cost of a reduction of people working in other fields as well. So you’d need to look at the benefit of increased number of medical scientists, the loss associated with fewer people in other fields and the deadweight loss.
Leonhardt has done precisely….none of that. Neither have I, but the starry eyed claims that these kinds of things are unmitigated good should be treated with utter contempt and derision since it is the product of somebody who has neither the time nor the inclination or even trying to determine whether or not it is a good thing or not.
It goes back to my position that public policy isn’t about finding outcomes that result in an improvement over the current state, but serves some other agenda (re-election, paying back supporter, both, etc.).
Steve, it goes back to what is fully, and what is under, subscribed.
We don’t need all that many engineers and scientists, but we graduate fewer. That’s why engineers and scientists score the top starting salaries.
So no, I don’t accept the assumption that we are at “capacity.”
Right, and you sneer at me for assuming that markets will do things instantly even when I note that theory and practice do differ….but when you have that implicit assumption built into your reasoning why its just peachy.
See, we may not be “at capacity” but the idea we can have more quickly or even not so quickly even when there already is a price signal saying, “We need more of these guys….” (that would be the top starting salaries) suggests that perhaps the problems are not simply just a function of money.