When an entrepreneur invests his savings or borrowings in a business venture, he is primarily motivated by the profit incentive. Same is true for his making investments in the field of research and development, where he is trying to outsmart his competitor and thus earn the loyalty of even larger number of customers by providing them with better quality goods and services. Historically, most of the development of the civilization has owed their success to this private endeavor.

However, when a government makes a similar investment funded by the taxpayer’s money, they do not have such incentive. The nature of such an investment becomes impersonal as the success or failure of the venture is not going to affect him in any substantial way, since the resources invested are not his own. Here the public funds are allocated for research and development in the fashion of any other public welfare project, i.e., dictated by the pressure groups and short term electoral objective of the politician in power as opposed to the spontaneity of the market. Such short-sightedness and pursuit of private agenda on the part of public office bearers only causes the wastage of resource.

Economists Thomas J. McQuade and William N. Butos in their 2003 paper on, “Order-Dependent Knowledge and the Economics of Science”, concludes that to them the approach to the economics of science views science as a social order, a Hayekian cosmos, one that has emerged out of the self-interested actions of people attempting to pursue happiness in identifiable ways.

Butos and McQuade argues in their another 2006 paper titled “Government and Science: A Dangerous Liaison” that the government funding of science creates winners and losers in the scientific community, where winning is not necessarily based on scientific achievement, but on the ability to secure and maintain a flow of politically motivated funding. The only solution is for the political connections to be bypassed. They finally conclude that the government funding affects science in a way analogous to the ways price controls, subsidies, credit expansion and central planning affect free markets.

The Climategate scandal where prominent Climatologists were caught exaggerating the anthropogenic effects on the global warming to pursue their private agenda, only reinforces the conclusion reached by Butos and McQuade. More on the “Climate Change” euphoria and the related “Economics of Science” in future posts.

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The opinions expressed in this essay are those of the authors. They do not purport to reflect the opinions or views of CCS.

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Kumar Anand

Kumar Anand is an economist with over ten years of experience working with for-profit companies, government ministries and not-for-profit think tanks. Kumar has previously worked with National Institute of Public Finance and Policy (NIPFP) where he was part of the research team that assisted the Financial Sector Legislative Reforms Commission (FSLRC). Before joining NIPFP, he worked with Hong Kong-based Asianomics Limited, where he kept a watch on the developments in the Indian sub-continent markets. Before his present role, Kumar worked with Centre for Civil Society in New Delhi, where he created an online library of Indian liberal works to preserve and revive the rich Indian liberal and free market tradition.

Currently, Kumar leads the research team at Nayi Disha in Mumbai, where he is exploring the right set of principles-based rules that should govern a city and a nation and the ways to create a popular demand for such a change. Kumar's research interests are in Indian economic history, urban economics and public choice economics. He is a graduate of Gokhale Institute of Politics and Economics, Pune.