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What Would Bill Say?

Here’s another letter to the Washington Post:


That Jonathan Gruber’s and Simon Johnson’s case for a massive increase in government support for research and development is co-sponsored by the Niskanen Center is deeply ironic (“We need new research hubs – but not on the coasts. Here’s how we get them.” December 7).

The second chapter in the 2008 collection (Reflections of a Political Economist) of some of the late William Niskanen’s finest scholarly writings is his superb 1997 paper “R&D and Economic Growth: Cautionary Thoughts” – which features such passages as:

– “The United States had become the richest nation in the world long before there was significant ‘American leadership in science and technology.’” 

– “Governments are often the most myopic institutions in society, given the limited political payoff of conditions beyond the next election.”

– “The record is more consistent with a hypothesis that R&D is an income-elastic consumption good, something that rich people and rich nations do rather than an investment that will increase future economic growth.” 

– “A market imperfection, however, does not imply that government can improve this outcome.”

Basic science is clearly not a pure public good; there was and would be a substantial amount of basic science in the absence of any government support.

– “These institutional conditions and the cumulative evidence summarized in this chapter lead me to question whether the government should directly finance basic research.”

– And last but not least (given the title and details of Gruber’s and Johnson’s essay): “Suppliers of the new technology have better information and incentives [than do government officials] to select the most valuable research and the places where it should be performed.”

No one can read his 1997 paper and come to any conclusion other than that, were Niskanen still alive, he would strenuously oppose professors Gruber’s and Johnson’s scheme, and likely be miffed that it is endorsed by an organization bearing his name.

Donald J. Boudreaux
Professor of Economics
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030