Comments on Dave Mowery What does economic theory tell us about mission-oriented R&D? Ed Steinmueller SPRU

1. Comments on Dave Mowery What does economic theory tell us about mission-oriented R&D? Ed Steinmueller SPRU

2. What does economic theory tell us about mission-oriented R&D? An immediate answer – not much Once one defines a mission as a public good, the question need not be asked. Implicitly mission-oriented research is pure public good – it is not that its funding will be inadequate; without this funding research in service of the mission will not exist. This is a ‘blank cheque’ rationale by which allocation is purely a political matter and thus subject to stories of pork barrels and the like… This, however, is not the end of the story…

3. In meeting the mission, knowledge is produced as a byproduct • By creating or expanding components of national innovation system, e.g. university research and training infrastructure • By generating spin-offs when commercially relevant opportunities emerge from pursuing the mission • Through procurement – particularly when the mission is a lead user or when needed knowledge is absent • Vast differences exist in the share of the R component of R&D between missions. Universities have a role in R and not in D. • Modern US research universities built on federal research funding (with defence as a central component) • But it would be useful to report on the diversification of the funding in 1963 versus 2003 when NIH achieves its 70% share)

4. So, what is the problem? • Universities’ pioneer new knowledge areas and have to accommodate to changing mission priorities. • Diversity may matter – mono-culture of Federal research funding may tilt balances within universities, atrophying capabilities that are needed by other sectors of the economy. • Research without procurement may create a misalignment between knowledge generated and knowledge needed for commercial purposes • Expectations of secondary payoff may be unrealistic, as in the Bayh-Dole model which attempts to unlock the ‘hidden wealth’ of knowledge assets or engage ‘dual use’ possibilities

5. What else? • Mono-culture of funding closes the ‘multiple windows’ strategy for funding promising ideas – energy storage technologies might be useful for several missions, rationalising its relevance to health alone may be more difficult • Relatively rapid shifts in mission without adjustment allowances favour richer universities and concentrates the formation of research relevant human capital • Similarly, the move away from physical sciences and engineering ‘de-constructs’ infrastructure that might continue to produce returns

6. Future prospects? War without soldiers Energy without emissions Knowledge without learning All very tempting and scary…these too are missions Waiting for a mission…the opening line of Apocalypse Now

7. Comments on Bhaven Sampat The Dismal Science, the Crown Jewel, and the Endless Frontier Ed Steinmueller SPRU

8. So, let’s look inside one of the missions… • Rationale for NIH • Yields health benefits • Produces knowledge private actors would not • To which Bhaven Sampat, asks • How? • Why not?

9. Evidence on mortality What do we expect? Is the goal eliminating death or ‘premature’ death or some type of ‘avoidable’ death? Since death still seems inevitable, the fact that a lot of progress has been made in reducing cardiovascular disease-related deaths necessarily means that people are going to die of other causes If we use the phrase ‘health outcomes’ it is still relevant to say that medical intervention relative to diet, exercise, and genetic pre-disposition remains unimportant – this doesn’t mean that $44 dollars per year is a wasteful expenditure

10. Appropriability • Nelson-Arrow framework is not binary except at the limit, which is partially recognised by Sampat • Indeed, we will have to be concerned now about how patents are administered (to generate rent or to maximise social welfare – goals that are not mutually exclusive) • Arguably, patents can produce benefits through avoiding ‘development races’ (and thus are a basis for private investment in development efforts) • How much private funding will be forthcoming if markets for knowledge are imperfect? Arrow and Nelson say less than socially desirable – the margin is one rationale for public funding

11. Governance Is the political process adequate to oversee the management of public research (a case of governance failure?) Reason to be concerned – fear of death is a powerful motivator In short, there is good reason to believe that rationality will not triumph It is easy to make this observation and its corollaries --Some diseases make good ‘poster children’ --Other diseases are stigmatised --Drama wins over the routine It is more difficult to carry the alternative – does rational health care policy mean let the ‘public health technocrats’ decide? Or, more cynically, if they want circuses – why not given them circuses?