Terence Kealey is the Vice-Chancellor at Buckingham University and he will be in Sydney next week for the Mont Pelerin Conference. In 1996 he published a book which has a few controversial ideas in it. I don’t recall any talk about it at the time and it was not on my radar when it turned up on the sale tables at the Sydney Uni book fair last month (culled from the Science Library, clean enough to be unread). So the $4 that I paid was a punt. But once started the narrative was gripping.
This is a summary of Terence Kealey, The Economic Laws of Scientific Research, Macmillan, 1996. 380 pages.
A more detailed summary of the evidence and arguments can be found here.
The take-home message from this book is that governments should pull back from their dominant position in funding and from trying to direct research and development. The historical record indicates that wealth-generating technology is mainly developed on site, not in academic research laboratories and private enterprise can supply most if not all the necessary funds for both pure and applied research.
The first chapter on Francis Bacon and Adam Smith spells out the two competing models of the optimum relationship between state funding, basic research, technology and human welfare.
The Baconian model is linear.
State support -> Basic Research -> Technology -> Progress in human welfare
Old technology -> New Technology -> Wealth and Welfare
In this model, Basic Research has a give and take (arrows each way) relationship with New Technology. The State has no special role to play in the process.
Chapter 2. Research and Development in Antiquity. The early development of technology by the Egyptians, Babylonians, Chinese, Greeks and even the Romans did not have any dynamism and remained arrested for long periods. In the case of the Greeks the leading philosophers such as Plato and Aristotle had contempt for trade and commerce, which is where practical developments in technology occur. The Roman empire degenerated into a tax-extraction machine and lost population by defection to the “barbarians” and by natural attrition as the productivity of nation declined.
The third chapter on The Dark Ages indicates that decline set in before the fall of the Roman empire and although arty types are scornful of this period it was a time when many economically important innovations occurred, notably the saddle, horse collar and tandem harness which increased the power from horses by a factor of four, and the crank which permitted many kinds of machines to be driven from a rotating shaft.
Chapter 4. The Commercial Revolution.
The small Italian states led the way with advances such as premium insurance, double-entry bookkeeping and the cheque. Merchants were the thin end of the wedge that opened up the way from feudalism towards more open and productive societies. Italy was located in a good climate on the cross-roads of many trade routes by land and sea. The small principalities, protected for some time by mountains and the sea, permitted merchants to thrive and become the leaders of the small republican states.
Chapter 5. The Agricultural Revolution.
The Italian states were eventually invaded from all sides and the area of innovation shifted to Holland and England. Vital innovations such as crop rotation and systematic improvement of crops and pastures were driven by gentleman farmers such as “Turnip” Townsend and associations such as the Lunar Society which consisted of a mix of scientists, engineers and industrialists. By 1850 agricultural productivity in Britain was increasing by 0.5% per annum, unprecedented in history. Laissez faire ruled (almost) and there was no state involvement in research or industry policy.
Chapter 6. The Industrial Revolution.
Between 1780 and 1860 the population of Britain tripled from 7.5M to 23M and the real per capita income double in real terms across all classes.
The drivers were increased productivity of machines and the movement of labour from the land (and Ireland) to the factories. The driver of machine technology was NOT science as predicted by the Bacon but the improvement of existing technology by ingenious artisans such as Newcomen, Watt, Trevithic and Stephenson. Amazingly, the scientists were struggling to keep up with the tradesmen! Hooke (the scientist) told Newcomen that his idea would not work while he was developing it (fortunately he persisted) and Carnot’s work on thermodynamics was prompted by Watt’s steam engine which could not work according to the laws of science as they were understood by leading scientists at the time.
France followed the Bacon model and set up glittering science laboratories and institutions of learning, while the state ran on the basis of taxes extorted by an army of Farmers-General (tax farmers) working on a commission basis with draconian powers of search, detention and confiscation. Hence the Revolution, while the science laboratories produced scientific advances without any impact on technology or the wealth of the French people.
Chapter 7. Economic History since 1870
This chapter is about the comparative economic performance of nations with some warnings about the valid and invalid comparisons that are often made. Invalid comparisons are often used to promote the Baconian approach to science with the aim of getting more state involvement by way of industry policy and public spending on science and education. A classic example is the comparison of Germany and Britain post 1870. Bismark’s warfare/welfare state sudsidised and protected local industries, especially steel. With the inflated cost of German steel it made sense for England to produce less and buy from Germany, still a lot of people just saw the decline of an industry, not wealth transfer from Germans to Britons. They also misread the play on technical education, being over-impressed by the network of state-funded technical colleges in Germany and forgetting about the 700+ industry-funded mechanics institutes that were established in Britain between 1820 and 1850.
There is a stunning table on the economic performance of the current (1980) 16 richest nations from 1870 to 1980. These figures indicate GDP per capita in 1870 adjusted to the $US in 1970.
Australia at 1393, UK 972, Belgium 925, Holland 831, Switzerland 786, US 764.
On an index of productivity Australia scored 1.3 compared with UK 0.8, Holland US and Belgium 0.7. Australia was at the bottom in growth of productivity since that time.
Chapter 8. Science Policies of the Twentieth Century
In this chapter Kealey traced the evolution of science policy in the US and Britain. They both started with a substantially laissez faire economy and also minimal state involvement in science, then during the 20th century the Baconians and the Czars of science took over and they went for central funding and control in a big way. For those who have been receptive to Kealey’s argument thus far, the results are predictable (cw 18th century France).
Chapter 9. The Economics of Research: Why the Linear Model Fails
The purpose of the chapter is to test the linear (Baconian) model.
Government money -> academic science -> technology -> wealth
There are case studies of Government projects to develop and implement high tech systems and infrastructure. These include the European Community plan to develop High Definition TV, the Japanese fifth generation supercomputer program, the European Airbus project. In each case the lesson is clear. Massive sums of taxpayers money were wasted, or would have been wasted if the TV project had gone ahead.
What about the benefits of state funding for basic research. Kealey provides evidence that (a) basic research contributes next to nothing to progress in industry, compared with the on-site modification of existing plant and (b) industry will fund basic research anyway.
Chapter 10. The Real Economics of Research
In this chapter Kealey looks at the economics of R&D and then the economics of academic science, in each case asking whether government funding is required to optimise spending.
He confirms three Laws of Funding for Civil R&D.
First Law. The % of national GDP spent increases with national DGP per capita.
Second Law. Public and private funding displace each other (compete). So public funds tend to displace private funds.
Third Law. The public/private displacement is not equal. Public funds displace a larger volume of private funds than the public input. (net loss)
Chapter 11. The So-called Decline of British and American Science
In this chapter Kealey describes the regular explosions of anger by British scientists over the last three decades and the way they some of them regularly fudged the figures to give the impression that science is going down the drain for want of public funds. The evidence appears to indicate the contrary, namely robust growth and sustained quality.
British boffins medaled in productivity and quality of publications! On papers per capita of population Britain took bronze behind the US and Canada. In the most cited papers Britain took silver behind the US in life sciences and total citations, and bronze behind the US and Canada in chemical science and physical science.
If Britain did that well in the Olympic Games there would not be a lot of talk about the decline of British sport.