 It's a pleasure for me to talk to you about the economics of science and technology. And I'm going to be a little bit more specific as we go about differences between basic science and applied science, differences between science and technology, R&D, and so forth. But some of the points will be much more general as well. Of course, there's not just science and technology, there's science, technology, and duct tape. And I just want to note for the record that this is something I did to the podium right before the lecture because the angle of the screen was a little bit too low. So I couldn't really see the screen because the hinge on this computer won't go back far enough. So I didn't even get Chad's permission. I just did this with a water bottle and some duct tape. So I just wanted to be noted that my level in sort of public speaking, life hacking, I'm an expert level. But one of the reasons to have this conversation today is because there are a lot of people who understand economics or trained in economics, people who understand how markets work and are sympathetic to the free market point of view, who still manage to make exceptions for science and technology. Thinking that science and technology are somehow outside of the normal realm of economics. Economics doesn't apply to them or applies in a different way. And of course, there are many people, as we'll see, who think that free markets are not capable of doing enough science and technology or the right kind of science and technology. But it reminds me of free market positions on national defense and police protection and so forth, as some of you heard in the session just before lunch, right? A couple of the presenters were talking about Murray Rothbard's position on the market provision of defense services and adjudication and property protection and so forth. How Rothbard made the argument that, well, if the free market is able to produce shoes and television sets and water bottles and so forth, why should police protection, judicial services, defense services, and so on be any different? And in some sense, one of the messages that I hope you'll take away from our discussion today is that scientific and technological research, scientific and technological progress are also, when properly defined and construed, when we think about them in the right way, we realize they are also economic goods. And the same arguments we would use to analyze the market for shoes can also be used perhaps with some minor modifications to explain the market for scientists or the market for research grants or the market for gadgets and so forth. Okay. Let me just begin by elaborating on that specific issue. Why do I think scientific and technological or technical progress can usefully be regarded as economic goods? Well, to make this argument, I need to be more precise about what I mean. So we need to distinguish between two different sets of activities, two different kinds of routines and objects and so forth that are often jumbled together in discussions about science and technology. So first there's knowledge, right? Ideas, plans, discoveries. Knowledge per se is not an economic good, right? Knowledge is valuable or knowledge is potentially valuable, but knowledge, ideas, plans, discoveries and so forth are not scarce, right? So they're non-rivalrous goods, meaning that, you know, I can have the Pythagorean Theorem in my head, I know the Pythagorean Theorem and, you know, Timothy, Terrell can also have the Pythagorean Theorem in his head and it doesn't mean he takes it out of mind, right? Multiple people can possess the same knowledge at the same time. You know, knowledge may be excludable if I write down, if I'm the only person who knows the Pythagorean Theorem and I write it down on a piece of paper and lock it away in a safe, then maybe there's no way unless he also discovered it simultaneously that Timothy would ever come to possess that knowledge as well, okay? These knowledge and ideas, you know, are often suey, generous, meaning they just sort of spring from, come into people's minds and cannot themselves be explained in terms of some prior cause, right? We don't know, you know, how did Einstein come upon that particular idea or even just something more mundane, you know, what made me think to stick a water bottle under here with some duct tape? You know, this is not something I'd been researching for a long time. I was just getting ready to give this talk and I thought, oh, gosh, the last time I was in this room, I had to kind of do like this to see the screen. Hey, there's a water bottle. There's some duct tape. Chad's not here to tell me I can't do this, so why not? To put this in more technical terms, there's no supply curve for ideas. It's not the case that at a certain price, you know, at a higher price, the quantity of ideas forthcoming will increase as we would discuss supply curves for tangible goods and services. Now, knowledge does have some interesting properties. You know, there may be spillovers, meaning that, you know, multiple people who possess similar knowledge can be better off when they collaborate and exchange knowledge, right, just by being in the same room as Timothy, I might hear him speaking about the Pythagorean theorem and I overhear what he's saying as he's explaining it to someone else and maybe I have a better chance of learning it. You know, there may be so-called increasing returns to scale, the more knowledge I possess, you know, the more valuable marginal units of knowledge may be and so forth. And that's interesting and those are things that we should talk about. However, when we apply economic analysis to science and technology, we're not primarily talking about knowledge, ideas, plans, or discoveries. We're talking about stuff. We're talking about economic goods and services that are part of the knowledge generation and knowledge application process. For example, laboratories, equipment, labor, books, websites, servers, tools, you know, classroom space, the electricity that powers the lights and so forth. I mean, there's some knowledge exchange going on right now. I hope, right? There's some sort of, you know, knowledge transfer and maybe good knowledge or not or whatever. But, you know, the fact that we're doing it here in this room, you know, with PowerPoint and with electricity and air conditioning, thank goodness, and, you know, there are people who are watching it on the internet or some of some people are watching this a year later on the internet, you know, the economic value of the activities that we're performing today, the way we do them, how we do them, when we do them, how much we do them are all dependent on these sort of ancillary or complementary economic goods or services. And of course, laboratories and equipment and labor and so forth are economic goods. They do have a supply curve, right? They are bought and sold in markets. Marginal units of them are bought and sold in markets. You can rent time on the machine or you can, you know, you can build a building, you can pay for electricity. You can rent space on a server and so forth. Typically, these types of goods are rivalrous or they may be rivalrous to some extent. You know, if this room is packed, nobody else can fit in the room. If we're using all the bandwidth or all the space on a server, there's no available bandwidth or space for somebody else. They typically are excludable. I can close the door and shoot people away who might be, you know, listening outside like this. We can password protect the website or whatever. Again, keep in mind the relevant unit here is not research, but it's a specific discrete marginal unit of research or computer time or scientist labor or whatever. And, you know, these things are produced and distributed and allocated and so forth according to the usual laws of supply and demand. It's a little bit like, I'm sure I missed Timothy's lecture on environmental issues, but it is very similar. I don't know if you mentioned this to discussions about economics and the environment and, you know, people say, well, don't you value diversity in the ecosystem? You know, and I might say deep in my heart somewhere, oh, yes. I think, you know, ecosystem diversity is very important. But ecosystem diversity is not on the market. I mean, that's not being offered for sale on the market. That's not something that is priced and exchanged. What's priced and exchanged is, you know, this piece of land, will we cut down the trees and build a house on it? Or will we leave the trees so the little fluffy bunnies can run around, you know, under the trees or whatever? You know, specific units of natural resources, particular activities and so forth. That's what is exchanged in markets and priced and so forth. Specific discrete units of scientific activity or research activity. So don't let anyone tell you, for example, if you say, well, I don't think, here's an argument why the government should not subsidize this physics lab. Don't let somebody tell you or ask you, are you opposed to science? I mean, science is not the thing that the government is subsidizing. The government is subsidizing this specific laboratory to do these things for this period of time with these people doing the science and so forth. That's the issue on the table. Not some abstract notion of science or innovation or something flowery like that. OK. As I mentioned before, and as I'm sure you already know, many people, even those who are, in general, favorably disposed toward the market system and free markets, tend to think that science and technology aren't an exception. If you look in the basic textbooks, economics textbooks, where they discuss, for example, the so-called public goods problem, and how many of you have seen a diagram like this in your micro class or your public finance class, where they characterize different goods according to rivalry, or rivalrousness, excludability, private goods, and pure public goods, common pool resources, club goods, and so forth. Most people, most economists, argue that, well, science, scientific research, scientific discovery is an example of a collective good or a public good, and therefore is undersupplied on the market for the usual reasons that they give with regard to public goods. When I was an undergraduate student, when they had these kinds of diagrams or the textbook chapter on public goods, usually gave examples like the Lighthouse or a fireworks display, maybe radio, public art, or something as an example of a public good that the government must supply. And of course, we all know that all of those are lousy examples, even to illustrate the point that Paul Samuelson and so on, other textbook writers would want to make, because all of those things are and were supplied on the free market. But nowadays, it seems like a very common example to go in this bottom right box is science or scientific research, especially basic science. Of course, Apple is going to invest a lot in coming up with a slightly different kind of touch screen. But theoretical physics can only be done by the state, can only be subsidized. We won't have it at all, or we won't have enough unless the government does it, because it's not excludable and it's non-rivalrous and so forth. There's a very influential book that came out a couple years ago by Mariana Mazzucato called The Entrepreneurial State. It's been, I guess, a best seller within its genre. And I don't know how many people have sent to me on social media copies of a TED Talk that she recently gave. She says that within the tech community and people who write on tech issues and think about tech issues are unfairly maligning the state. All these tech knows say the free market is great and they don't like intrusive government. But in fact, according to Mazzucato, all of these great, or most of the great technological advances of our age are all due to the state. Without the government, we wouldn't have mobile phones and we wouldn't have computers and the internet and we wouldn't have radar. And there's a long list of things that I'll, some of which I'll share with you in just a moment. And I'm sure you've encountered plenty of discussions or you've read articles or heard lectures that make these same kinds of points that, yeah, the free market is OK for shoes, but because science is a public good, because scientific research is, you know, the benefits cannot be fully appropriated by private entrepreneurs, therefore, we need the government to do it. You know, Mazzucato is offering primarily kind of an empirical argument illustrated with some detailed case studies, but the underlying theoretical argument is the standard public goods argument that you get in the textbooks. So what's wrong with it? I mean, I'll say just a few words about public goods in general. Most of you know this already. And then I'll speak more specifically about science and technology as a public good. But so here's my mini rant on public goods theory and why it's pretty lousy. OK. First, there are conceptual issues associated with rivalry and exclusability. OK. So if we think a little bit more carefully about what it means for a good or service to be rivalrous or not, or a good or service to be excludable or not, it becomes a little bit more ambiguous, right? In particular, if we think about, you know, marginal discrete units of goods or services rather than these holistic aggregates, right? So, you know, pick any example that you want. We could do the lighthouse, but that's already been analyzed by coasts and other people. You know, how about the fireworks show? You know, it's late July. Those of you who live in the US probably attended some kind of fireworks celebration on Independence Day, the 4th of July, Secession Day, as most of us around here like to call it. You know, the standard argument is, oh, well, if I were a profit seeking entrepreneur, it would not be feasible for me to say, OK, I'm going to have a fireworks show in my backyard and now I'm selling tickets for the show. And if you don't pay for the ticket, you can't watch it. Again, according to the textbooks, well, this is completely infeasible because anybody who is in the neighborhood, my next door neighbor, people across the street, people a couple blocks over, if it's big in a fireworks show, they can see it, whether they bought a ticket or not. There's no way I can prevent people who didn't pay from consuming the services of the fireworks show. In other words, going, ooh, ah, OK. Therefore, the only way I can recover my costs is if I am the state or I'm a state contractor and the city or the community pays for it through taxation. Everyone who lives in that town is compelled to pay a share of the fireworks show through taxes, then the money goes to the operator of the fireworks show. That's the only way you could do it. Well, of course, that's not the only way you can do it. How many people have ever been to Disney World or one of the Disney theme parks? They have a big fireworks show and it just so happens that Disney World has a really big yard. It's not like my backyard at my house. If you're off the Disney property, depending on which Disney property you're at, the original Disneyland in Southern California is actually fairly small. But Disney World in Orlando is huge. I don't know how many hundreds of acres are within the walls. And you can maybe just barely see it if you're in a hotel offsite. But the only way you can actually see the fireworks show is to be on the Disney property, which means you paid for a ticket. Is the fireworks show non-rivalrous? Well, I mean, not in my town. So my family and I went to the fireworks show in our little town and it's done by the city, paid for through taxation. But there's certain viewing spots that are good. So it's in downtown and there are some parking garages that have the best spots. There are five, six-story parking decks. If you go to the top of the parking deck, you can set out some lawn chairs there and you get the best view of the fireworks show from up high. But we got there too late this year. And if you don't get there at least a couple hours early, all the parking spots are taken by greedy people who got there first and they're using up all the space. And yeah, I mean, I could still see it. No one could prevent me from seeing it. But I couldn't get a good view of it unless I were up close. So is being up close and getting a good view of the fireworks, is that the same economic good as being a mile away and only barely being able to see it and not hear it and so forth? No, I mean, of course, those are heterogeneous economic goods or services, right? I mean, oh, the internet's a public good. Have you ever had a YouTube video freeze on you? That's because of congestion, right? The pipes that carry data around through the internet are, I mean, in principle, they're excludable. You could, with the architecture, you could make them where only people who have paid can get on there. And they sure as heck are rivalrous. I mean, is the internet rivalrous? Well, I guess not. But that specific piece of bandwidth that I needed yesterday when I was trying, the bandwidth that we needed last night when we were trying to get the Skype call with Patrick Byrne and it kept freezing up, you can bet that was rivalrous, it was congested. If we could have booted some other people off, we could have consumed Patrick Byrne a little bit more smoothly, okay? And that would have been a different, different thing. The other thing to keep in mind is that, you know, whether something is excludable or not depends on the legal environment, depends on institutions, customs, and so forth. Depends on technology. I mean, someone who mentioned radio, you know, traditional broadcast radio, another example of something that supposedly is not excludable. Anybody with a radio can pick it up. And the only way that you can provide radio, if you're in many parts of the world, is through state provision. In the US, it's mostly done through advertising revenues with some state regulation and so forth. But I mean, I flew to Atlanta and then got a rental car to come here to Auburn. And the rental car company that I use is one of these where within a certain class of car, you can pick any car on the lot that you want within that category. And so people like me who do this lot, you know, we have this way of going and quickly scoping out all the cars on site to decide which one we want. And I always look for one that has satellite radio because there's not a lot of good radio options between the Atlanta airport and Auburn. And I was so excited to get one with, you know, XM radio, but of course the rental car company hadn't subscribed. So the only channel I could get was the Sirius XM promotional channel that's telling you how to subscribe. Right? So if you have satellite radio, satellite radio is 100% excludable. If you haven't paid the subscription fee, you can't watch it. Netflix movies are excludable. If you're not a subscriber, you can't watch them. So to say audio, video is non-excludable. Depends on the technology. Depends on the legal system and so forth. Okay. Second point is, you know, even if it were the case, imagine, do one of these imaginary constructs like the ERE, right? Of a world in which fireworks shows are completely non-rivalrous and completely non-excludable. Would it follow that social welfare is increased by having the government tax everybody a certain amount and then use that money to put on a fireworks show? How would you know? Right? If, you know, if we exchange in a private transaction and I give him this pen and he gives me a dollar, which of us has made better off? Both, how do we know? Yeah, I mean, what's the word that Rothbard uses? Yeah, demonstrated preference. I mean, he could have refused, I could have refused. We know that I expected to, you know, I prefer the thing I got, at least in an expected value sense compared to the thing I gave up, otherwise I wouldn't have done it. Same thing for him. I mean, how would we know if the fireworks show were in fact, you know, welfare increasing? I mean, we wouldn't, we would have no way of knowing, right? There's no way people can demonstrate their preference for one of these so-called public goods. I mean, it could be that people, you know, I pay $2, my taxes go up by $2 and I get to watch this, and this fireworks show is put on for me whether I want it or not. How do we know that the value on the margin of that fireworks show to me exceeds $2? Unless I paid $2 for a ticket, we can have no way of knowing, right? It's impossible to know. It might be that everybody in that community hates fireworks shows. They're lousy. I mean, they're loud, maybe lousy too. They're loud, I was trying to say loud and noisy, it came out lousy. They're loud, they're noisy, I don't like the smell of a smoke, you know, they scare my cat or whatever. The point is, there's no scientific procedure for demonstrating that the value of what is produced exceeds the value of the resources that were used to produce it when it's funded through compulsory taxation. In other words, of course, there's interpersonal comparisons. One person really loves fireworks shows, somebody else doesn't. Ultimately, it's sort of a question of passing the market test, right? If a good or service is offered on the market by an entrepreneur and revenues exceed costs with counting for discounting and so forth, we say, oh, it passed the market test. I mean, it generated value for consumers because they bought it when they didn't have to. Any so-called public good produced by the state, by its very nature, did not pass any kind of market test. It was extra market. So government officials can say, oh, it's great that we did this, we made our community so much better off by producing these valuable fireworks shows, roads, sewage systems, national defense, basic science, et cetera. How do you know that? Because we intellectuals believe it because the government simply declares that it is so, but it would be impossible to know scientifically whether in fact they were valuable, these things were valuable or not. So the point I wanna make is, I think that so-called public goods as well as common pool resources and club goods are sort of at best theoretically interesting. We can have this conversation about the fireworks show or bandwidth or whatever and think about different aspects of it and how you might approach it from an engineering point of view and what things entrepreneurs might try to do to be able to collect money for things. But it's certainly not, it's what I call a non-actionable concept. In other words, there is no specific action that follows from contemplating the theory of public goods. Declaring that something is a public good is an extremely weak rationale for government provision of that thing, okay? It's not a good argument. Oh, it's a public good, therefore the state should provide it. It doesn't follow at all. That's a non-sequitur. Let me say a little bit about science funding specifically. What do people like Masakato and other writers have in mind when they claim that we need the state to be the engine of scientific and technical progress? I mean, theoretically, they explicitly or implicitly have in mind some notion of, something from public goods theory, okay? What do they take as their sort of empirical evidence? Well, the common technique and Masakato does this in several other books that are in the same genre do this, is to do what I call the laundry list. You know what a laundry list is? It's just like a sort of a, just a list of one item after another, like your to-do list or something. So they say, well, here are 25 examples of stuff that we have that the state also funded either completely or partially through a subsidy or a tax incentive or whatever. And a lot of times these laundry lists are organized according to which war they're associated with. So I apologize to those from outside the US for using US-centric examples, but the same general notion applies anywhere in the world. So they say, for example, well, during World War I, when the government commandeered all these resources, like Bob Higgs was telling us about, we got things like penicillin, large scale manufacturing of penicillin. We got the development of some technologies that originally had a military purpose, but then had a valuable civilian spin-offs, you know, nylon, aerosol sprays and so forth. World War II was even bigger in this sense because you got atomic energy, a lot of aerospace technology, radar and sonar, radar was a little bit before actually, jet power and also a lot of things that are kind of like managerial or organizational technologies. A lot of things in sort of modern logistics, how do you move a lot of stuff around quickly? Whether it's getting stuff on and off a ship or keeping track of inventories, how do you move material to the frontline quickly and so forth. A lot of these technologies were developed by the military or by research units, government research units associated with the military during World War II. And of course, during the Cold War, military research and other kinds of government research brought us the digital computer, right? The ENIAC was the first general purpose digital computer came out of the US Navy. You know, GPS, it's hard to imagine nowadays how you could ever survive without GPS in your car or on your phone or whatever. And of course, as people like Masakata will endlessly remind you, well, the satellites that were put up there originally, the technology for using, what do you call it, how they triangulate to find your location, that was all military, that's military tech that has subsequently been modified and embraced by private industry. The internet itself, you've probably heard that example many times, not just that Al Gore invented it, right? But that the internet came out of the RAND Corporation and some US universities in the 1960s and 70s and DARPA, the Advanced Research Projects Agency. And depending on which account you read, it was either designed to allow for sort of secure communications, even in the event of a bomb dropping, sort of a distributed network without central nodes would not be vulnerable to a single bomb that lands in the middle of the central switch or whatever. But, or the idea with packet switching and so forth was to allow multiple researchers to share the same government computer by accessing it in little slices at different times from all around the world. And so everybody will say you wouldn't have an iPhone and we wouldn't have Google and we wouldn't have Netflix and so on if it hadn't been for the government doing all this internet and other technology, kind of R&D during the 1950s, 1960s and 70s. Game theory, is game theory in advance of our knowledge? I don't know, it depends who you ask. But a lot of game theory was developed by people like Nash and his colleagues, especially at the RAND Corporation in the 1950s and 1960s. So, is it a good argument for government science funding to point out that a lot of goods and services that all of us would agree, I would certainly agree, are valuable? Is it a good argument that those things were spin-offs of government projects? Is that a good argument for government funding of science? Well, it probably won't surprise you that my answer is going to be, no, it is not a good argument. Why? Let's talk about some problems with these arguments. I'll give you four kinds of problems, four categories of problem with this sort of standard argument. So first, proponents of this view, very often confuse what we might call technological innovation and economic innovation. So what is an innovation in an economic sense? Well, this is a new good or service, a new activity, new firm that produces, the consumers want to buy, that consumers value more highly on the margin than the value of the dollars they have to give up. Say the government comes along and invents some machine or some device and we say, oh, we never had a machine or a device like that before. Wow, that is really cool and really great. What does it do? Well, we don't know. Would people be willing to buy this thing if they could? Probably not. Is it an innovation? Well, I mean, from an engineer's point of view, in sort of an engineering sense, yeah, it's a new thing that we didn't have before. But if consumers don't want to buy it on the market, then it's not an economically valuable innovation. Remember for my entrepreneurship talk, the Edsel and Apple's Newton and so forth. I mean, the Newton was a very technologically advanced device for its day. It certainly was a technological innovation, but consumers hated it or they didn't hate it, it's just, it wasn't useful. I mean, there wasn't much you could do with it given the price you had to pay. It broke down, it wasn't reliable, so forth. So just because the government made something doesn't mean that that thing is valuable. It would be like people saying, well, if it weren't for the US federal government, we wouldn't have the Lincoln Memorial. That's probably true, okay? But to me that's not a good argument for having a government monument or a government statue or a government building or a government airplane or whatever, okay? Second point is that people often confuse what you might call gross benefit versus net benefit, right? I mean, it may very well be the case that if the government appropriates a huge amount of wealth and uses it to produce something, and we say, okay, that's a cool thing, that's a good thing, I'm glad we have that thing, we would still wanna ask, well, how much did it cost? I've been engaging on some listservs that I'm on, talking to some people about some scientists, government science type people, about just the other day, the NASA probe that went by Pluto and gave us these great pictures of Pluto. And these people I'm talking to say, oh man, this is so cool. This is so awesome. My heart is stirred when I see these pictures and we gotta do more to educate the public about why NASA needs more funding because of this really cool Pluto thing. And I'm thinking, but look, I mean, how many billions and billions of dollars, tens of billions of dollars, maybe hundreds of billions of dollars have gone into the space program over the decades to give us these little grainy pictures of Pluto? I mean, it's like, if that turns you on, that's great, more power to you. But I mean, even if we like that thing, is it worth the cost, right? Think of Austrian economics 101, opportunity cost, right? What are all the other things that we could have had but don't have if those resources had been used in an alternative way? And what I'm arguing with these, sort of pro-government science types, I mean, I even try to argue it on their terms. I say, yeah, I give them a list of here's 10 other government projects that were never undertaken. What if the tens of billions of dollars that went to Pluto had instead gone to build, super colliders or had gone to hire more science teachers in public schools, whatever. I mean, of course I wouldn't do those things either. But I'm trying to get these people to see the point that simply identifying the benefit, the gross benefit is not a justification in economic terms for undertaking some activity. We need to know the net benefit. Do the benefits exceed the costs on the margin? And of course with government funded scientific projects as with government funded public goods of any time, we don't know because again there was no market test, right? A third is what I'll call to use a sort of a technical econometrics term, difference between treatment effects and selection effects of government spending. What I mean by that is you may have heard these terms before in class. The terms come from biomedical research. If you have some pill, you wanna know if this pill works, you have like a treatment group and a control group, right? And you have to make sure the two groups are pretty much the same in terms of their demographics and health status and one group gets the pill and the other group gets a placebo and you see if there's a difference in health outcomes. You couldn't just say, oh, here's a pill that will treat insomnia and put an ad in the newspaper. Anybody wanna be in my experiment and take this pill and see if it works, stop by my laboratory because you're not gonna get a random sample of people, right? It might be that you get a bunch of insomniacs who are already kind of getting over their insomnia before they showed up at your door and you give them the pill and they start to sleep better and you think, aha, my pill works, right? But it's really just sort of self-selection. People who are in a good enough shape that a pill might help them chose to participate in the experiment and people who just were so, their insomnia was so bad like the guy in Fight Club, right? That they would never even bother to participate in an experiment. So really what you might be picking up is a self-selection, not that your drug is actually treating the problem that it claims it's treating. What's the application here? There's a very interesting story by a very interesting paper on scientific, on the wages of scientific personnel. It was an NBER paper, I think it was published in the Quarterly Journal of Economics, Journal of Political Economy, one of those, or AER, that the main effect, or one of the main effects of increases in government science funding is to increase the wages of scientists. Think about that a little bit. Let's say that you're a famous scientist, professor, physicist at MIT. You have some experiments you want to perform. Okay, MIT is a pretty rich school. In physics, it's probably number one in the world. They have pretty nice labs. You have a lot of assistants and so forth. Then you apply for an NSF grant. You get the NSF grant, what does it do? It's like, oh wow, I got this grant. I don't have to teach this other class. I thought I was gonna teach. I don't have to do some summer project. I can take vacation instead, right? Because now I have this additional income coming in, but I'm still gonna do the same experiment I would have done anyway. Right, it's just now I'm better off. Okay, so it could be the case that when the government subsidizes X, really what that is doing is making the people who were already doing X better off than they were before. More money, more prestige, more recognition, but it doesn't give you an X you otherwise wouldn't have gotten. Okay, so it may very well be that when government increases its spending on scientific research, technological research, it doesn't actually give you more or better science. It just makes those scientists better off than they otherwise would. Okay, so it's only, you know, if you assume sort of a perfectly inelastic sort of supply curve, sorry, let me say it a different way. Only if you believe that MIT physicists are sitting around waiting to see what grants they get before they start doing scientific research, would you believe that the money gets you stuff you otherwise wouldn't have gotten? In fact, the evidence suggests that mostly what the money does is make the scientists happier. Okay, but they're still gonna do the same work even if they don't get the government science funding. Okay, fourth kind of argument is if you look at these cases carefully, if you review the case studies from people like Mariana Mazzucato, you find that they're really weak. Okay, if you look at the details, you almost always find that the effect of government intervention in this activity was pretty much like the effects of government intervention in anything else. Namely, it completely messes it up, okay? The scientists do worse work than they otherwise would have done. Their research is pushed in a direction that they otherwise might not want to go. The best source on this is Terrence Kealy, whose book from the mid-90s is called The Economic Laws of Scientific Research. He actually did a great book review of the Mazzucato book just a couple months ago in the Journal of Markets and Prices, I think. We sort of walked through these cases and says, well, Mazzucato has it wrong here, wrong here, wrong here, wrong there. Just to give you a few examples that are emphasized by Kealy. He has a lot of discussion about the Cold War, which is held up as the golden example of when the government really took science funding seriously and was spending a lot in the US to try to beat the Soviets, and that's why we have the internet and GPS and so on. And Kealy points out some interesting phenomena. For example, most of the Cold War research was not actually anything to do with basic science, but it was stuff that was very, things that had very direct military application, and a lot of scientist effort and laboratory resources were in a sense squandered on very short-term sort of military projects. Of course, as you would all expect, you had the emergence of a lot of companies, laboratories, and organizations whose main existence, whose rationale for existing was to suck on the government teat, okay? Raytheon is a good example. The founder of Raytheon was the same guy who was the first head of the National Science Foundation, and Raytheon was created in the 1950s just to get government contracts, right? So think of all those scientists and engineers who could otherwise have been gainfully employed in the market, but instead were engaged in rent-seeking. Military research sometimes crowds out other kinds of research. The modern university, it would take me a month of these talks to treat that example with as much attention as it deserves. People often say, well, look at the research university, look at Harvard, MIT, or Stanford, or Auburn University, or whatever. The modern university really grew and emerged because of government spending, especially Cold War spending, GI Bill, and so forth. I mean, by some accounts, this was a complete disaster for higher education, that almost everything wrong with the modern research university can be traced to this huge infusion of government funds from the 1950s through the 1970s. Okay, I have some charts on showing you how much private research spending there actually is, but we don't really have time for that. Okay, so here are my conclusions. Scientific and technological progress are economic goods when understood correctly, right? When we think of specific, discrete, marginal units of goods or services that can be traded and priced in the market, not these abstract holistic concepts. Regular economics, by which, of course, I mean regular Austrian economics, I mean, there is no other kind, right, that's any good, applies to science. Public goods arguments for government funding are just as weak when applied to science as they are when applied to anything else. Finally, government intervention in science and technology works about like government intervention in other industries. Go to the post office or the Department of Motor Vehicles or be in the Army or whatever. I mean, we all know that when government intervenes in markets like that, the results are not good. I think one of Milton Friedman's famous funny quips, Friedman had a lot of these quips was, if you put the government in charge of the Sahara Desert within two weeks, there'd be a shortage of sand, okay? I mean, for people who correctly understand that, why would you think that science and technology would be an exception to that? Then when you put these people who are running the post office in charge of the research lab, oh no, now it's gonna be great. We know it's gonna be exactly the same way and anyone who has dealt with government science bureaucrats knows that that's exactly the case. So thank you very much.