 Thank you. Thank you very much. Now, Hans has asked me to be the last speaker to punish me. He had hoped that I would be here for the whole conference, but he didn't have to punish me because I wanted to be here for the whole conference. I didn't want to come late, but there were obligations at home I couldn't get out, because there is no better place in the whole world to talk about the economic science. The economics of science than Bodrum. Because most human activities emerge gradually. Nobody knows who the first trader was or the first technologist. But science is a human construct, and we know who the first scientist the world ever had. We know who he was. He was Thales of Miletus. We know who the world's second scientist was. He was Anaximander of Miletus. We know who the world's third scientist was. It was Anaximinis of Miletus. I think you get the point. Now, Miletus is just down the road. And in the 5th century BC, science started here. Why here? Was it because these three were the beneficiaries of the patronage of Philip of Macedon, of some great king? No. It's because Miletus was the most commercial city in the world in the 5th century BC, right next door to Libya, which is next door, and which was then the most commercial state in the world. The Lydians were so commercial. Their king was King Midas. We all have heard of him. His kingdom invented coins. The Lydians were the first people in the world to have retail shops open 9 to 5 Monday to Friday. And the Lydians were so commercial, they would sell their daughters into prostitution. Science, like the selling of one's daughters into prostitution, was the consequence of a very commercial culture. Now, the reason the economics of science are so important, particularly to libertarians, is that I regret to say that we libertarians have sold the past on the most important economic activity of all. The most important economic activity is the creation of wealth, and it is absolute dogma that wealth creation, which is based on research, and that research needs government subsidies. Even Milton Friedman, when he wasn't inventing PAYE to help the government raise income tax, even Milton Friedman believed that governments had to fund science. In fact, the numbers of people in the world who believe that governments should not fund science is a very small number indeed. In fact, I sometimes think I'm the only one, which is a very lonely position to be in. But I see, oh, there are two marvellous people here who agree with me. Oh good, another one over there. Oh great, it's like a revivalist meeting. The argument that governments should fund science, and we are in a Muslim country here, so we can blame the Muslims, was first made by Rashid Al Bin in 1302. He was the vizier to the Persian Empire, and he then wrote in language that is astonishingly modern, that governments had to fund science because science was the basis of what we'd now call economic growth. This was taken up by an Englishman, Francis Bacon in 1605, his book, The Advancement of Learning, in which he spelled out the modern story. This is what he said, I'm translating it into modern language, but this is what he said. If an individual invests in a piece of research and makes a discovery, it will cost a great deal of money to do that. But the competitors can copy practically for nothing, any fool can copy, and therefore the competitors who are copying will have an advantage over the person who made the discovery, and they will take his discovery, and they will drive him into bankruptcy, because it's easier to copy than it is to create. Therefore, unless governments fund science as a social good, there will be no economic growth. Now, if we as libertarians are going to make an important contribution, a really fundamental contribution to the study of economic growth, which is the basis, really, electricity, hotels, civilisation, flights, the blood running, unless we as libertarians can capture economic growth for ourselves away from the statists like Northern Freedmen, then we are marginalised. So, let's look at the facts. Firstly, it is worth noting that Adam Smith thought that Bacon was wrong. Bacon was a lawyer. He knew nothing about economic growth. He just wrote about it. Adam Smith was immersed in the beginnings of the British Industrial Revolution and he observed what happened in the factories of the day, and he noted that it was the factories of the day doing the research and development and making the innovations, and he noted that it was universities like his own, Glasgow, that seemed to be receiving ideas from industry rather than the other way round. But, in fact, the modern econometric evidence is surprisingly strong. The Organisation of Economic Cooperation and Development, the OECD, published a very important book in 2003 called The Sources of Growth in OECD Countries, 2003. That's what it called the book. You can get on the web. And they looked at the performance of the OECD countries, all of them, over the previous 26 years, measuring every parameter they could think of and the OECD has access to a lot of data, trying to work out which policy inputs and which other parameters correlated with subsequent economic growth. I'm not correlation time on time, but an event to then five years down the line. I'm something as close to causative as an econometrician can produce. What the OECD found was that privately funded R&D correlated very strongly indeed across the OECD countries while to various analysis with subsequent economic growth. Publicly funded R&D had no impact at all, not even a little. Even worse, publicly funded R&D, Search and Development, seemed to crowd out privately funded R&D, which is the good one. It might even be, the OECD concluded, that the public funding of R&D damages economic growth by crowding out its private funding. The OECD are not the only people to have made this observation. A number of other econometricians have pointed out that it is simply impossible to find econometric data on a national level which shows that a government funding science has any positive impact at all. It's simply the evidence is simply not there. Now, lack of evidence doesn't mean no evidence for what we're trying to find, but the historical story is also very interesting. The two lead countries of the last 200 years had been first the United Kingdom, which was the richest country in the world between about 1800 and 1900, and then the United States, which is country in the world from 1900 to the present day. It is, of course, a country such as France and Germany. What's interesting is that British led the way through the agricultural revolution, of course, we took over from the Dutch at that point, so we finished off the agricultural revolution and led the way into the industrial revolution under complete and utter laissez faire in science. There were a few government interventions in science, of course there were. For example, there was a course of lectures on agricultural chemistry once fostered by the Department of Agriculture in London. There were one or two totally tiny, totally trivial interventions in science in Britain, but they were so insignificant as to be nothing more the noise on any global picture. We were, and proud of it, laissez faire. That was the whole point of Gladstone, Peel and all the others. Low taxes, low government intervention, huge industrial revolution. Which country overtook us in 1900, the States? The United States was so laissez faire in science that, for example, when Smithson left his money to Washington for the Smithsonian Institution, initially Congress refused the money. Not only I see someone nodding their head, not only. The Congress not believe that the American taxpayers shouldn't fund science. They didn't even believe the American taxpayers should take someone else's money to fund science. In the end, Congress was embarrassed into using the money because they banked it with some banks in Arkansas and after a few years they noticed that only half the money was left. I think Arkansas clearly has a culture that hasn't changed very much in the last two hundred years. Before it all disappeared, they took the money back and built the Smithsonian. So laissez faire in science was America that by 1940 when America had been the richest country in the world and therefore by definition the most technologically advanced country in the world, by 1940 still over 80% of American R&D, both pure and applied science was in the private sector and the remaining 20%, half of that was for defence research which of course has no economic benefits and the other half, by 10%, was for agricultural research and never forget the overriding problem with American agriculture since long before the Republic has been the problem of overproductivity. The American government never funded agricultural research in America to solve problems of lack of productivity It was always how do we handle the fact that the farmers are also poor because they produce too much food and therefore they are themselves poor and demanding subsidies and the moral colleges are so called came into that business of trying to persuade American farmers to produce less as a paradox. Only in 1940 when the war breaks out, the Second World War well in America's case rather late in 1941 actually but only in 1941 when the Americans come in with a war to invest hugely in science and then carry on. Now what is interesting you can go to a wonderful man called Angus Madison who died just the other day who's collected GDP per capita data productivity data, technology data for the whole history of humanity wonderful series of books but we can go back and look in the history and we can ask questions. What is the rate of economic growth in America before 1940 and after 1940? Britain is the same story. The British government starts to fund science only in 1913 with the creation of the Medical Research Council Eugenics was of course the big worry at the time 1916 of course at the height of the war we started to create research councils to develop barbed wire and things which then developed into peacetime organisations just like in the United States the American Academy of Sciences in Washington was created at the height of the Civil War to help build on-claves to defeat as we now discover from our earlier talk the despised people in the south these are all wartime initiatives you can ask what happens to long-term rates of American growth GDP per capita before and after 1940 what happens to long-term rates for British GDP per capita growth before and after 1913? One of the astonishing things you discover from Madison's data is that lead countries like Britain France, Germany, Switzerland, Canada we've all been growing at 2% a year for nearly 200 years now rates of economic growth amongst lead countries are astonishingly steady but of course as you can guess I'm going to say there is no deflection that can be attributed to the introduction of science government science in these countries what is interesting is that France and Germany huge government investment in science from 1800 onwards in fact in the case of France and Colbert for the middle of the 17th century onwards France and Germany they never converge they never catch up on Britain, let alone on America they're always kept behind and they only take over from Britain France and Germany long after 1945, long after the post-war period when the British are stuck with post-imperial acts and all the rest of it but they never catch up with America the countries on the lead countries or the less affair countries, Britain and America the ones with the huge demigisum like France and Germany, they do well but never as well as the less affair countries one of the paradoxes that is never remarked upon and when we British finally do get overtaken by the French and the Germans it is because we too have vast scope of cunning of science and that's when we get overtaken where we've adopted the French and the Germans so why is it why is it that there's no historical data to show that the government funding of science is a benefit there's no contemporary economic economic metric data to show that the government funding of science is an economic benefit and yet everyone says that the government must fund science or the answer is of a misunderstanding of the nature of science the standard story the one that even Milton believed in which is that science is a public good in the sense that anybody can go to the journals or the internet today and pick up the journal Milletial Biology and read the papers to free anybody can do that you can, I can we can get it for nothing we can go to the patent office which very kindly publishes all the stuff thanks to Stefan Kincela and we can read all the patents admittedly we can't copy them directly but we can get ideas blah blah blah by the way I think Stefan will agree with me that's why Thomas Jefferson prompted a patent's office he himself didn't actually believe in monopoly he believed in the free transmission of ideas he just made a different calculation he assumed that patents transferred to the information more than industrial secrecy would do regardless of what he thought we all know that science is publicly available therefore it's easy to copy all the rest of it but hold on a second how many people in this room can read the journal Milletial Biology how many people in this room can read contemporary journals and physics or maths or physiology very very few now the interesting thing and you can show this very clearly that the only people who can read the papers the only people who can talk to the scientists who generate the data are fellow specialists in the same field and what are they doing they are publishing their own papers and if they try not to publish papers if they say we're not going to get engaged in the exchange of information we're going to keep out of it and just try to read other people's papers but not do any research of our own not making advances of our own not having any conversations with anyone within two or three years they're obsolescent and redundant and they can no longer read the papers because they're not doing the science themselves which gives them the tacit knowledge or the subtle stuff that's never actually published that enables you actually to access the information of your competitors before the Royal Society of London was created it's the world's world's oldest surviving scientific academy there were others before but they're now dead so the Royal Society's oldest one was survived before the Royal Society was created scientists published secretly they would for example write a paper and deposit in the safe of a college or a lawyer and keep it secret until eventually someone else published in a similar field and then they would go back extract the original paper which had been dated and notarised so they could claim that they got there first and say look the credit is mine I was there first but I didn't want to publish because I didn't want to help my competitors alternatively they would publish in code journals, there were many of them the publications of the 17th century are sometimes published in amigrans in latin or greek or literally in code so that people can register they've published and can prove it but they won't break the code until the subsequent competitive publication comes along and then they can go back and prove that they were first and get the credit this is no way to advance knowledge what the Royal Society introduced was the new idea because science is a human construct of publishing openly publishing the method section and the credit going only to the person who published first not to the person who claimed subsequently who made the discovery why was that important? imagine this room is all the scientists that existed in Europe in the 17th century imagine that from there to that side they're all members of the Royal Society and you from this side are not now these people here have a deal they will publish in the journal of the Royal Society everything, methods everything as quickly as possible now the worry that these people all have by publishing so quickly someone else may grab their discovery and run away with it on the other hand everybody in this room on this side has access to the advances made by 30 different people they have to take their chances on being scooped but they have 29 times more chance of having something to scoop you lot are all single handed practitioners you have only your own resources by which to achieve guess who will win the Nobel prizes will it be one of this lot or one of you lot and so once the Royal Society got into this new business of sharing knowledge instantly or as quickly as is feasible then this lot realised that they were going to lose out and so they had to join the same conventions and so very quickly the convention arose of full disclosure but you can't access the science of others unless you're part of a game it is only the molecular biologist who's publishing his own papers getting invited to the conferences having the discreet conversations of the fellow molecular biologists who can capture the work of others and so you don't get the information for free you pay a very high price to access the information of your fellows science is not a public good I call it in my book here an invisible college good the Royal Society met an invisible college because it was worried about religious oppression at the time and what science is it is an invisible college good and it costs as much to access information as it does to make it and actually if you go into the fine print of the contemporary economic data it's all there no one has put it together because no one wants to put it together but put together all the disparate bits of evidence it's very easy to show the data's been there for years now it costs as much to access other people's science as it does to make it it's just that the cost of accessing is the sort of subtle parallel cost of the work you have to do before you're ready to read it and as part of that you're contributing into the common pool of knowledge and it's interesting the common pool of knowledge in this book I have a whole chapter called let's abolish patents he's absolutely right and by the way the libertarians have a problem with patents I put it slightly different because all libertarians obsess through property rights there are some libertarians who simply can't understand in my opinion that intellectual property rights are a very different bit from property rights I think my libertarians paradoxically often have more problems with IPR than others but it's a very interesting example of this business of pooling knowledge and science works it happened in the United States of America something that very few people know is that the Wright Brothers aeroplane Flyer 1 has spent more time does anyone in this room know in which museum Flyer 1 has spent most of its life most of its life Flyer 1 sorry no, no, no, no I'm English British Museum Flyer 1 has spent more time in the British Museum than the Smithsonian not many people know this and the reason for this is the Wright Brothers became America's enemy number one when they invented the aeroplane they invented the whole aeroplane the wings, the aerolons, the propellers the whole shooting mash and they did it for the investment of a thousand of their own dollars at the same time the Smithsonian had received very rare in America before 1940 a very substantial grant of £76,000 from Congress to develop their own aeroplane which they called Aerodrome this is a grant in 1896 because by 1896 as we've heard from an earlier speaker the Americans had run out of Red Indians to kill so they're now killing Spaniards in Cuba and in the Philippines and they thought it would be a nice idea to kill them from the air as we know has never changed this is not me, this is one of the previous speakers and so the Smithsonian had the $76,000 from Congress to develop a bomber and the Wright Brothers got there first and the Wright Brothers panted the entire aeroplane and any time Glen Curtis or anyone else tried to fly an aeroplane in America the Wright Brothers were there immediately taking them to court the result was that by the time America finally joined the war in 1917 America did not have an aviation industry the Wright Brothers were too busy defending their patents and no one else was flying the French had a great aviation industry the Germans had a great one so did the Brits even the Canadians were quite a good one but the Americans didn't have one so in 1917 Congress the day after the declaration of war imposed a patent pool on the American aviation industry and from 1917 to 1975 which is a very long time there were no effective patents in the American aviation industry you could patent but you couldn't claim anything as a consequence a patent pool 1917 strong patent law most backward aviation industry in the world America 1975 no patent law weakest America strongest aviation America and strict America a very nice empirical example of how the sharing of knowledge creates technological growth for everybody try to restrict knowledge either through patents or before the war society changing knowledge 1975 Richard Nixon took away the patent pool because unfortunately he didn't actually understand the economics of science and he was in the hands of certain lobbyists so to conclude oh just one more thing before I do conclude and then I shall shut up what is really interesting about the exchange of knowledge is the work of Von Hippel and others at MIT Sloan Management School industrial scientists collude or I don't know what word you want to use exchange information all the time even competitors it's a straight quip pro pro just like academic scientists Von Hippel showed for example a few stele makers in America a level of them routinely met discreetly and exchange information as quip pro quips it's a very nice model economically there is actually shared knowledge among scientists one of the leading economists of science I don't know the names because it's born really but he's shown that there are no industrial secrets in America or in Britain or in the west scientists at the level of research in companies exchange so much information that no secrets exist more than by the year and a half you may believe that Coca-Cola's formula or Kentucky Fried Chicken's formula is a secret Pepsi knows what it is and so does everybody else these secrets don't exist but what there is is proprietary knowledge and technology so all the scientists are always exchanging knowledge but once you develop the product then you get competition with other marketing and almost perfect economic model for economic growth so to conclude not only is there no evidence that the government funding of science benefits there's actually evidence from France and Germany to say nothing of Russia or India which had huge government programmes then it might actually damage and the reason it would damage is it's based on the wrong model science is not a public good or not a bad thing scientists are not atomised competitors actually scientists have learnt from 1662 onwards and industrial scientists today why do you think they congregate in Science Park why do competitors congregate in Science Park it's to exchange information even though they're competitors scientists discovered a very long time ago that their own self-interest is assured that they share knowledge with competitors because the ones that don't share knowledge whether academic scientists looking for their nobles or business artists looking for money it's the ones that don't share that will absolutely get left behind so the model is wrong and there's no evidence to show it's right and why why has no one established this I think the answer is a very disgraceful one I have spoken to the leading economists of science and really pressed them and I really think it comes down ultimately to popularity and a desire not to be unpopular there is no vested interests apart from the general taxpayer and we know what happens to them there is no vested interest to defend SFN science the politicians love funding science because for relatively small sum of money they can do what Clinton and Blair did to stand together and claim that they funded the human genome they can send men to Mars the moon and claim they love it scientists love it because it's irresponsible much nicer if they get money from the government to do what you want to do than actually do something socially useful industry loves it because it sees it as a one way corporate subsidy welfare everybody loves it apart from some of the people in this room thank you very much