Government R&D is central planning – it crowds out innovation and is subject to rent-seeking

Hall = J Storrs Hall, Chief Scientist of Nanorex, Inc, and Research Fellow of the Institute for Molecular Manufacturing

Hall’s indictment of modern innovation policy does not end with regulatory encumbrances. He is equally critical of government research and development (R&D) efforts. “One of the great tragedies of the latter 20th century, and clearly one of the causes of the Great Stagnation,” he argues, “was the increasing centralization and bureaucratization of science and research funding.”

Hall identifies two problems with over-centralized government funding of science: It can lead to a stodgy, insular system in which the old guard protects its own interests, and it can also crowd out private-sector funding efforts. He says “ivory-tower syndrome”—a closed-mindedness and protectionist instinct among those who benefit from a well-settled status quo—has crept into federal R&D programs and agency funding processes. “Centralized funding of an intellectual elite makes it easier for cadres, cliques, and the politically skilled to gain control of a field, and by their nature they are resistant to new, outside, non-Ptolemaic ideas.” He is particularly critical of how this don’t-rock-the-boat mentality has set back research on cold fusion, where the old guard threw up roadblocks to potentially important research. “The ivory tower has a moat full of crocodiles,” he says, and “we increasingly have major social institutions whose prestige comes in substantial part from virtue signaling rather than actually producing useful results.”

Worse yet, Hall says, is the crowding-out effect created by federal R&D programs. To those who claim massive government R&D is needed to spur innovation and growth, he says “the evidence simply does not support the conclusion.” Hall points out that “the great innovations that made the major quality-of-life improvements came before 1960 . . . and they were all developed privately.” He recites a long list of such inventions: refrigeration, vacuum cleaners, gas and electric stoves, fertilizer and almost every media and communications technology.

He notes that the Great Stagnation has coincided with a massive increase in federal science funding, and that the most explosive periods of innovation and growth in both the U.S. and Britain came when the countries “were squarely in laissez-faire mode.” The issues of over-centralized science bureaucracy and turf-protecting constituencies further exacerbate the crowding-out problem.

It is hard to see how this problem will be reversed with industrial policy experiencing a major resurgence in the U.S. and Congress considering a 2,300-page, $250 billion, pork-laden Innovation and Competition Act. Despite all the evidence supporting Hall’s indictment of past government support measures, the tech pork barrel appears ready to roll on.