Taxpayers have a large, unacknowledged role in the nation’s innovation.

Taxpayer-financed research can generate large rewards down the road. Every $100 million invested in research by the National Institutes of Health, according to the R&D consulting firm Battelle, generates almost six patents. At the National Science Foundation $100 million generates more than 10.

At the National Institute of Biomedical Imaging and Bioengineering — which finances research in radiology — it produces almost 25 patents. And these patents sparked $578.2 million worth of additional R&D further downstream.

Science is, of course, a public good. It produces better health, first rate universities and a robust economy supporting more jobs and tax revenues. The government’s investment in basic research can be justified by these social benefits. Private companies are unlikely to invest in such risky projects, which at best offer a long shot at financial rewards many years down the road. In light of the limits to federal funding access for same research, philanthropic organizations and some state governments have stepped in to support.

President Obama has reversed same barriers to human embryonic stem cell research. After President Obama’s executive order in 2009 overturning these Bush-era constraints, federal funds can now be used for research on any hES cell line that is found to meet the NIH’s strict ethical policies. However, it is still not possible to create new hES cell lines from viable embryos using federal funds, and verifying that hES cell lines were derived from donors who provided informed consent — which is essential for NIH approval.

Perhaps the taxpayer could reap a share? In an era of tight budgets, this could finance the research to power American innovation. The argument has been made most forcefully by Mariana Mazzucato, a professor of economics at the University of Sussex in Britain who specializes in science and technology policy. She argues that the distribution of risks and rewards in the American economy looks nothing like the myth spun by free-marketeers, which posits a nation populated by entrepreneurial risk-takers overcoming the obstacles thrown up by an overbearing, bureaucratic state to produce the innovations that spark economic growth.

Taxpayers have a large, unacknowledged role in the nation’s innovation. Still, the argument that the government has a stake in innovation could be exploited further.

Source: NYTimes May 26, 2015.  Government R&D, Private Profits and the American Taxpayer

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