The University-Government Complex
Overfunding federal research has led to scientism and stagnation
In the CSPI Essay Contest: Policy Reform for Progress, this essay won an honorable mention.
This essay will propose certain reforms Congress can undertake to revive the innovative and entrepreneurial spirit that propelled the economy to outstanding prosperity in the past.
Economist Tyler Cowen has declared that the extraordinary explosion of innovation in the United States in the period roughly from 1850 to 1970 was a fluke in human history, at least partly because such fundamental technologies as railroads and electric power arrived at a time when America had lots of free land and a rapidly growing population. He called the practical inventions that propelled American prosperity “low-hanging fruit.” There are good reasons to question this analogy, but the data clearly show differences between the two periods.
This essay posits that the return to lackluster improvements in productivity beginning around 1970 was not a return to normalcy but traceable to several factors that require remedies on the federal level.
Economists measure the effects of innovation and entrepreneurship in terms of productivity increases and as part of Total Factor Productivity (TFP), which includes the effects of investment in new technology. These measures show significantly reduced rates of increase in recent decades – that is, at the same time government research funding increased significantly. This does not prove an etiological relationship, but there are other correlations to be discussed below.
In a review of university research, Michael S. Teitelbaum observed that the present predominantly federally funded system evolved from a mainly fellowship funded model.1 In 1944, the eminent scientist Vannevar Bush wrote a report titled “Science: the Endless Frontier,” recommending the establishment of a “National Research Foundation,” which would financially support students and universities rather than wholly government-owned research laboratories. The idea was embraced but has evolved into a system of greatly increased funding of research to serve a vision of sustainability rather than productivity enhancement.
Teitelbaum’s book is mainly about the boom and bust history of employment for scientists and engineers, but also pointedly says “US research universities are widely admired around the world for their high level of research productivity” and “On balance, it is fair to say that the US system has been a triumph of major proportions.”2
This is the almost universal opinion in academia, buttressed by statistics on the numbers of startup companies founded with grant-supported research, numbers of patents, stories about “basic” breakthroughs and exotic technologies, groundbreaking papers, and so forth. In their embrace of research, American universities are far from the “comatose” state noted by the eminent British historian Paul Johnson, referring to British universities during Britain’s famous industrial revolution.3 Research in American universities is booming because of federal subsidies, but the economy does not seem to notice. University research has little or no effect on the economy because it is directed by elites who are out of touch with the needs and desires of the marketplace.
In Dwight D. Eisenhower’s presidential “Farewell Address” on January 17, 1961, he famously warned of the “military-industrial complex.” Not as well remembered has been his admonition that “The free university, historically the fountainhead of free ideas and scientific discovery, has experienced a revolution in the conduct of research. Because of the huge costs involved, a government contract becomes virtually a substitute for intellectual curiosity.” The “domination of the nation’s scholars” by the power of federal money was a danger “to be gravely regarded,” as was the danger that “public policy could itself become the captive of a scientific-technological elite.”4
More than sixty years later, it is time to look again at the relationship between the universities and the federal government, which has become what I call the “University-Government Complex.”
The University-Government Complex
Around 1970, federal funding of research at universities began to increase noticeably, and further accelerated after the passage of the Bayh-Dole Act of 1980. The National Science Foundation was not the only source of funding – the NIH, and cabinet departments such as the Departments of Energy and Defense, also greatly increased funding. Federal money dominates, and an elite class dictates the course of research.
President Eisenhower was ignored. But consider the following more recent comments from Nobelist Edmund Phelps:
In the medieval past, (it was) supposed, attempts to innovate were directed by the economy’s communal authority, with results generally along the lines of what the community had hoped. When such communal goals came to be largely crowded out by the unannounced, largely unobserved, and often inscrutable initiatives of a welter of individuals and companies in the business sector, the economy could be said to have been left rudderless, which gave rise, understandably enough, to a sense of disorder. And that sense, no doubt, lay behind some of the unease felt across Western Europe in the last years of the 19th century and the early decades of the 20th. The desire for direction (for dirigisme, as the French said), was a major strand of corporatist thought.
This is the doctrine dubbed techno-nationalism by Richard Nelson. It is one manifestation of the more general belief called scientism – the belief that scientists, equipped with the tools of their science, more effectively advance the flowering of new products and methods than do the diffuse and poorly directed initiatives taken in a free enterprise economy. It was under Mussolini in 1923, then prime minister, that Italy founded its Consiglio Nazionale della Ricerche, a full 27 years before America’s National Science Foundation.5
The nationalistic Mussolini-imitating visionaries, who supply the dirigisme of American university research, are not good for the economy.
Prior to the enactment of Bayh-Dole, government-funded research at universities was notoriously unutilized in commerce, primarily because of a policy that profit-seeking entities should not benefit from publicly funded research. Therefore, the reasoning went, even if an invention was patented, anyone could use it; no entity could have exclusive rights. The new Act sensibly recognized that no one wanted to invest in an untried idea if it could be immediately copied, and that there should be a way for government-funded inventions to be commercialized so that their benefits could be seen in the public sphere.
Under the Bayh-Dole Act, typically, a professor known as the Principal Investigator (PI) is appointed by a university to undertake a research project funded by the government. Often using equipment paid for by the grant, and with free graduate student help, he invents something and the university patents it. Being a “non-profit” entity,6 the university cannot commercialize the idea, so the professor forms a company – a startup – and the university grants it an exclusive license that requires royalty payments to the university. The royalty income, highly profitable by any accounting standard, is by law not taxable to the university. The university is, however, required to share perhaps 30% of the royalty with the inventor(s). So the professor collects his royalty share as well as the stock options and salary typical of the usual startup company. The contrast with the risks taken by the traditional entrepreneur-inventor is stark.
What Are We Funding?
Government entities such as the NIH and the Department of Energy have goals relating to their fields and solicit applications for grants accordingly. In recent decades, the Department of Energy’s choices have been driven by climate warming convictions bordering on hysteria. Many NSF subjects are also climate or environmentally oriented, often attempting to influence drastic changes in energy usage.7
But after noting, among other eyeopeners, that “Greenland’s ice sheet isn’t shrinking any more rapidly today than it was eighty years ago,” Steven E. Koonin, former Undersecretary for Science in President Obama’s Energy Department and ranking member of various international committees on climate change, wrote:
The earth has warmed during the past century, partly because of natural phenomena and partly in response to growing human influences. These human influences (most importantly the accumulation of CO2 from burning fossil fuels) exert a physically small effect on the complex climate systems. Unfortunately our limited observations are insufficient to usefully quantify either how the climate will respond to human influences or how it varies naturally. However, even as human influences have increased almost fivefold since 1950 and the globe has warmed modestly, most severe weather phenomena remain within past variability. Projections of future climate and weather events rely on models demonstratively unfit for the purpose.8
In his book, Dr. Koonin deplores the hyperbolic and apocalyptic predictions not only in the popular media, but especially from governments and scientific sources.
Scientists from academia are tapped for positions in the NSF, where they write solicitations for projects doling out billions to their ideological colleagues. This article cannot begin to document the hundreds or thousands of recent grant proposals and requests that seem like parodies or satires, such as the one partly reproduced in this footnote9 listing the “grand challenges” of the überclever homonymic acronym INFEWS (Innovations at the Nexus of Food, Energy and Water Systems) that must be met. One writing a grant proposal in response will be careful to use the reverent upper-case E for “earth,” and to stifle the urge to hint at future renewals of the grant when it becomes undeniable that the quest for “sustainability” is never-ending. At the same time, a commonsense engineer in a regional sanitary authority, simply trying to find a site for a new sewage plant, can only wonder if the world has gone mad.
There is a closely followed “success rate” for research grants – not necessarily for the research, but for obtaining grants. The success rate has declined by 50% recently because competition among research universities has accelerated. Some schools have graduate courses in grant writing. Experience in the granting agencies of government is a plus for applicants for positions in universities. Patent attorneys and technology transfer specialists proliferate in the universities, such that patenting occurs at a rate per research dollar far above that of private industry. But inventories of unlicensed patents pile up because many of the patents are on inventions that no one wants. Rent-seeking and public choice principles are on vivid display throughout the University-Government Complex.
Too much of America’s fortune and talent are squandered on useless effort.
Here is What Congress Could Do:
Abolish the National Science Foundation. It has not increased productivity in the economy. Its attempts to advance so-called renewable energy seldom take the kinds of practical approaches private industry would; they lead to never-ending public subsidies, a major drag on the economy. Its abuse is beyond redemption.
Drastically reduce research expenditures in cabinet departments on energy research. Trust that traditional incentives will encourage private investment in what the public wants and needs. Oversight could be strengthened for specific entities such as NASA.
Recognize that universities are profit-making. “Stakeholders” such as administrators and professors benefit financially. Revise the tax laws accordingly.
Follow the advice sometimes attributed to that great contemporary philosopher Clint Eastwood: “Don’t just do something – stand there!” And watch the market work – again.
William L. Krayer is a semi-retired intellectual property lawyer and past president of the Pittsburgh Intellectual Property Law Association.
Read the other prize-winning essays from the CSPI Essay Contest:
“Gathering Steam: Unlocking Geothermal Potential in the United States” by Andrew Kenneson
“Mo’ Money Mo’ Problems” by Maxwell Tabarrok
“Drone Airspace: A New Global Asset Class” by Brent Skorup
“It’s Time to Review the Institutional Review Boards” by Willy Chertman
Teitelbaum, Michael S. 2014. Falling Behind? Boom, Bust & the Global Race for Scientific Talent. Princeton University Press. p. 158.
Ibid. p. 190.
Johnson, Paul. 1991. The Birth of the Modern. Harper Collins. p.572.
As quoted in Smith, Jean Edward. 2013. Eisenhower in War and Peace. Random House. p. 760.
Phelps, Edmund. 2013. Mass Flourishing. Princeton University Press. p. 138.
Non-profit status is specifically conferred on universities by statute. 35 USC 201(i). Universities also have “small entity” status and even can get Orwellian “microentity” status which entitles them to greatly reduced Patent Office fees. Since the Patent Office is self-sustaining (that is, supported almost entirely by applicants’ and patentees’ fees), universities are subsidized by their competitors in commerce.
Improvements in energy efficiency are not a monopoly of environmentalists. This has been a major goal of engineers and their professional ancestors, such as millwrights and the inventor of the wheel, for millennia.
Steven E. Koonin. 2021. Unsettled – What Climate Science Tells Us, What it Doesn’t, and Why it Matters. BenBella Books. pp, 2, 24.
Humanity is reliant upon the physical resources and natural systems of the Earth for the provision of food, energy and water. It is becoming imperative that we determine how society can best integrate across the natural and built environments to provide for a growing demand for food, water and energy while maintaining appropriate ecosystem services. Factors contributing to stresses in the food and energy and water (FEW) systems include increasing regional and social pressures and governance issues as result of land use change, climate variability, and heterogeneous resource distribution. Interconnections and interdependence associated with the FEW nexus create research grand challenges for understanding how the complex, coupled processes of society and the environment function now, and in the future. To meet these grand challenges, there is a critical need for research that enables new means of adapting to future challenges. The FEW systems must be conceptualized broadly, incorporating physical processes (such as built infrastructure and new technologies for more efficient resource utilization), natural processes (such as biogeochemical and hydrologic cycles), biological processes (such as agroecosystem structure and productivity) social/behavioral processes (such as decision making and governance), and cyber-components (such as sensing, networking, computation and visualization for decision-making and assessment). Investigation of these complex systems may produce discoveries that cannot emerge from research on food or energy or water systems alone. It is the synergy among these components in the context of sustainability that will open innovative science and engineering pathways to produce new knowledge, novel technologies and predictive capabilities to solve the challenges of scarcity and variability.
The overarching goal of INFEWS is to catalyze well-integrated interdisciplinary and convergent research to transform scientific understanding of the FEW nexus (integrating all three components rather than addressing them separately) in order to improve system function and management, address system stress, increase resilience, and ensure sustainability.