Role of State Funding of R&D, and the Costs of Funding Research

Some thoughts on Martin Wolf and Prof. Mariana Mazzucato assertions on state funding of R&D,  and on the Times Higher Education Innovation Index – my article was published in the Irish Times on 19th August last….

On August 7th last, this paper reprinted with permission from The Financial Times Limited, an article by Martin Wolf entitled “Much-aligned state takes the boldest risks in innovation”. His piece reviewed the book ‘The Entrepreneurial State: Debunking Public vs Private Sector Myths’, by Mariana Mazzucato, a Sussex university professor of economics who specialises in science and technology. His essay noted that governments (eg in the USA and the UK) have funded, through their science agencies, major research breakthroughs using taxpayer funds, including the discovery of monoclonal antibodies by the UK Medical Research Council; the US National Science Foundation’s funding of what became the Google search engine; and all the technologies which make Apple’s smart phone ‘smart’ – the internet, wireless technologies, GPS, microelectronics, touch-screen displays, and even the SIRI personal assistant.

Mr Wolf argued that far from a symbiotic ecosystem of evolution between the state, academia and industry, rather a parasitic one has evolved in which the costs of failed research are born by taxpayers whilst successful research is profitably exploited by the private sector. The state’s role in research has become important because of the risks and uncertain timescales of fundamental, science-based innovation. If taxpayers fail to appreciate the economic impact of publicly funded research, then political support for science may wither. His piece concludes that a failure to acknowledge the role of state funding of science may lead to diminished funding, and consequently damage future economic prosperity.

There is credence in Wolf’s review. However – and I have not read Mazzucato’s thesis – the elephant in the room so deftly ignored by Wolf is the public funding of science for national security. Most, if not all, of the component technologies listed above by Wolf which make Apple’s smart phone ‘smart’, in fact have their primary application directly in the defense of the United States. Private sector exploitation of publicly funded science is frequently a useful consequence – ‘useful’ in that governments seek to procure packaged products for national defense rather than just raw technology, and the engineering of scientific research results into operational products is most economically driven by competitive industry.

Concurrently with Wolf’s effusive review of Mazzucato’s book, the Times Higher Education (THE) published their World Academic Summit Innovation Index. Based on their 2012-13 World University Rankings of 400 universities in thirty countries, THE divided the research income from industry for each university, by the number of employed researchers. They thus derived the industry sponsorship per researcher. South Korea’s six universities (in the global top 400) show an average of €74,000 income per researcher. Ireland’s five universities (in the 400) collectively come last out of the thirty countries involved, with an average of just €6,000 per researcher.

There are some obvious shortcuts in THE’s analysis. Only a subset of each nation’s universities are considered (just those making the global 400). Both consultancy income from business, and royalties and/or equity from commercial licensing are ignored. Nevertheless the analysis led to much critical comment, and perhaps some consternation not just here in Ireland but also elsewhere.

On the other hand, although Ireland may have been last in the ranking of thirty nations for commercial funding per researcher, clearly Ireland is nevertheless doing something right. Ireland is one of the world leaders for foreign direct investment. Clearly Ireland’s academic system is helping attract and retain global multinationals in Ireland. Thus, the real story for Ireland from the Innovation Index of THE may not be the commercial funding per researcher, but its reciprocal – the number of researchers supported for a given amount of commercial funding. The analysis from THE then shows that Ireland leads thirty countries: it is far more cost effective for industry to fund multiple researchers in Ireland than in many countries, and especially compared to South Korea. The fiscal efficiency of Irish researchers for multinationals – the ‘roster bang for the buck’ as compared to other nations – is indicative of the relative funding of researchers by the state versus industry, on international comparisons of scientific remuneration and capital investment, and of researcher demographics.

Ireland clearly does not have the national fiscal resources of the more populous states to fund science, nor does Ireland concern itself with scientific research for national defense and security. Nevertheless, Irish taxpayers have spent a considerable sum on publicly funded research since the creation of Science Foundation Ireland in 2003. In 2010 alone, Forfas reported a figure for Ireland of €870M (about 0.67 percent of GNP). One direct benefit for Irish taxpayers has indeed been the continued momentum in foreign direct investment, in part driven by well-trained researchers. Nevertheless, it is disappointing that hitherto there have yet to emerge world-leading Irish brand names based on Irish-funded scientific discovery.

Concurrently with the Wolf article and the analysis from THE, in the last fortnight two major private sector innovations received global publicity. In the United Kingdom, Reaction Engine’s Skylon project is building a 27,000 km/hr highly-reusable spaceplane. In the United States, Elon Musk (who founded PayPal, Tesla cars and SpaceX private space vehicles) announced details of his 1,300 km/hr Hyperloop train. When will an Irish team ever announce an ambitious – yet feasible – innovation that grabs the world’s imagination?

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About chrisjhorn

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