Science and the Entrepreneurial State

The title of this post is adapted from Mariana Mazzucato’s book “The Entrepreneurial State,” published in 2013, and in which she successfully – at least in my view – debunks a number myths that modern capitalism has impressed upon most of us concerning the role of private entrepreneurs in innovation. I am attempting below to link that discussion with the need for public investments in science.

I hope I will be forgiven for extensively quoting from Mazzucato's brilliant work.

Science is risky

This statement is true inasmuch as science cannot really guarantee a return on investment, at least not in financial terms within a predictable timeframe. It does not serve this purpose. Science is a “public good, difficult to appropriate” (Mazzucato 2013).

Eventually, the return on investment of science can nevertheless be measured in various ways, monetary, societal, cultural or even as the mere “luxury” afforded by developed societies in exploring the unknown. But the time horizon is unknown, as is unknown whether this return will ever take place.

It might be argued that certain domains of science are more prone to enabling applications, such as biomedical research or materials science rather than, say, medieval history, string theory or cosmology. But I am not even sure that this is the case. Applications seem to be able to spring up totally unexpectedly from the least probable areas: an X-ray based camera developed for theoretical astrophysics missions that is being used in medical imaging; the Global Positioning System that is so commonplace today and that is a direct consequence of Einstein’s most fundamental, most arcane theory: General Relativity – except it took 80 years to materialise!

This is why science – basic research – is risky. This is also why the private sector, although it can and does support fundamental science in various areas, is not the best vessel to accompany basic research as it should be: throughout all domains, at all times, and without any consideration for short-term applications or the number of patents that a given domain of research can hope to file.

The State as the science business angel

The basic reason why the above is true is that, despite an assumption commonly accepted for a few decades, the private sector is most adverse to risk-taking, precisely because of the associated financial uncertainties. Not so the public sector, whose role is precisely to foster and support innovation through a risk-based approach that private companies cannot afford. As highlighted by Mazzucato (page 32, note 2) “…the State has…provided important directionality in its spending, increasing the animal spirits of the private sector by investing in areas that the private sector fears.”

Mazzucato describes 5 of the myths alluded to at the beginning of this post. Having no claim on any academic knowledge about economy, I will not discuss those, save for the main finding that the State is –or should be – in the best position to take risks and pave the way for future investors and companies to reap the benefits of bold and crazy explorations.

People often take the view that the US are the champions of wild capitalism, of bold entrepreneurs that do not – and do not want to – use the State, and who would stand as the real innovators, while the “useless” State is relegated to the bureaucratic role of regulator and tax collector or, at best, of simple support to the free market. This is another myth. The US is not a “hands-off” state, but rather takes an active part in the market landscape and in directed support to the innovation chain. It is because the US economy is actually one of the most protectionist that it enabled smart and risky interventions from the State (DARPA, DoE or DoD are quite prominent examples in the USA), leading to the development of modern-day disruptive technologies, which have been matured and then made available for subsequent uptake and profit-making by the market.

I am here again borrowing heavily from Mazzucato’s book and the examples she highlights in her demonstration. She indicates (page 87) that “…without the massive amount of public investment behind the computer and Internet revolutions, such attributes might have led only to the invention of a new toy – not to cutting-edge revolutionary products like the iPad and iPhone which have changed the way that people work and communicate.”

And she goes on to look at how State-funded research made possible Apple’s inventions. On this issue it is remarkable to look at the US White House’s Office of Science and Technology Policy 2006 report  on the American Competitiveness Initiative that maps the public sector’s origin of major innovations that made possible a well-known MP3 device. Interestingly enough, one of those major innovations comes from CERN, in Europe…

So what about science?

Just as innovation can be fostered by the State through a risk-based approach, sponsoring ideas in science that may appear crazy – certainly too crazy to attract any funding from private entrepreneurs or business angels – requires a similar approach. There is often the tendency to separate so-called “blue-sky research”, the science that does not generate any foreseeable applications, from the science that is, or can be, immediately applied with identifiable prospects for patents and industrial products. This allows coming to the conclusion that metrics are necessary to gauge the “impact of research”, whether it is blue-sky or applied. Indeed the right metrics would be useful to judge the impact of basic research and support informed decision-making by scientific stakeholders and policy-makers.

The problem however with fundamental research is that it is fundamentally difficult to rate, as is difficult the comparison between different fields and topics. This is because the outcome of basic research is by nature unpredictable, both in terms of application domains and of timeline. Trying to constrain basic research by attaching too rigid impact measurement practices and metrics carries with it the risk of discouraging creativity and young researchers. Those metrics could also lead to the suppression of funding in potentially valuable areas that would be deemed unproductive on the face of short-term assessments while, as we have seen at the beginning of this post, revolutions sometimes take decades to occur.

Yet various means do exist to better understand the link between basic research and prosperity. It is a known and demonstrated fact that growth derives from investments in R&D and in basic research (see, e.g. Bochove 2012 ). So, should certain “right” metrics be used by science stakeholders to decide what to fund and what not to fund? No – growth benefits from investments made in basic research in a generic way, across the board of all scientific fields, and these efforts need to be sustained permanently. As indicated in van Bochove’s paper (page 1), “Directing basic research towards economic opportunities is detrimental to growth and may reduce the growth rate by as much as one half…”

There you have it: nobody but the “Entrepreneurial State,” through approaches already successfully tested in the US or novel ones, can afford to be crazy enough, foolish enough, to fund curiosity-driven research, basic research, fundamental research, whatever you want to call it!

Science is, once again, to "boldly go where no one has gone before."

Is this entrepreneurial enough...?

 

Image credit: By Kārlis Dambrāns - Flickr: HTC One Max, CC BY 2.0, commons.wikimedia.org/w/index.php

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