Long Live Government Research
Like Nuclear Fusion
I’m not going to pretend like I’m a physicist, or that I really know anything at all about nuclear physics. One of the few things I do know is that people have been fantasizing about nuclear fusion for decades.
And now it’s a real thing. And the United States government did it.
I’ll let people smarter than me tell you about the differences between nuclear fission and nuclear fusion, and why this was so hard, and why it means amazing things for energy production once the technology is developed.
From my perspective, sitting in an economist’s chair, the lesson to learn from this is about research. The federal government can and should play a really important role in the research and development of technology. It used to play a much larger role than it currently does, and it should do so again.
Sometimes profit maximization creates a common welfare problem for markets. The core issue is this: if a company can easily develop a product that will greatly increase common welfare, but may not be able to generate profit, will they develop that product? If they do, will they make that product public and sell it?
The classic example here is Xerox.
What, what? They copy machine company?
Yes, the copy machine company. In their early days, Xerox was not just a tech leader but the tech powerhouse. They pioneered the Graphical User Interface (GUI) we all know and love that is now standard for all personal computing, whether on a PC, tablet, or smartphone. Most people had forgotten this until Walter Isaacson released his Steve Jobs biography. In 1985 Jobs accused Bill Gates of stealing his idea when the first version of Windows was released. Gates’ response is now pretty famous:
Well, Steve, I think there's more than one way of looking at it. I think it's more like we both had this rich neighbor named Xerox and I broke into his house to steal the TV set and found out that you had already stolen it.
When Gates was asked later to discuss who copied whom between he and Jobs, he elaborated.
The main "copying" that went on relative to Steve and me is that we both benefited from the work that Xerox Parc did in creating graphical interface - it wasn't just them but they did the best work.
Gates found a way to make a profit from GUI where Xerox couldn’t, and it completely flipped the trajectories of each company. Even Jobs couldn’t find a way to monetize GUI—he had attempted to sell his Mac PCs, where Gates went with the licensing strategy. This turned out to be a far better business decision. Apple as a computer company was fledgling at best until Jobs dreamed up the iPod in 2001.
And therein lies the common welfare problem. What CEO wants to be Xerox—making a life changing product only to see their competitors make mountains of profit from it while they lose out completely? Because of this, few companies pursue research and development that their competitors might easily benefit from. Many inventions are what economists call public goods. Public good is anything that is non-excludable and non-rival—meaning it can’t be limited to just paying customers and my use of it does not mean that you cannot also use it.
I can use an invention in my factory, but that doesn’t stop you from using it in yours, so it is non-rival. And, once you know about the invention, I can’t keep you from using it just because you don’t pay for it, so it is also non-excludable.
Perhaps as important as Xerox Parc was Bell Labs. Again, we have the Xerox problem. Bell Labs produced some of the most world changing innovations of the 20th century. Things like vacuum tubes, transistors, fibre optic cables, and it even played a big role in satellite communication. Bell became AT&T, and while in a much better state than Xerox, you might have noticed they haven’t produced any serous tech advancements lately.
So, with this public good problem dissuading corporate research from common welfare advancements, who does the research for common welfare? The biggest player is government, including government funded universities.
I know it’s popular in economic and policy circles to say the government is evil and the less it does the better. But I couldn’t disagree more. Governments are in the best place to do common welfare research because they are not in competition with anyone. In fact, for a government, it is ideal if everyone takes their ideas and uses them to make profit. The more companies that do this the better. To make profit from a government invention the companies will have to compete with each other to make the invention better, or sell it for cheaper than their competitors.
Rather than belabor the point with more boring economics, perhaps the most convincing argument for government doing more stuff is a short list of inventions that came directly from federal research or grants. This list is by no means exhaustive, this is just the first few I thought of off the top of my head.
Nuclear bombs, which also led to nuclear energy.
Supercomputers
Microchips
LED lights
The internet
GPS
MRI Machines
Radar
Touch screens (believe it or not the CIA, of all agencies, was the funder here).
Hydraulic fracking.
Human gene sequencing and thereby DNA testing.
Self driving cars.
Many vaccines—flu, Hep B, HPV, and Covid come to mind right away.
Even Google and Tesla exist because of government funding and research.
Now, if you noticed that most of this list consists of inventions from quite a while ago, then you’ve already grasped the central argument I’m making here today. When I was a kid everyone was so sure flying cars would be a thing. But the pace of technological advancement has leveled out, or even declined. We have no flying cars—The Jetsons still seems as futuristic now as it did in the 90s. I talked about Brad DeLong’s book recently, and he places the date of the end of the broad tech boom to 2010. Government has cut research and development by about 1/3 in the last few decades. Is it any wonder that we haven’t seen more advancements like nuclear fusion?
The capitalist marketplace puts government in the perfect place to be the largest hub for research and development. Just a handful of those inventions I listed are responsible for increasing economic productivity more than just about anything else in the last century. This phenomenon isn’t limited to internet or computer dependent/derived industries. Even farming has become more productive and efficient with GPS driven tractors and computer run irrigation.
Government should do more R&D. What corporate company would take on the years (decades?) long task of nuclear fusion, with the associated billions in cost, just to be copied as soon as it is discovered? I can’t think of one. What company would have invented the internet, then just watched as the whole world used it? I can’t think of one. Government research is essential for common welfare advancements, and we need more of it.
Next time someone tells you the government shouldn’t exist, and private companies should take over all government functions, tell them to pull out their microchip run, GPS enabled, LED lit, handheld supercomputer with touch screen, and ask Google to get them some education.
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