Yes, but that’s a tiny fraction of the issues you list above. Unless I’m misreading you. By for example deadweight cost of taxation, you mean the deadweight loss of the portion of taxes that go to fund academic research?
Taking that sort of interpretation throughout, I’m still not sure what your point is. Can you be more explicit and maybe use full sentences?
You stated that academics aren’t easily funded by the private sector because of an externality argument. I agreed that it is possible to argue that “basic research” or some such is underprovided by the market, because the private sector may not be able to capture all externalities, and that this is in some sense a market failure. However, I am saying that:
No-one can say how by much the private sector is underproviding. Therefore even if the intervention were done by angels, it is as likely to make things worse as better.
Government intervention will cost money, resulting in deadweight losses through tax.
The creation of a powerful body of rent-seeking will cause academic research to be massively oversupplied
Moreover “research” is not a fungible good; the money and resources will not necessarily go to the most useful areas, but to the most politically convenient ones
The rent-seeking will also have deadweight costs (e.g. academics spending lots of time writing grant proposals, taxpayers having to organise to prevent themselves getting robbed blind)
This will also incentivise rent-seeking elsewhere (if the academics are successful in asking for a subsidy, it encourages the farmers)
The adoption of the subsidy discourages market participants from finding new ways to capture the externality.
So, even though there may be a textbook “market failure,” there is no reason for any intervention. Dissolve the modern-day monasteries, and let academics prove their use, if they can. And indeed, I’m sure Alvin Roth would be just fine if we did.
No-one can say how by much the private sector is underproviding. Therefore even if the intervention were done by angels, it is as likely to make things worse as better
No. We can make such estimates by looking at how helpful basic research was in the past.
Government intervention will cost money, resulting in deadweight losses through tax.
Sure. How much?
The creation of a powerful body of rent-seeking will cause academic research to be massively oversupplied
That’s a danger certainly, but what evidence do you have that that’s happening?
Moreover “research” is not a fungible good; the money and resources will not necessarily go to the most useful areas, but to the most politically convenient ones
The areas where politics has heavy aspects are actually the areas with the least government funding. For example, physics has a lot of government funding, whereas most of the humanities and social sciences have comparatively little. Thus, the politics comes into play primarily through the interaction with outside donors with agendas. That’s how you get virulently anti-Israel attitudes in Middle-Eastern studies due to funds from rich Saudis and you get Israel studies as a subject which is about as ridiculously biased in the other direction for the same reason. Political problems in the sciences are rare.
The adoption of the subsidy discourages market participants from finding new ways to capture the externality.
We have theorems and a lot of empirical of how externalities interact with markets. If you think there’s something wrong with that vast body of literature, feel free to point it out.
This will also incentivise rent-seeking elsewhere (if the academics are successful in asking for a subsidy, it encourages the farmers)
Is this a serious argument?
The rent-seeking will also have deadweight costs (e.g. academics spending lots of time writing grant proposals, taxpayers having to organise to prevent themselves getting robbed blind)
Yes, grant proposal writing is annoying and often a waste of time. Question: What fraction of taxpayer money is going to academic research?
No. We can make such estimates by looking at how helpful basic research was in the past.
At this point I think I have to cite Use of Knowledge in Society, Hayek, 1945 link.
Sure. How much?
Where I live, we spend approx $4bn per year (0.64% of GDP) on state-funded research (note that this figure is conservative because it doesn’t include the way that higher education funds get siphoned off into research). Conservatively then, let’s say $1bn in deadweight loss annually, just in this country—and our state-funded research is low compared to most OECD countries. If we extrapolate this figure to the world economy, we get a deadweight loss of approx $127bn annually, just due to government research spending. That’s a lot of bednets.
The areas where politics has heavy aspects are actually the areas with the least government funding… political problems in the sciences are rare.
I am not talking about partisan clashes. I am talking about money being spent on worthless projects because they seem cool or win votes. NASA has a budget of almost $18bn!
Is this a serious argument?
Of course it’s a serious argument—subsidizing one group of rent-seekers encourages others. I am of course being a little facetious in the sense that both the academics and the farmers already have their snouts deep in the trough.
At this point I think I have to cite Use of Knowledge in Society, Hayek, 194
Sorry, I’m not following. You are citing Hayek to argue what here?
Sure. How much?
Where I live, we spend approx $4bn per year (0.64% of GDP) on state-funded research (note that this figure is conservative because it doesn’t include the way that higher education funds get siphoned off into research). Conservatively then, let’s say $1bn in deadweight loss annually, just in this country—and our state-funded research is low compared to most OECD countries. If we extrapolate this figure to the world economy, we get a deadweight loss of approx $127bn annually, just due to government research spending. That’s a lot of bednets.
Ok. So we have less than 1% of GDP going to state-funded research. And where is that going to go?
I am talking about money being spent on worthless projects because they seem cool or win votes. NASA has a budget of almost $18bn!
Projects seeming “cool” is a very different claim than political rent-seeking. In this case though, looking at the overall NASA budget isn’t very helpful: First, much of that budget is not going to what would be considered academic research. Second, you are talking about the space program of one of the world’s largest economies, so the total cost is a misleading metric. Third, technologies developed by the US space program (especially GPS, communication satellites and weather satellites) have had large-scale world-changing impact.
Of course it’s a serious argument—subsidizing one group of rent-seekers encourages others.
It often doesn’t, and the case you’ve picked is a really good one. In the US, many of the people getting farm subsidies are people who are rural and if anything anti-ivory tower. A large fraction would probably be turned off of the idea of government subsidies if it was compared to what those East Coast intellectuals were doing. (I’m engaging in some broad brush strokes here obviously but some people like this do exist.) This sort of thing is connected to why many groups (including farmers) have tried to get their money through tax breaks rather than direct subsidies. Of course, from an economic perspective, tax expenditures are identical to subsidies. But people don’t like to think of themselves as getting handouts so they prefer tax breaks (at least in the US).
By the way, my point earlier about only a small fraction of tax money going to academic research was (to be clear) about the claim that academic research would necessitate tax policy watchdog groups.
Sorry, I’m not following. You are citing Hayek to argue what here?
That no central planner can know how much “ought” to be spent on research.
Ok. So we have less than 1% of GDP going to state-funded research. And where is that going to go?
I don’t know what people would spend their own money on. That’s the whole point.
Projects seeming “cool” is a very different claim than political rent-seeking.
Yes, which is why I made distinct points. One is the problem of rent-seeking, but the point you are responding to there is about misallocation.
my point earlier about only a small fraction of tax money going to academic research was (to be clear) about the claim that academic research would necessitate tax policy watchdog groups.
Oh every group of rent-seekers bleeding the polity dry claim that they’ve only made a small nick, so there’s no need to worry. Meanwhile we die of a thousand cuts. Are academia worse rent-seekers than (say) teachers? Obviously not. But the opportunity cost is probably higher, because they are far more likely to be able to do something productive.
That no central planner can know how much “ought” to be spent on research.
Since no one is arguing for complete central planning, I don’t see how this is relevant.
I don’t know what people would spend their own money on. That’s the whole point.
You are missing my point, maybe I should be more explicit: You have a tiny portion of GDP going to research, and most of those resources go back into the economy.
Oh every group of rent-seekers bleeding the polity dry claim that they’ve only made a small nick
Missing the point. You claimed that academics getting tax money for research necessitated the creation of tax payer watchdog groups. The point is that since there are much larger interest groups getting much more money who are much more effectively organized, the watchdog groups will be necessary no matter what.
Yes, but that’s a tiny fraction of the issues you list above. Unless I’m misreading you. By for example deadweight cost of taxation, you mean the deadweight loss of the portion of taxes that go to fund academic research?
Taking that sort of interpretation throughout, I’m still not sure what your point is. Can you be more explicit and maybe use full sentences?
You stated that academics aren’t easily funded by the private sector because of an externality argument. I agreed that it is possible to argue that “basic research” or some such is underprovided by the market, because the private sector may not be able to capture all externalities, and that this is in some sense a market failure. However, I am saying that:
No-one can say how by much the private sector is underproviding. Therefore even if the intervention were done by angels, it is as likely to make things worse as better.
Government intervention will cost money, resulting in deadweight losses through tax.
The creation of a powerful body of rent-seeking will cause academic research to be massively oversupplied
Moreover “research” is not a fungible good; the money and resources will not necessarily go to the most useful areas, but to the most politically convenient ones
The rent-seeking will also have deadweight costs (e.g. academics spending lots of time writing grant proposals, taxpayers having to organise to prevent themselves getting robbed blind)
This will also incentivise rent-seeking elsewhere (if the academics are successful in asking for a subsidy, it encourages the farmers)
The adoption of the subsidy discourages market participants from finding new ways to capture the externality.
So, even though there may be a textbook “market failure,” there is no reason for any intervention. Dissolve the modern-day monasteries, and let academics prove their use, if they can. And indeed, I’m sure Alvin Roth would be just fine if we did.
No. We can make such estimates by looking at how helpful basic research was in the past.
Sure. How much?
That’s a danger certainly, but what evidence do you have that that’s happening?
The areas where politics has heavy aspects are actually the areas with the least government funding. For example, physics has a lot of government funding, whereas most of the humanities and social sciences have comparatively little. Thus, the politics comes into play primarily through the interaction with outside donors with agendas. That’s how you get virulently anti-Israel attitudes in Middle-Eastern studies due to funds from rich Saudis and you get Israel studies as a subject which is about as ridiculously biased in the other direction for the same reason. Political problems in the sciences are rare.
We have theorems and a lot of empirical of how externalities interact with markets. If you think there’s something wrong with that vast body of literature, feel free to point it out.
Is this a serious argument?
Yes, grant proposal writing is annoying and often a waste of time. Question: What fraction of taxpayer money is going to academic research?
At this point I think I have to cite Use of Knowledge in Society, Hayek, 1945 link.
Where I live, we spend approx $4bn per year (0.64% of GDP) on state-funded research (note that this figure is conservative because it doesn’t include the way that higher education funds get siphoned off into research). Conservatively then, let’s say $1bn in deadweight loss annually, just in this country—and our state-funded research is low compared to most OECD countries. If we extrapolate this figure to the world economy, we get a deadweight loss of approx $127bn annually, just due to government research spending. That’s a lot of bednets.
I am not talking about partisan clashes. I am talking about money being spent on worthless projects because they seem cool or win votes. NASA has a budget of almost $18bn!
Of course it’s a serious argument—subsidizing one group of rent-seekers encourages others. I am of course being a little facetious in the sense that both the academics and the farmers already have their snouts deep in the trough.
Sorry, I’m not following. You are citing Hayek to argue what here?
Ok. So we have less than 1% of GDP going to state-funded research. And where is that going to go?
Projects seeming “cool” is a very different claim than political rent-seeking. In this case though, looking at the overall NASA budget isn’t very helpful: First, much of that budget is not going to what would be considered academic research. Second, you are talking about the space program of one of the world’s largest economies, so the total cost is a misleading metric. Third, technologies developed by the US space program (especially GPS, communication satellites and weather satellites) have had large-scale world-changing impact.
It often doesn’t, and the case you’ve picked is a really good one. In the US, many of the people getting farm subsidies are people who are rural and if anything anti-ivory tower. A large fraction would probably be turned off of the idea of government subsidies if it was compared to what those East Coast intellectuals were doing. (I’m engaging in some broad brush strokes here obviously but some people like this do exist.) This sort of thing is connected to why many groups (including farmers) have tried to get their money through tax breaks rather than direct subsidies. Of course, from an economic perspective, tax expenditures are identical to subsidies. But people don’t like to think of themselves as getting handouts so they prefer tax breaks (at least in the US).
By the way, my point earlier about only a small fraction of tax money going to academic research was (to be clear) about the claim that academic research would necessitate tax policy watchdog groups.
That no central planner can know how much “ought” to be spent on research.
I don’t know what people would spend their own money on. That’s the whole point.
Yes, which is why I made distinct points. One is the problem of rent-seeking, but the point you are responding to there is about misallocation.
Oh every group of rent-seekers bleeding the polity dry claim that they’ve only made a small nick, so there’s no need to worry. Meanwhile we die of a thousand cuts. Are academia worse rent-seekers than (say) teachers? Obviously not. But the opportunity cost is probably higher, because they are far more likely to be able to do something productive.
Since no one is arguing for complete central planning, I don’t see how this is relevant.
You are missing my point, maybe I should be more explicit: You have a tiny portion of GDP going to research, and most of those resources go back into the economy.
Missing the point. You claimed that academics getting tax money for research necessitated the creation of tax payer watchdog groups. The point is that since there are much larger interest groups getting much more money who are much more effectively organized, the watchdog groups will be necessary no matter what.