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Governmental research funding and economic distortion

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Knowledge, Technology & Policy


Science and technology are “good” things. Still, there are many good things that should not be done by government and there are many other things that the private sector does far better. Government-funded research and development (R&D) falls into both these categories.

Research funding is big business. In 1998, the Department of Health and Human Services received $13.1 billion, the National Aeronautics & Space Administration $9.3 billion, the Department of Energy $5.6 billion, and the National Science Foundation $2.3 billion. Newt Gingrich, still adhering to the Progressive dictum that “government does it better,” is now calling for a doubling of current federal research expenditures.

This article will assess the theoretical arguments for government-funded research and examine specific research programs of the Department of Energy and the Environmental Protection Agency. Throughout, I will argue that private property rights, the rule of law, and free markets are the greatest incentives to conduct scientific research; under-investment in R&D is due not to market failure but to the failure to have markets.

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a public interest group active in economic and environmental public policy issues. Located in Washington, D.C., CEI has a web site at Mr. Smith has debated free-market approaches to public problems as a guest on MacNeil/Lehrer, Crossfire, and 20/20. This article began as testimony before the Subcommittee on Energy and Environment, House Committee on Science, 25 March 1998.

National Science Foundation website.

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Smith, F. Governmental research funding and economic distortion. Know Techn Pol 11, 27–39 (1998).

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