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Innovation: The Government Was Crucial After All

70 points by mturmon 13y ago

AccountsBlow 13y ago
Sensationalist title, with no logical argument to back it up. Way to attack a straw man! The argument is not that government never contributes to great discoveries, the argument is that government hinders great discoveries. Without government influence, progress would be occur much more quickly and the acceleration of progress would be greater as well. Governments make destruction (war) profitable. Their presence always has a net negative effect, that gets progressively worse with time in general.
twoodfin 13y ago
The debate over the nation’s budget deficit aside, government’s contribution to innovation is not financially rewarded. The benefits to government, it has always been argued, would be increases in tax revenues as companies grow based on its research. The fact that Apple avoids almost all taxes by international avoidance strategies, as do many other high-technology companies, shows such hypotheses to be largely bogus. This sounds to me like a non sequitur. The government has collected massive tax revenue from a growing Apple, let alone the larger, more productive economy spurred by the internet as a whole. Income taxes on Apple's employees, capital gains taxes on AAPL stock transactions, sales taxes on Apple products... If spending on basic research leads to even a tenth of a percent of higher annual GDP growth, it will almost certainly pay for itself as that compounds over time into a much larger tax base.
- eli_gottlieb 13y ago
  >This sounds to me like a non sequitur. The government has collected massive tax revenue from a growing Apple, let alone the larger, more productive economy spurred by the internet as a whole. Income taxes on Apple's employees, capital gains taxes on AAPL stock transactions, sales taxes on Apple products... Compare the real taxes reaped by the state from companies that make use of publicly-funded research versus the alternative: the government holds all intellectual-property rights to publicly-funded discoveries and licenses them for a profit to commercial firms.
  - twoodfin 13y ago
    The government's goal isn't to turn a profit: It's to bring a better life to its citizens, improve its ability to defend itself, etc. Basic research being financially self-sustaining is a benefit, but it's not necessary or sufficient for the success of the programs. But putting that aside, if the government owns the basic research that it funds, why would any (self-interested) researcher or institution choose to work for the government vs. private industry, which can offer a share of future revenue? How does the government set prices for its licensing? Don't we benefit that Jobs and Wozniak didn't have to have a large amount of capital to invest in licensing in order to take advantage of all that basic research?
    - sanderjd 13y ago
      > why would any (self-interested) researcher or institution choose to work for the government vs. private industry For the same reason researchers choose to do so now: the government pays for a lot more fundamental research than private industry does.
    - eli_gottlieb 13y ago
      I'm not talking about whether the research is self-sustaining or not. I'm talking about whether the economic value of basic research is treated as a positive externality (current situation) or captured by some actor at a market price (my counterfactual). Why ask that question? Because, quite interestingly, without the value of basic research being captured as revenue with a market price, we don't have numbers to perform a direct comparison between research costs and research revenues to compute the profitability of basic research. We don't actually know right now whether basic research is financially self-sustaining - in which case the apparent "expense" is actually a state subsidy to technological industries - or whether basic research is a financial net-negative. We also don't actually know what lengths of time are necessary to realize the final economic result of basic research. So we kinda sorta feel pretty sure that basic research eventually helps the economy, but nobody's accounting ledgers actually get forced to reflect that or pay for it.
- beloch 13y ago
  I don't understand why some feel the need to defend Apple on this count. They've evaded taxes to an outrageous degree and are sitting on a pile of cash so big it would take generations for the company to get anywhere near bankruptcy again. Had they been forced to pay the taxes any sane tax regime would say they owe, they'd still be the same company making the same products. They'd just have a smaller nest-egg. Non sequitur or not, this actually cuts to the heart of the matter. Governments play a huge role in innovation, so we should stop using false claims to the contrary when rationalizing theft of revenues the government is owed for its work. Corporate tax evasion is a crime against innovation and theft from all of us who actually do pay our taxes.
  - nickff 13y ago
    >"They've evaded taxes to an outrageous degree" How did you arrive at this (normative) judgement? They are paying the minimum in taxes that they legally can, so that they can invest the money in research, buy back stocks, or hold it in reserve for some period of time; why is this bad? Do you have any evidence that the government's allocation of additional funds would be more productive than Apple's use of the money?
    - gopher1 13y ago
      It's bad because it's unfair. If everyone, including small businesses, got to pay 0% tax, then you might have a good argument. But as it stands, we have a 35% corporate tax rate for everyone except large multi-national companies who have the means to take advantage of the loopholes. Regular Joe Business does not have those means. And of course, these same large companies are spending millions lobbying the government to not reform the code.
      - liber8 13y ago
        This doesn't take away from your point, but from a practical perspective, small businesses pay 0% corporate tax. When you have just a few shareholders, as nearly all small businesses do, all profits get paid out as salary. If small businesses didn't do this, their owners would be taxed twice (first at the corporate level and then again individually). The companies that get squeezed are not the Regular Joe Businesses but the midsize businesses that can't get away with paying out all profits as salary (because they have third party shareholders who don't work for the business) and yet can't afford to set up the necessary bureaucracy to take advantage of things like a Double Irish With a Dutch Sandwich.
sharemywin 13y ago
I do have a problem with foreign companies( or foreign subsidiaries) owning US patents, copyright trademark etc. if it's a US patent, trademark copyright you should pay a US tax on earnings from that.
- Drakim 13y ago
  On the flipside, imagine US companies licensing necessary patents (such as those for colored shapes or round buttons) from foreign companies that are made extremely expensive because the licensing is heavily taxed and full of fees by foreign governments.
- ARothfusz 13y ago
  Presumably they do: a US patent only protects you if you are selling something in the US. Assuming that sale shows up somewhere as someone's profit, there would be an income tax from that.
firstOrder 13y ago
> Government had nothing to do with Bill Gates, Steve Jobs, Zuckerberg Gates and Jobs built their companies on the microprocessor, the development of which was completely dependent upon government contacts to Fairchild. Zuckerberg's debt is even more so - the Internet was a government funded R&D project from 1969 until the 1991 entry of ANS/CIX. He built his business on top of a 20+ year government project, just like Google and other businesses did. To say that the government had nothing to do with it is absurd, and just highlighting Gordon's own ignorance of how technology, and for that matter the economy, works. Just looking at the official government forms, tens of billions in military contracts have come into the Peninsula over the past decade ( http://www.governmentcontractswon.com/department/defense/california_counties.asp http://www.governmentcontractswon.com/department/defense/cal... ). That doesn't even cover all military spending, and it does not cover non-militray government spending.
crusso 13y ago
The problem with centralized government isn't that it doesn't succeed in cases. The problem is that it's never allowed to fail.
- deleted 13y ago
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- gopher1 13y ago
  Can you elaborate on this? Because there were plenty of projects funded by no-bid government contracts that failed. Likewise, plenty of government R&D dollars have also gone toward efforts that have failed. Nobody bats 100%, but it all becomes worth it when they hit on something very big, like the micro-processor or the internet.
  - logfromblammo 13y ago
    Different people define failure in different ways. In business, if you fail, your assets are liquidated and recycled or transferred to your former competitors, your customers go elsewhere, and you lose the ability to command economic resources. In government, if your contract fails, your company/team/department/bureau/whatever still exists, and is still eligible to fail again the next year. There might be a reshuffling of personnel, if anyone is watching, but there is no real penalty for failing to deliver. The important thing about business failure is that resources are reallocated away from the people who created the failure towards those less likely to fail (in the same way). This mechanism is not usually present with government.
    - avmich 13y ago
      I've got perception that bureaucrats are reluctant to change things for the very reason the new things can come worse - and those specific bureaucrats will be held accountable, in one way or another. In other words, I doubt there is no reason to try to do better. May be incentives as a whole are different enough - say, lesser, if we can compare - with government-baked projects rather than with privately backed ones. Could it be so that government is less efficient, but only on some projects where it can have good competition from private resources? May be government is better - or actually the only option - with some other areas, where you just can't find private backing?
ataggart 13y ago
So, X contributed to Y, therefore Y could not exist without X. Is there a name for that kind of logical fallacy?
- wyager 13y ago
  Perhaps a form of the fallacy of composition? P(X) = "X exists due to the government" S = "Scientific developments" Fallacious statement: ∃x ∈ S (P(x)) ⇒ ∀x ∈ S (P(x))
- logfromblammo 13y ago
  Post hoc, ergo propter hoc (after this, therefore because of this).
  - mpyne 13y ago
    That's not quite right either, because in this case there was some sort of casual relation, not merely a barrier in time.
    - logfromblammo 13y ago
      There's a little bit of Complex Cause in there, too.
- scotty79 13y ago
  Stating that this reasoning is always a falacy is in itself "coulda woulda shoulda" "falacy". Strict reasoning is hard.
- mattmcegg 13y ago
  attribution bias is close.
- Kroem3r 13y ago
  Ya, good call. It is a super interesting fallacy that people interested in disassembling dysfunctional status quo models should be good at calling-out. Something like a "post hoc rationalization". For me, another use case is 'all the fantastic things that have been invented because of war'.
rayiner 13y ago
I don't get why there is this tendency to try and avoid giving the government the credit it's due. It seems to me to be a distinctly West Coast "we pulled ourselves up by our bootstraps, which we made ourselves" attitude. It's foreign to me, as someone who grew up in the DC area, in a climate where innovators and the government had a comfortable relationship. There is a ton of fundamental innovation that is coming out of what's often derisively called the "Military Industrial Educational Complex." MIT gets about a billion dollars a year in DOD funding. Apple's Siri came out of SRI, a major defense contractor, and is derived from a DARPA-funded project. My friend just finished his PhD in robotics from Stanford. From high school, where our robotics team was funded by the Navel Surface Warfare Center, through college, where he worked on DARPA's Grand Challenge on Autonomous vehicles, the government has played an enormous role in his development as an expert in the field. This is good. Not everything is something you can hack out in your basement with no capital. There's a lot of hard problems where you need big teams of PhD's with a lot of resources, and the MIEC does that better than anyone.
- epistasis 13y ago
  This is hardly a West Coast attitude. It's just the typical narrow perspective on the world from people that overly rely on well tuned skills with first-order logic, and therefore use ridiculously leaky abstractions that fall down. It's also ignorance, a lot of people don't know where ideas and implementations came from, and how various products got traction. Combine that with politics, the most powerful tool that mankind has invented for turning off critical thought, and you get a bunch of people parroting "government bad" who are far louder.
- nickff 13y ago
  Private industry tends to innovate in different ways from governments, and it has been crowded out of innovation in many areas, in most Western countries, making this comparison difficult. You could look at industries which have low levels of government regulation and intervention, and try to compare them to government-run industries, to find the comparative innovativeness of the industries. This analysis will give you a mixed bag, with some government-related fields having historically high levels of innovation (aerospace), and others having low levels (education and healthcare). The private sector has many innovative sectors (retail, software, semiconductors, IT) and probably some low achieving industries, though none come to mind. Those arguing for the positive role of government in disruptive innovation should also avoid allowing the government to 'take credit' for anything in any field which it has ever been involved in, as the private sector is not given the same deference; (McDonnell built Mercury and Apollo, Grumman made the moon lander, and Rockwell designed the space shuttle; Rocketdyne and P&W designed, tested, and built the engines).
ctdonath 13y ago
That vast resources were confiscated from the public at large and spent with some notable successes (waste & failures are conspicuously absent), does not trump the conspicuously absent analysis of what that money would have been used for outside of confiscation.
- rayiner 13y ago
  Sure, but what's notably absent is any sort of major counter-example. What civilization has build massive technology and infrastructure without government-coordinated programs? The U.S. government has had a tremendous impact on everything from aerospace to medicine to nuclear energy to computing. Where in the world does that development happen without the government? Not in China, where centralized government is transforming the country from a backwater into a world power. Not in Singapore or Taiwan, where government investment into R&D turned poor countries into rich ones. Not Great Britain, not Rome not Ancient Egypt. It was government that built the Roman road network, government that split the atom, and government that sent man to the moon.
  - ctdonath 13y ago
    The Internet. Government served only to set some basic standards and fund initial military & research networking. Factory farming. Food costs have been driven down tremendously, and productivity increased hugely, by private farming. Heck, Y Combinator. Smaller scale, but it sure isn't public money that's going into funding these startups which make a big difference. That the government simply established standards amid otherwise competing options is a proper role (nice that we're all agreed to drive on the same side of the street). Government is also sometimes useful to force concentration of funds into something that needs development but has prohibitive startup costs. But there are certainly plenty of vast proliferations of spending which occur absent of, or even contrary to, government involvement. Don't confuse the presence of free money (say, farm subsidies) with the successes; anyone will accept a large enough check. Don't overlook the destructiveness (say, many wars, or the "Cash for Clunkers" disaster that destroyed the used car market, or the multi-billion-dollar "bailouts" that lost vast sums of cash, or the 100M dead from government conquest spending including the Chinese Great Leap Forward). Yes, there are some successes. Let's talk about private successes, which DO exist. Let's talk about public-funded failures, which DO exist. Yes, large-scale government spending not pure evil incarnate, but it sure isn't the benevolent deity which many are increasingly making it out as.
maratd 13y ago
In all of the examples given, government contributed funds toward the creative process. At no point was the government itself the source of the creativity. Which makes sense, since those who create are scientists, artists, industrialists, etc. etc. ... not politicians and bureaucrats. Politicians do not create. Well, that's not exactly right, there are political and legal works which can be considered great contributions, but they seem to come only every few decades.
- pessimizer 13y ago
  Governments can't be faulted for not being creative because they are not human. Employees of the government are the creative ones.
- deleted 13y ago
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- bowlofpetunias 13y ago
  By the same logic, entrepreneurs and businessmen do not create either. Both government and business merely provide incentives.
  - deleted 13y ago
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- mpyne 13y ago
  > At no point was the government itself the source of the creativity. Which makes sense, since those who create are scientists, artists, industrialists, etc. etc. ... not politicians and bureaucrats. No doubt, but you could just as easily have said that about the USSR and been right. The inventor of Tsar Bomba was a scientist, not a politician, after all. Does that mean a Communist planned economy is a bad way to advance science? When people are saying government needs to be involved in science it's almost never because they think the government itself should be training administrative clerks to do science and then engaging in research. It's because they want the government to ensure that our existing pool of trained scientists are tasked with doing research, either directly or indirectly.
sunshinerag 13y ago
A government that prints money to spur innovation is merely redistributing wealth around. Arguably it does pull top talented citizens to do it's bidding in a captive economy. But eventually it goes down in a spiral despite more and more poured in. The govt. is an inefficient machine for such ventures as it eventually attracts scammers who systematically drain the pipe. For every 1 of successful outcome there are millions of screwed up endeavours for which it guzzles our money.
- acdha 13y ago
  Government investment got us the internet. Private investors and rent-seeking gave us GEnie, CompuServe, and AOL. Perhaps your binary thinking is not adequate for explaining the complexities of the modern economy.
  - sunshinerag 13y ago
    And Netscape, Microsoft, Apple and Google.... why do you think it would not have happened in the absence of a bloated government?
    - acdha 13y ago
      You keep making the mistake of assuming that government only comes in one type. My point was that there are good and bad outcomes on both sides of the public / private line (not to mentioned grey areas like DARPA) and using simplistic terminology prevents you from participating in the conversation about how to use the strengths of both. Phrases like "bloated government" are intellectual junk food — not to mention amusingly blinkered in a list including Microsoft or Netscspe. Your choice in examples underscores the point: all of those companies have profited enormously by taking technology which was developed elsewhere, often on government grants at universities, and successfully commercializing it. None of them have in their combined histories funded even a fraction of what NSF / DARPA / etc. funds every year because the business model for a public company isn't really compatible with funding speculative research without a proven path to market.
JackFr 13y ago
I think the author and many people who look at this fail to distinguish between a research grant (good thing for the government to do) and investment/tax break/subsidized loans for an on going business concern (iffy thing for the government to do.) It's a good idea for the government to get involved in basic research, research which might not have a positive economic return for at least a generation. On the other hand, if the government is involved in trying to make unprofitable companies profitable, it's social policy not technology research. Grant proposal -- good; Business plan -- bad.
- scotty79 13y ago
  I don't see much difference between giving science team a grant and giving research company money to develop cool robot. Either way it's giving money to the people that free market doesn't want to fund so they can do the stuff that free markets deems too risky to undertake.
  - zhemao 13y ago
    I don't think JackFr sees a problem with giving grant money to an R&D company. JackFr is most likely referring to tax breaks, subsidies, and other assistance that government gives to non-R&D companies in order to prop them up. A few examples: Agricultural subsidies for big agricultural companies Starbucks gets real estate deals that smaller cafes cannot. That's why there is a frickin' Starbucks on every street corner. Bank bailouts In those cases, government is actively picking economic winners and losers, not funding basic research.
    - scotty79 13y ago
      I might imagine good scenario of goverment giving money to some large player in non-innovative industry so they can modernize instead of waiting a decade or so for small more up to date company to grow and eat old behemoth. It's picking winners and it's not fair but it doesn't matter who wins as long as technology advances. It's not like people are in the business only because it's fair. But generally I agree that examples you provided are bad goverment spending. Subsidizing agriculture is actually subsidizing poor that would not be able to afford food if consumers would need to pay for it 100% out of their pockets. Bank bailouts came out of fear that economy could not take massive bank bankruptcies. I can't even imagine what goes on with starbucks. Those are bad reasons to give money. Money for food should be given to poor in form of basic income and farmers should compete for that money like every other company. And gambling banks should be allowed to fail if they were allowed to gamble. Real economy is much more resiliant and it's pretty distanced from financial markets "economy" to be seriously harmed by collapse of multiple banks.
justin66 13y ago
As much as I agree (the central point is very obvious), the author does something pretty common which I think might be a mistake: defending current government-sponsored projects as having a low bankruptcy rate. Right now that's true, but it's also an indication that they might be doing it wrong rather than an indication of that spending's correctness. Government money would best be spent on things that might have an outsized impact but are too risky, expensive or unfashionable for private enterprise to fund alone. If government is taking the same amount of risk as private funds, they should probably be looking a little harder. On the other hand, try selling that to voters...
- mikeyouse 13y ago
  > On the other hand, try selling that to voters... Aint that the rub? Solyndra cost taxpayers ~$550 million in 2011. It was an attempt to develop a domestic manufacturing capacity for a next-gen solar panel technology. It failed due to shitty management, but also to the massive subsidies on Chinese panels that dropped PV prices dramatically. Their bankruptcy is still in the news on a regular basis. For comparison's sake; US Military-related spending in 2011 was $1.2 trillion. Solyndra's failure cost the same as four hours of 2011's military budget. [1] - http://upload.wikimedia.org/wikipedia/commons/8/86/InflationAdjustedDefenseSpending.PNG http://upload.wikimedia.org/wikipedia/commons/8/86/Inflation... (2011 Dollars)
  - hagbardgroup 13y ago
    There are some additional negative consequences that are neither readily apparent nor easy to measure. Think about if you were trying to run a competitor to Solyndra. You would not be able to hire qualified engineers, because your subsidized competitor does not need to care about what the market will bear. You could say that the solar market worldwide has been a boondoggle because of these government subsidy price wars, as you note yourself. All that has resulted is a lot of junk equipment that can only be manufactured at a loss when you factor in all the layers of production. Accounting performs a business function that many modern people like to ignore. Perhaps because math is scary, or accounting as a concept has become politically unpopular in America. Accounting matters even in technology research and development. It tells you whether or not the underlying market and societal conditions can actually support a particular project or not. Extended losses on a process inform managers that that process must either be reformed or eliminated. Government does not operate based on profit-loss accounting, but on the dead-reckoning decisions made by political leaders and bureaucrats. Voters are not relevant to this because almost none of them know what a solar panel is, how it works, or anything else relevant to energy issues. Almost no voters make decisions based on such issues. Almost no voters are even vaguely informed of the issues in general. Projects that do not use accounting to improve the decision-making process fall prey to corruption and cost over-runs in a systematically predictable way. This is what happened to Solyndra. I don't blame the people in charge. I don't even blame the politicians who commissioned the project. Our intellectual culture has decayed in such a systematic way so that no one with social status even recognizes that it has.
logfromblammo 13y ago
"The government" does not exist. It's just individual people, manipulated by psychological tricks into identifying with a certain tribe. It's a lot like "the company", actually. Those two metanymic illusions should probably be compared more on the basis of how efficiently they allocate resources to productive people than their absolute number of successes. Given only $100 apiece, which could make more--"the company" or "the government"? Remember also that the same $100 cannot be given to both at the same time.
mistakoala 13y ago
Lemmeguesswithoutclicking... Mariana Mazzucato?
liber8 13y ago
The author's hilarious use of the Medici family[1] as an example of government contributing to great advances of civilization aside, one of the things that is often overlooked is not that government has successfully contributed to some major technological advances, but why, and whether government contributions were really necessary. The examples of government successes range from those that almost certainly required government backing to those that almost certainly did not. I have a hard time imagining that anyone but a government is going to finance atomic research. The profits simply aren't there to justify it, particularly when compared to existing means of energy production. But I have an equally hard time believing that the internet or pharmaceuticals wouldn’t have come to market if government had nothing to do with them. The profit potential, even in those early years, was simply too staggering for the market to ignore. The fact that, in many cases, companies were able to persuade governments to share their costs or flat-out underwrite their research doesn’t change this. And so, because government was persuaded to share or pay for many of these costs, I think we get a distorted view of history, including success stories that can be attributed to government involvement, even though we don’t know whether government involvement was really necessary at all. [2] [1] If you're unaware, the House of Medici became so wealthy that they were able to essentially buy control of Florence, then most of Italy, and turn it into their own little kingdom. They used their wealth to foster wars that expanded their sphere of control, but are now generally known for underwriting the production of some of the great art of the 15th century. Shockingly, much of that art lionized the House of Medici. Claiming that the House of Medici is an example of a government contributing to the advancement of the arts is like claiming Brunei contributed to the advancement of the automotive industry because the Sultan spent a billion dollars on Ferraris, Lamborghinis, Bentleys, and crazy one-off concepts. [2] Another example from the article highlights this: touch-screens. Once it was clear computers would eventually be more than simply adding machines, was there any doubt that users would eventually want touch-screens? (The Jetsons, in the early 1960's, featured consumers using touch-screens, for reference.) And is there any doubt that this is something that absolutely could have been developed privately?
- mrxd 13y ago
  > But I have an equally hard time believing that the internet or pharmaceuticals wouldn’t have come to market if government had nothing to do with them. The argument is that the private sector invests for shorter time frames. VCs look for commercial viability within 3-5 years. They're unlikely to fund biotech and green energy, which have 10-20 year time frames, or the internet, which took 30 years to reach commercial viability.
deleted 13y ago
[deleted]

70 points by mturmon 13y ago

Sensationalist title, with no logical argument to back it up. Way to attack a straw man! The argument is not that government never contributes to great discoveries, the argument is that government hinders great discoveries. Without government influence, progress would be occur much more quickly and the acceleration of progress would be greater as well. Governments make destruction (war) profitable. Their presence always has a net negative effect, that gets progressively worse with time in general.

twoodfin 13y ago

The debate over the nation’s budget deficit aside, government’s contribution to innovation is not financially rewarded. The benefits to government, it has always been argued, would be increases in tax revenues as companies grow based on its research. The fact that Apple avoids almost all taxes by international avoidance strategies, as do many other high-technology companies, shows such hypotheses to be largely bogus. This sounds to me like a non sequitur. The government has collected massive tax revenue from a growing Apple, let alone the larger, more productive economy spurred by the internet as a whole. Income taxes on Apple's employees, capital gains taxes on AAPL stock transactions, sales taxes on Apple products... If spending on basic research leads to even a tenth of a percent of higher annual GDP growth, it will almost certainly pay for itself as that compounds over time into a much larger tax base.

eli_gottlieb 13y ago
>This sounds to me like a non sequitur. The government has collected massive tax revenue from a growing Apple, let alone the larger, more productive economy spurred by the internet as a whole. Income taxes on Apple's employees, capital gains taxes on AAPL stock transactions, sales taxes on Apple products... Compare the real taxes reaped by the state from companies that make use of publicly-funded research versus the alternative: the government holds all intellectual-property rights to publicly-funded discoveries and licenses them for a profit to commercial firms.
- twoodfin 13y ago
  The government's goal isn't to turn a profit: It's to bring a better life to its citizens, improve its ability to defend itself, etc. Basic research being financially self-sustaining is a benefit, but it's not necessary or sufficient for the success of the programs. But putting that aside, if the government owns the basic research that it funds, why would any (self-interested) researcher or institution choose to work for the government vs. private industry, which can offer a share of future revenue? How does the government set prices for its licensing? Don't we benefit that Jobs and Wozniak didn't have to have a large amount of capital to invest in licensing in order to take advantage of all that basic research?
  - sanderjd 13y ago
    > why would any (self-interested) researcher or institution choose to work for the government vs. private industry For the same reason researchers choose to do so now: the government pays for a lot more fundamental research than private industry does.
  - eli_gottlieb 13y ago
    I'm not talking about whether the research is self-sustaining or not. I'm talking about whether the economic value of basic research is treated as a positive externality (current situation) or captured by some actor at a market price (my counterfactual). Why ask that question? Because, quite interestingly, without the value of basic research being captured as revenue with a market price, we don't have numbers to perform a direct comparison between research costs and research revenues to compute the profitability of basic research. We don't actually know right now whether basic research is financially self-sustaining - in which case the apparent "expense" is actually a state subsidy to technological industries - or whether basic research is a financial net-negative. We also don't actually know what lengths of time are necessary to realize the final economic result of basic research. So we kinda sorta feel pretty sure that basic research eventually helps the economy, but nobody's accounting ledgers actually get forced to reflect that or pay for it.
beloch 13y ago
I don't understand why some feel the need to defend Apple on this count. They've evaded taxes to an outrageous degree and are sitting on a pile of cash so big it would take generations for the company to get anywhere near bankruptcy again. Had they been forced to pay the taxes any sane tax regime would say they owe, they'd still be the same company making the same products. They'd just have a smaller nest-egg. Non sequitur or not, this actually cuts to the heart of the matter. Governments play a huge role in innovation, so we should stop using false claims to the contrary when rationalizing theft of revenues the government is owed for its work. Corporate tax evasion is a crime against innovation and theft from all of us who actually do pay our taxes.
- nickff 13y ago
  >"They've evaded taxes to an outrageous degree" How did you arrive at this (normative) judgement? They are paying the minimum in taxes that they legally can, so that they can invest the money in research, buy back stocks, or hold it in reserve for some period of time; why is this bad? Do you have any evidence that the government's allocation of additional funds would be more productive than Apple's use of the money?
  - gopher1 13y ago
    It's bad because it's unfair. If everyone, including small businesses, got to pay 0% tax, then you might have a good argument. But as it stands, we have a 35% corporate tax rate for everyone except large multi-national companies who have the means to take advantage of the loopholes. Regular Joe Business does not have those means. And of course, these same large companies are spending millions lobbying the government to not reform the code.
    - liber8 13y ago
      This doesn't take away from your point, but from a practical perspective, small businesses pay 0% corporate tax. When you have just a few shareholders, as nearly all small businesses do, all profits get paid out as salary. If small businesses didn't do this, their owners would be taxed twice (first at the corporate level and then again individually). The companies that get squeezed are not the Regular Joe Businesses but the midsize businesses that can't get away with paying out all profits as salary (because they have third party shareholders who don't work for the business) and yet can't afford to set up the necessary bureaucracy to take advantage of things like a Double Irish With a Dutch Sandwich.

sharemywin 13y ago

I do have a problem with foreign companies( or foreign subsidiaries) owning US patents, copyright trademark etc. if it's a US patent, trademark copyright you should pay a US tax on earnings from that.

Drakim 13y ago
On the flipside, imagine US companies licensing necessary patents (such as those for colored shapes or round buttons) from foreign companies that are made extremely expensive because the licensing is heavily taxed and full of fees by foreign governments.
ARothfusz 13y ago
Presumably they do: a US patent only protects you if you are selling something in the US. Assuming that sale shows up somewhere as someone's profit, there would be an income tax from that.

firstOrder 13y ago

> Government had nothing to do with Bill Gates, Steve Jobs, Zuckerberg Gates and Jobs built their companies on the microprocessor, the development of which was completely dependent upon government contacts to Fairchild. Zuckerberg's debt is even more so - the Internet was a government funded R&D project from 1969 until the 1991 entry of ANS/CIX. He built his business on top of a 20+ year government project, just like Google and other businesses did. To say that the government had nothing to do with it is absurd, and just highlighting Gordon's own ignorance of how technology, and for that matter the economy, works. Just looking at the official government forms, tens of billions in military contracts have come into the Peninsula over the past decade ( http://www.governmentcontractswon.com/department/defense/california_counties.asp http://www.governmentcontractswon.com/department/defense/cal... ). That doesn't even cover all military spending, and it does not cover non-militray government spending.

crusso 13y ago

The problem with centralized government isn't that it doesn't succeed in cases. The problem is that it's never allowed to fail.

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gopher1 13y ago
Can you elaborate on this? Because there were plenty of projects funded by no-bid government contracts that failed. Likewise, plenty of government R&D dollars have also gone toward efforts that have failed. Nobody bats 100%, but it all becomes worth it when they hit on something very big, like the micro-processor or the internet.
- logfromblammo 13y ago
  Different people define failure in different ways. In business, if you fail, your assets are liquidated and recycled or transferred to your former competitors, your customers go elsewhere, and you lose the ability to command economic resources. In government, if your contract fails, your company/team/department/bureau/whatever still exists, and is still eligible to fail again the next year. There might be a reshuffling of personnel, if anyone is watching, but there is no real penalty for failing to deliver. The important thing about business failure is that resources are reallocated away from the people who created the failure towards those less likely to fail (in the same way). This mechanism is not usually present with government.
  - avmich 13y ago
    I've got perception that bureaucrats are reluctant to change things for the very reason the new things can come worse - and those specific bureaucrats will be held accountable, in one way or another. In other words, I doubt there is no reason to try to do better. May be incentives as a whole are different enough - say, lesser, if we can compare - with government-baked projects rather than with privately backed ones. Could it be so that government is less efficient, but only on some projects where it can have good competition from private resources? May be government is better - or actually the only option - with some other areas, where you just can't find private backing?

ataggart 13y ago

So, X contributed to Y, therefore Y could not exist without X. Is there a name for that kind of logical fallacy?

wyager 13y ago
Perhaps a form of the fallacy of composition? P(X) = "X exists due to the government" S = "Scientific developments" Fallacious statement: ∃x ∈ S (P(x)) ⇒ ∀x ∈ S (P(x))
logfromblammo 13y ago
Post hoc, ergo propter hoc (after this, therefore because of this).
- mpyne 13y ago
  That's not quite right either, because in this case there was some sort of casual relation, not merely a barrier in time.
  - logfromblammo 13y ago
    There's a little bit of Complex Cause in there, too.
scotty79 13y ago
Stating that this reasoning is always a falacy is in itself "coulda woulda shoulda" "falacy". Strict reasoning is hard.
mattmcegg 13y ago
attribution bias is close.
Kroem3r 13y ago
Ya, good call. It is a super interesting fallacy that people interested in disassembling dysfunctional status quo models should be good at calling-out. Something like a "post hoc rationalization". For me, another use case is 'all the fantastic things that have been invented because of war'.

rayiner 13y ago

I don't get why there is this tendency to try and avoid giving the government the credit it's due. It seems to me to be a distinctly West Coast "we pulled ourselves up by our bootstraps, which we made ourselves" attitude. It's foreign to me, as someone who grew up in the DC area, in a climate where innovators and the government had a comfortable relationship. There is a ton of fundamental innovation that is coming out of what's often derisively called the "Military Industrial Educational Complex." MIT gets about a billion dollars a year in DOD funding. Apple's Siri came out of SRI, a major defense contractor, and is derived from a DARPA-funded project. My friend just finished his PhD in robotics from Stanford. From high school, where our robotics team was funded by the Navel Surface Warfare Center, through college, where he worked on DARPA's Grand Challenge on Autonomous vehicles, the government has played an enormous role in his development as an expert in the field. This is good. Not everything is something you can hack out in your basement with no capital. There's a lot of hard problems where you need big teams of PhD's with a lot of resources, and the MIEC does that better than anyone.

epistasis 13y ago
This is hardly a West Coast attitude. It's just the typical narrow perspective on the world from people that overly rely on well tuned skills with first-order logic, and therefore use ridiculously leaky abstractions that fall down. It's also ignorance, a lot of people don't know where ideas and implementations came from, and how various products got traction. Combine that with politics, the most powerful tool that mankind has invented for turning off critical thought, and you get a bunch of people parroting "government bad" who are far louder.
nickff 13y ago
Private industry tends to innovate in different ways from governments, and it has been crowded out of innovation in many areas, in most Western countries, making this comparison difficult. You could look at industries which have low levels of government regulation and intervention, and try to compare them to government-run industries, to find the comparative innovativeness of the industries. This analysis will give you a mixed bag, with some government-related fields having historically high levels of innovation (aerospace), and others having low levels (education and healthcare). The private sector has many innovative sectors (retail, software, semiconductors, IT) and probably some low achieving industries, though none come to mind. Those arguing for the positive role of government in disruptive innovation should also avoid allowing the government to 'take credit' for anything in any field which it has ever been involved in, as the private sector is not given the same deference; (McDonnell built Mercury and Apollo, Grumman made the moon lander, and Rockwell designed the space shuttle; Rocketdyne and P&W designed, tested, and built the engines).

ctdonath 13y ago

That vast resources were confiscated from the public at large and spent with some notable successes (waste & failures are conspicuously absent), does not trump the conspicuously absent analysis of what that money would have been used for outside of confiscation.

rayiner 13y ago
Sure, but what's notably absent is any sort of major counter-example. What civilization has build massive technology and infrastructure without government-coordinated programs? The U.S. government has had a tremendous impact on everything from aerospace to medicine to nuclear energy to computing. Where in the world does that development happen without the government? Not in China, where centralized government is transforming the country from a backwater into a world power. Not in Singapore or Taiwan, where government investment into R&D turned poor countries into rich ones. Not Great Britain, not Rome not Ancient Egypt. It was government that built the Roman road network, government that split the atom, and government that sent man to the moon.
- ctdonath 13y ago
  The Internet. Government served only to set some basic standards and fund initial military & research networking. Factory farming. Food costs have been driven down tremendously, and productivity increased hugely, by private farming. Heck, Y Combinator. Smaller scale, but it sure isn't public money that's going into funding these startups which make a big difference. That the government simply established standards amid otherwise competing options is a proper role (nice that we're all agreed to drive on the same side of the street). Government is also sometimes useful to force concentration of funds into something that needs development but has prohibitive startup costs. But there are certainly plenty of vast proliferations of spending which occur absent of, or even contrary to, government involvement. Don't confuse the presence of free money (say, farm subsidies) with the successes; anyone will accept a large enough check. Don't overlook the destructiveness (say, many wars, or the "Cash for Clunkers" disaster that destroyed the used car market, or the multi-billion-dollar "bailouts" that lost vast sums of cash, or the 100M dead from government conquest spending including the Chinese Great Leap Forward). Yes, there are some successes. Let's talk about private successes, which DO exist. Let's talk about public-funded failures, which DO exist. Yes, large-scale government spending not pure evil incarnate, but it sure isn't the benevolent deity which many are increasingly making it out as.

maratd 13y ago

In all of the examples given, government contributed funds toward the creative process. At no point was the government itself the source of the creativity. Which makes sense, since those who create are scientists, artists, industrialists, etc. etc. ... not politicians and bureaucrats. Politicians do not create. Well, that's not exactly right, there are political and legal works which can be considered great contributions, but they seem to come only every few decades.

pessimizer 13y ago
Governments can't be faulted for not being creative because they are not human. Employees of the government are the creative ones.
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bowlofpetunias 13y ago
By the same logic, entrepreneurs and businessmen do not create either. Both government and business merely provide incentives.
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mpyne 13y ago
> At no point was the government itself the source of the creativity. Which makes sense, since those who create are scientists, artists, industrialists, etc. etc. ... not politicians and bureaucrats. No doubt, but you could just as easily have said that about the USSR and been right. The inventor of Tsar Bomba was a scientist, not a politician, after all. Does that mean a Communist planned economy is a bad way to advance science? When people are saying government needs to be involved in science it's almost never because they think the government itself should be training administrative clerks to do science and then engaging in research. It's because they want the government to ensure that our existing pool of trained scientists are tasked with doing research, either directly or indirectly.

sunshinerag 13y ago

A government that prints money to spur innovation is merely redistributing wealth around. Arguably it does pull top talented citizens to do it's bidding in a captive economy. But eventually it goes down in a spiral despite more and more poured in. The govt. is an inefficient machine for such ventures as it eventually attracts scammers who systematically drain the pipe. For every 1 of successful outcome there are millions of screwed up endeavours for which it guzzles our money.

acdha 13y ago
Government investment got us the internet. Private investors and rent-seeking gave us GEnie, CompuServe, and AOL. Perhaps your binary thinking is not adequate for explaining the complexities of the modern economy.
- sunshinerag 13y ago
  And Netscape, Microsoft, Apple and Google.... why do you think it would not have happened in the absence of a bloated government?
  - acdha 13y ago
    You keep making the mistake of assuming that government only comes in one type. My point was that there are good and bad outcomes on both sides of the public / private line (not to mentioned grey areas like DARPA) and using simplistic terminology prevents you from participating in the conversation about how to use the strengths of both. Phrases like "bloated government" are intellectual junk food — not to mention amusingly blinkered in a list including Microsoft or Netscspe. Your choice in examples underscores the point: all of those companies have profited enormously by taking technology which was developed elsewhere, often on government grants at universities, and successfully commercializing it. None of them have in their combined histories funded even a fraction of what NSF / DARPA / etc. funds every year because the business model for a public company isn't really compatible with funding speculative research without a proven path to market.

JackFr 13y ago

I think the author and many people who look at this fail to distinguish between a research grant (good thing for the government to do) and investment/tax break/subsidized loans for an on going business concern (iffy thing for the government to do.) It's a good idea for the government to get involved in basic research, research which might not have a positive economic return for at least a generation. On the other hand, if the government is involved in trying to make unprofitable companies profitable, it's social policy not technology research. Grant proposal -- good; Business plan -- bad.

scotty79 13y ago
I don't see much difference between giving science team a grant and giving research company money to develop cool robot. Either way it's giving money to the people that free market doesn't want to fund so they can do the stuff that free markets deems too risky to undertake.
- zhemao 13y ago
  I don't think JackFr sees a problem with giving grant money to an R&D company. JackFr is most likely referring to tax breaks, subsidies, and other assistance that government gives to non-R&D companies in order to prop them up. A few examples: Agricultural subsidies for big agricultural companies Starbucks gets real estate deals that smaller cafes cannot. That's why there is a frickin' Starbucks on every street corner. Bank bailouts In those cases, government is actively picking economic winners and losers, not funding basic research.
  - scotty79 13y ago
    I might imagine good scenario of goverment giving money to some large player in non-innovative industry so they can modernize instead of waiting a decade or so for small more up to date company to grow and eat old behemoth. It's picking winners and it's not fair but it doesn't matter who wins as long as technology advances. It's not like people are in the business only because it's fair. But generally I agree that examples you provided are bad goverment spending. Subsidizing agriculture is actually subsidizing poor that would not be able to afford food if consumers would need to pay for it 100% out of their pockets. Bank bailouts came out of fear that economy could not take massive bank bankruptcies. I can't even imagine what goes on with starbucks. Those are bad reasons to give money. Money for food should be given to poor in form of basic income and farmers should compete for that money like every other company. And gambling banks should be allowed to fail if they were allowed to gamble. Real economy is much more resiliant and it's pretty distanced from financial markets "economy" to be seriously harmed by collapse of multiple banks.

justin66 13y ago

As much as I agree (the central point is very obvious), the author does something pretty common which I think might be a mistake: defending current government-sponsored projects as having a low bankruptcy rate. Right now that's true, but it's also an indication that they might be doing it wrong rather than an indication of that spending's correctness. Government money would best be spent on things that might have an outsized impact but are too risky, expensive or unfashionable for private enterprise to fund alone. If government is taking the same amount of risk as private funds, they should probably be looking a little harder. On the other hand, try selling that to voters...

mikeyouse 13y ago
> On the other hand, try selling that to voters... Aint that the rub? Solyndra cost taxpayers ~$550 million in 2011. It was an attempt to develop a domestic manufacturing capacity for a next-gen solar panel technology. It failed due to shitty management, but also to the massive subsidies on Chinese panels that dropped PV prices dramatically. Their bankruptcy is still in the news on a regular basis. For comparison's sake; US Military-related spending in 2011 was $1.2 trillion. Solyndra's failure cost the same as four hours of 2011's military budget. [1] - http://upload.wikimedia.org/wikipedia/commons/8/86/InflationAdjustedDefenseSpending.PNG http://upload.wikimedia.org/wikipedia/commons/8/86/Inflation... (2011 Dollars)
- hagbardgroup 13y ago
  There are some additional negative consequences that are neither readily apparent nor easy to measure. Think about if you were trying to run a competitor to Solyndra. You would not be able to hire qualified engineers, because your subsidized competitor does not need to care about what the market will bear. You could say that the solar market worldwide has been a boondoggle because of these government subsidy price wars, as you note yourself. All that has resulted is a lot of junk equipment that can only be manufactured at a loss when you factor in all the layers of production. Accounting performs a business function that many modern people like to ignore. Perhaps because math is scary, or accounting as a concept has become politically unpopular in America. Accounting matters even in technology research and development. It tells you whether or not the underlying market and societal conditions can actually support a particular project or not. Extended losses on a process inform managers that that process must either be reformed or eliminated. Government does not operate based on profit-loss accounting, but on the dead-reckoning decisions made by political leaders and bureaucrats. Voters are not relevant to this because almost none of them know what a solar panel is, how it works, or anything else relevant to energy issues. Almost no voters make decisions based on such issues. Almost no voters are even vaguely informed of the issues in general. Projects that do not use accounting to improve the decision-making process fall prey to corruption and cost over-runs in a systematically predictable way. This is what happened to Solyndra. I don't blame the people in charge. I don't even blame the politicians who commissioned the project. Our intellectual culture has decayed in such a systematic way so that no one with social status even recognizes that it has.

logfromblammo 13y ago

"The government" does not exist. It's just individual people, manipulated by psychological tricks into identifying with a certain tribe. It's a lot like "the company", actually. Those two metanymic illusions should probably be compared more on the basis of how efficiently they allocate resources to productive people than their absolute number of successes. Given only $100 apiece, which could make more--"the company" or "the government"? Remember also that the same $100 cannot be given to both at the same time.

mistakoala 13y ago

Lemmeguesswithoutclicking... Mariana Mazzucato?

liber8 13y ago

The author's hilarious use of the Medici family[1] as an example of government contributing to great advances of civilization aside, one of the things that is often overlooked is not that government has successfully contributed to some major technological advances, but why, and whether government contributions were really necessary. The examples of government successes range from those that almost certainly required government backing to those that almost certainly did not. I have a hard time imagining that anyone but a government is going to finance atomic research. The profits simply aren't there to justify it, particularly when compared to existing means of energy production. But I have an equally hard time believing that the internet or pharmaceuticals wouldn’t have come to market if government had nothing to do with them. The profit potential, even in those early years, was simply too staggering for the market to ignore. The fact that, in many cases, companies were able to persuade governments to share their costs or flat-out underwrite their research doesn’t change this. And so, because government was persuaded to share or pay for many of these costs, I think we get a distorted view of history, including success stories that can be attributed to government involvement, even though we don’t know whether government involvement was really necessary at all. [2] [1] If you're unaware, the House of Medici became so wealthy that they were able to essentially buy control of Florence, then most of Italy, and turn it into their own little kingdom. They used their wealth to foster wars that expanded their sphere of control, but are now generally known for underwriting the production of some of the great art of the 15th century. Shockingly, much of that art lionized the House of Medici. Claiming that the House of Medici is an example of a government contributing to the advancement of the arts is like claiming Brunei contributed to the advancement of the automotive industry because the Sultan spent a billion dollars on Ferraris, Lamborghinis, Bentleys, and crazy one-off concepts. [2] Another example from the article highlights this: touch-screens. Once it was clear computers would eventually be more than simply adding machines, was there any doubt that users would eventually want touch-screens? (The Jetsons, in the early 1960's, featured consumers using touch-screens, for reference.) And is there any doubt that this is something that absolutely could have been developed privately?

mrxd 13y ago
> But I have an equally hard time believing that the internet or pharmaceuticals wouldn’t have come to market if government had nothing to do with them. The argument is that the private sector invests for shorter time frames. VCs look for commercial viability within 3-5 years. They're unlikely to fund biotech and green energy, which have 10-20 year time frames, or the internet, which took 30 years to reach commercial viability.

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