3 ms·

I believe around 1/3 to 1/2 of all medical R&D in the US is paid for by the government; if we had an actual program in place to ensure the government kept a fin

I believe around 1/3 to 1/2 of all medical R&D in the US is paid for by the government; if we had an actual program in place to ensure the government kept a financial interest in these things (instead of just giving it away), we could choose to either lower prices or recoup funds, or some mixture of both. This is nothing new; the railroads were built with massive federal subsidies and guarantees (making Ayn Rand's hard-on for railroads hilariously misguided). Especially the trans-contitental railroad which was seen as a massive risk and almost entirely funded by US federal government loan guarantees. The US Interstate highway system and the internet were funded initially by the government as well.

jandrewrogers 12y ago
It is about a third. The US government is effective at funding early research but quite poor at funding development, and they ignore some valuable areas of research for reason of political optics. Development tends to be where almost all the expense is incurred. In practice, there is a hand-off between government and industry in the transition from research to development because it plays to their respective strengths. Most of the research done by the government, like all such early research, turns out to be medically worthless during development. Looking at it like a startup, the expected annual return on biomedical R&D if you have a huge portfolio is something like 10% even with the unrecovered government investment. In other words, better than investing in an S&P index fund and worse than broadly investing in early stage tech. Without the early government investing at a loss, it might not even be worth the money of the private sector to follow on for the development compared to other things they could be investing their money in.
Houshalter 12y ago
There are stories of railroads being built by government contract doing squiggly lines and taking the least efficient path possible. They were paid by the mile. There were also many successful private railroads.

jandrewrogers 12y ago

It is about a third. The US government is effective at funding early research but quite poor at funding development, and they ignore some valuable areas of research for reason of political optics. Development tends to be where almost all the expense is incurred. In practice, there is a hand-off between government and industry in the transition from research to development because it plays to their respective strengths. Most of the research done by the government, like all such early research, turns out to be medically worthless during development. Looking at it like a startup, the expected annual return on biomedical R&D if you have a huge portfolio is something like 10% even with the unrecovered government investment. In other words, better than investing in an S&P index fund and worse than broadly investing in early stage tech. Without the early government investing at a loss, it might not even be worth the money of the private sector to follow on for the development compared to other things they could be investing their money in.

Houshalter 12y ago

There are stories of railroads being built by government contract doing squiggly lines and taking the least efficient path possible. They were paid by the mile. There were also many successful private railroads.