The US government sends the lion’s share of money for research done to colleges and universities across the country. The market is so big years ago I invested in a company that streamlines the paperwork and grant process. It’s called Streamlink Software and they have saved state and local governments millions of dollars. They have a great company but this post isn’t about them. The problem with allocating and finding money is so acute, they were able to build a business on top of it.
The real problem with grant money is that it sends out poor economic incentives. When politicians speak, they often talk about “investing taxpayer dollars”. Grants are a huge part of that.
To be very crystal clear, governments can’t ever invest money and get a return. They can only spend money. The return is generated by private industry in various ways.
When private investors put money into a company and receive equity in return, they expect that the company will grow and increase the value of their equity so they can profit. That’s investing.
When a researcher says they don’t do research for profit, they aren’t telling the truth. They might not know they are fibbing but they might get more prestige for research, which is a different kind of profit. They might get a higher salary, or access to bigger grants, which is profit. There are all kinds of ways to define what “profit” is.
Everyone wants to think that the government is some altruistic angel that allocates without bias. That is not close to correct. The government allocates capital so that it can continue to allocate capital. That is their incentive. Through the allocation of that capital, the government increases its power over people.
The bureaucrat in DC is not that much different from the Russian commissar from the old Soviet Union.
Here is a way things might happen.
The Environmental Protection Agency is allocated billions of budget dollars that are used to grant to science researchers at universities. Scientists research all kinds of stuff. They go through a process to apply for a grant. As their research shows “success” however it is defined, they get more money.
Sometimes this research bears fruit. At many colleges/universities, there is an office that tries to monetize the research. They have intellectual and technology transfer offices. Some universities do this exceedingly well. Stanford has monetized lots of research and Silicon Valley benefitted. Some don’t do it well. The University of Illinois gave Marc Andreessen so many problems he had a falling out with the university that hasn’t really been totally amended to this day. Most universities subscribe to the principles laid out by AUTM to transfer IP to the public domain or companies.
There is a lot of failure in research. That’s okay. Things often don’t pan out. If we are going to make gains, we have to be highly tolerant of failure.
However, the bureaucracy has an economic incentive to extend its reach and power. There aren’t a lot of market forces that can hold it in check that might apply to a corporation.
Going back to our example, our assumed righteous EPA person might only be doling out grants to poorly constructed studies with poorly constructed hypotheses that are for global warming. Those studies’ hypotheses might actually conclude there is global warming and then do research to prove the assumption. An entire network of scientists that get money from the government might band together and assassinate the character and reputation of scientists that didn’t get with the program or had findings that didn’t jibe with their own.
This phenomenon isn’t confined to issues like global warming “where 99% of scientists agree” or some stupid panacea like that. It gets into all research. If you understand the underlying political agenda of the agency involved, eventually the research will track hand in hand with their agenda.
It happened with Covid. As my friend Jeff Minch says, “Follow the money”.
Science grants are a huge business. Many researchers glean large salaries from those grants so the competition to get continuing grants is strong. Publishing research that confirms the political agenda of the granting organization is not that much different than a politician who was elected with the overwhelming support of the Teacher’s Union sitting across the table from them “negotiating” a new contract. If there are knits and drama in the negotiations it is just a show because we know how the story will end before we open the book.
Look closely at the answers Dr. Fauci gave to Senator Rand Paul when quizzed about “gain of function” research. What’s Dr. Fauci’s retirement reward? A cozy high-paid professorship at an institution that lives off government grants money.
There is so much government money out there it is impossible to make sure it is spent with no fraud or underhanded things happening. Medical money that goes to finance research for bioweapons in labs outside the United States has happened and continues to happen. It’s illegal here but not in other places. That’s just one aspect of it all.
We really ought to rethink the entire government grant process. Certainly, there are gains from some research. We discover new things that don’t seem important but when put in the hands of an enterprising entrepreneur looking to make a buck, they become really important. The internet was shoved in a crate somewhere in a back office government warehouse until enterprising entrepreneurs figured out how to make it work.
Government grants going to corporations doing research might be better than universities. At least corporates are accountable to their shareholders and the market. The problem is, government will pick winners and losers in the corporate world the same as they do in the university research world. A “private-public” partnership could bring us things like Big Tech that want to censor us and stop freedom of speech.
So, that idea isn’t very good either. Maybe we just kill the government grant process and save taxpayers money. Force researchers to raise their own cash and be accountable to those investors. It could even be done as a 501(c()3 ) so “investors” could get a write-off on taxes and then if the research bears economic fruit, reverse the write-off and pay taxes on any gains.
Right now, there is more graft, grift, and waste from government grants than there is progress. With a hugely bloated and wasteful government budget causing inflation, grants might be one place to take an axe.
This behavior in the public sector was well described by James Buchanan in the 1980’s. He called it public choice theory. It was not well received by the intelligentsia then because it pricked the altruistic, self congratulatory bubble of the “public servant” in both government and the general nonprofit sector. The incentives in the nonprofit sector are not benign. They are just fuzzier and harder to quantify. In many ways that makes them worse than in the for profit world.
On the anecdotal side, I have seen it in my consulting practice. Almost without exception, offices are plusher, support staff more abundant and status more expected in the nonprofit/governmental sector than in an equivalent for profit business. At least this is so at the top of the pyramid.
"Right now, there is more graft, grift, and waste from government grants than there is progress. With a hugely bloated and wasteful government budget causing inflation, grants might be one place to take an axe. "
Excellent idea Jeffrey! Let's find some aspiring young politician to lead the charge & make it a nationwide effort.