The Limits of Government-Funded Research: What Should They Be?

chapter two

The Limits ofGovernment-Funded

Research:What Should They Be?

R. Paul Drake

introduction

The United States government today funds a wide range ofresearch, research that serves many ends. Government-fundedresearch seeks to find the limits of the universe, to understandhuman health, to discover cures for all known diseases, toknow the smallest constituents of matter, to improve crops, todevelop new sources of energy, to maintain control of ournuclear weapons, and to develop new systems for conventionaldefense. This, of course, is a tiny sample of (in 19981) a 67-billion-dollar enterprise. Our task here is to ask, from a clas-sical-liberal political perspective, just how broad governmentsupport of research should be.

In recent decades libertarians and conservatives have hadsome success in their efforts to limit the scope of government.They have made substantial progress in deregulating someindustries and in freeing some markets, but the scope of federal

1. National Science Board, Science and Engineering Indicators—2000(Arlington, Va.: National Science Foundation, 2000), chap. 2.

Hoover Press : Machan (R&D) DP5 HMACRD0200 05-06-01 rev2 page 27

research funding has been almost unchanged. Many tradi-tional conservatives are content to see the government play asubstantial role in research and are often willing to supportany research that does not immediately produce a profitableproduct. Their guiding principle, in effect, is that governmentmust not compete with business,but can do things that supportfuture business activity. Such conservatives would support theGeneral Welfare clause in the U.S. Constitution.

In contrast, libertarians oppose the General Welfare clause,and do not consider it proper for the government to supportfuture business activity. They often state their blanket oppo-sition to government support of research. Emotional fuel forthis position can be found in the work of the author Ayn Randwho, in her influential novel Atlas Shrugged, makes an emo-tionally powerful case against state control of science. Sheshows how the decision of a brilliant physicist to support suchcontrol leads to the destruction of his integrity, and eventuallyof his life, when he must progressively compromise his prin-ciples to placate those who control funding for his research.There has been a small libertarian assault on the idea thatresearch must and should be funded by government, usuallyin response to arguments by prominent scientists that suchfunding is essential to continued economic progress and tointellectual well-being. Here again, what is at issue is the roleof government in supporting the general welfare.2

What has been missing, however, is an analysis of govern-ment support of research that considers the purposes of gov-ernment within a classical-liberal political context. In this con-

2. Since one does not see legal challenges to the support of research bythe U.S. government, it is somewhat speculative to ground such supportexclusively in the General Welfare clause. For some research, in particularas it relates to regulatory actions, the Interstate Commerce clause mightalso be used.


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text, government exists for certain fundamental purposes, andmust act to achieve these purposes. In principle, it might ormight not prove necessary for the government to support re-search in order to achieve these fundamental purposes. Wewill see that it does, or can, prove necessary and this will leadus to ask what the limits of such government support shouldbe. This question, it turns out, does not have a simple answer,but we can and will make progress toward answering it. Aswe explore these issues, we will review some of the relevanthistory and consider specific cases.

achieving fundamentalpurposes of government

We will consider research from the perspective of a classical-liberal, or libertarian,3 view of politics, and will evaluate gov-ernment actions from this perspective. The classical liberalholds that the fundamental purpose of government is to defendthe natural rights of citizens. One can specify these rights, ona general level, as the rights to life, liberty, and property. Theserights imply other, more specific rights, such as freedom ofspeech, but we will not concern ourselves here with their elu-cidation. The question is what the government must do inorder to defend such rights. One can readily identify the needfor a national defense, to protect the citizens from the potentialactions of other countries, and for a police and criminal courtsystem, to protect the citizens from criminals.

3. It would not be productive to engage in the largely semantic discus-sion regarding any differences between “classical-liberal”and “libertarian”politics. There are, for example, anarchists who consider themselves to be“libertarians” politically. The text defines the political context that willform the basis of the present discussion. Those who would develop analternative discussion, in an alternative context, are welcome to do so.


The Limits of Government-Funded Research / 29

Beyond this, the government must do other things to protectthe rights of citizens and to allow citizens to exercise theirrights. Here we cite a few examples but do not provide anexhaustive list. Government must protect citizens from theinadvertent violation of their rights, which might occur, forexample, through the underground seeping of sewage fromone property to another. It must also define the rights associ-ated with new technologies and with intellectual property.Maintaining a patent office and patent law is one example ofthis. It must provide a framework for the exercise of the rightsof citizens, such as for the exchange of goods and servicesamong people. This occurs, for example, through the defini-tion and enforcement of law regarding contracts.

One sees here that government has a number of valid pur-poses, but these do not imply anything about the methodsthrough which it is to achieve them. There is a basic logicalrequirement that government must not achieve these purposesby routinely violating those rights of the citizens that govern-ment exists to defend. For example, the use of slave laborwould not be a legitimate method by which to achieve theproper purposes of government. There are also the challengingissues of funding a government that violates no rights, and thethorny quagmire of special emergencies, which lie outside ourfocus here. The important point for our purposes is that thereare no fundamental restrictions on the employment of individ-uals in order to achieve the legitimate purposes of government.

Thus, employing soldiers or policemen is valid, but so ishiring a construction company to build a jail. If a courthouseor a jail is needed, it is legitimate for the government to buildit. If the government needs a steady effort in the constructionof facilities, it is equally legitimate for the government to es-tablish an internal construction organization to carry out such


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work. However, this is not wise, as it is very well establishedby political science that governmental organizations tend tobe inefficient or incompetent in carrying out such activities.The wave of privatization that has been sweeping the worldduring the past two decades reflects an increasing recognitionof this fact. The distinction drawn here will also be importantfor our discussion of research. I will argue that although it islegitimate for the government to pursue a wide range of re-search through many methods of support, it is only wise topursue a narrower range of research and to employ specificmethods of support.

There is another point worth making here. In the context ofgovernment support, there is nothing special about scientificresearch. Scientific research is no more and no less than onetype of human activity. In some contexts, in the face of severecrises that can only be met by new knowledge, scientific re-search may be a very important human activity, but there areother important human activities. Those fundamental consid-erations that apply to government support of scientific re-search apply equally well to government support of any otherhuman activity, which makes our analysis a bit easier, as wecan draw examples from other areas.

From the above, one can conclude that it wouldbe legitimatefor the government to support any research required to achievethe valid purposes of government. One can ask: Is scientificresearch necessary for the government to achieve its properends? The answer is clearly yes, it can be. The easiest examplesare from wartime. In the course of World War II the U.S.government supported a great deal of research that had enor-mous consequences for the war. Here are two of many ex-amples. The development of radar provided advance warning



of airborne attacks.4 The development of nuclear weaponssaved an enormous number of American (and Japanese) lives.5

Some examples from the Cold War are also compelling.Continued research in nuclear weapons and related sciences,in the face of the threat from the Soviet Union, was obviouslycalled for by the mission of national defense. It was essentialto be as capable as, if not more capable than, a nation whoseexplicit political philosophy involved seeking worldwide dom-ination. For the same reasons, research that led to the devel-opment of improved technologies for spying was important.In addition, the initial steps into outer space were essential tothe national defense.

The Cold War provides other cases, though, which are moredifficult to evaluate. Research in the universities is a goodexample. From 1958 to 1968, federal support of universityresearch increased fivefold, from $1 billion to $5 billion (in1988 dollars).6 On the one hand, perhaps this expansion waspart of the general expansion of government involvement inlife and in the economy during the 1960s. On the other hand,there were very real national-defense motivations for it. Therewas a need for the United States to be strong and capable inthe face of the Soviet threat. Our question about this explosionof university research will be whether it was legitimate, and,if so, whether it was wise, but we are not quite ready to answerthis. We first need to return to the fundamental line of argu-ment.

4. Robert Buderi, The Invention That Changed the World: How aSmall Group of Radar Pioneers Won the Second World War and Launcheda Technological Revolution (New York: Simon and Schuster, 1996).

5. Richard Rhodes, The Making of the Atomic Bomb (New York:Simon and Schuster, 1986), 687.

6. Hugh Davis Graham and Nancy Diamond, The Rise of AmericanResearch Universities (Baltimore: Johns Hopkins University Press, 1997),83.


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can we find limits of legitimacy?

We have established that scientific research can be necessaryfor the government to achieve its proper ends. Such researchis then legitimate. Next one would like to understand the limitsof legitimacy. In particular, it would be convenient if therewere a simple principle that could identify some research aslegitimate and other research as not legitimate. In pursuit ofthis, let us examine some limiting cases. For this purpose, wecan draw a useful distinction between research that directlysupports actions necessary to achieve the purposes of govern-ment and research that indirectly supports such actions. Ex-amples of research that directly supports valid governmentalactions include research into the properties of high explosivesand research to improve fingerprint detection. It is fairly easyto establish whether such a direct connection exists. This de-fines a restrictive limiting case; we will examine it first byconsidering this proposed simple rule: the only scientific re-search for which government support is legitimate is researchthat directly supports actions necessary to achieve the validpurposes of government. Such research would support na-tional defense activities such as the development of weapons,or would serve a similarlynarrowfunctionwith regard to othervalid purposes of government. This simple rule, unfortunately,does not stand up to scrutiny. It is not hard to find cases inwhich much more than this would clearly be legitimate, by thestandard we specified above.

One such example, which might involve some support forresearch but primarily involves education, is the case of a newlyfree third-worldcountry. Imagine such a country,now devotedto the protection of the rights of its citizens, ready to let themagic of the market make its citizens rich. The country inquestion would have a substantial national defense problem.



As it became wealthier, it would become a tempting target forthe poorer countries around it. Such a country would have animmediate crucial need to produce educated, technicallytrained individuals to support its national defense. This needwould be similar to, but would go far beyond, the need forsoldiers. It would clearly be legitimate for this country to pro-vide extensive support for the general and technical educationof the people it needs. This could legitimately and sensiblyinclude establishing schools as well as sending people to West-ern universities. The wise pursuit of these methods might in-volve a delimited way for those educated to repay the govern-ment, similar to the Reserve Officer Training Corps in theUnited States. It might also involve a plan to phase out thegovernment involvement in the universities as the populacebecame better-educated and more naturally able to providethe required support for the national defense. But the legiti-mate actions of government in this case, necessary for thenational defense, would unquestionably include support foractivities that only indirectly support national defense.

We can draw another example from the present situation ofthe United States. The world includes many countries withnuclear weapons, and their number will only increase withtime. All such countries pose a potential threat of nucleardamage to the United States, whether deliberately or throughterrorist intervention. Certain countries have the potential tobecome a strategic threat to the United States. The UnitedStates itself has a large number of aging nuclear weapons. Forall of these reasons, the United States needs to sustain technicalexpertise in nuclear weapons and related areas of science andtechnology. However, this involves arcane subjects such as thebehavior of matter at extremely high pressures and the behav-ior of radiation in highly ionized metals. The U.S. economydoes not naturally produce experts in these areas. Moreover,


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within the context of science in the United States, the only wayto attract sufficiently capable people into this area is to have abasic research presence in the universities. (Basic research inthe universities is most often supported, not for the knowledgeit produces, but for the people trained through it.) This com-bination of circumstances makes it legitimate and appropriatefor the U.S. government to support basic research in techni-cally relevant areas, in the universities as part of its effort tosustain technical excellence in nuclear weapons. It is worthnoting that a significant fraction of astrophysics research canbe justified in this way.

Thus, a narrow principle claiming that legitimate supportfor scientific research must directly support valid govern-mental action is inadequate. There are cases in which indirectneeds must be met in order to achieve the valid purposes ofgovernment. However, having opened the door to indirectneeds, it is unclear how far one can go. A very wide range ofresearch activity can serve to indirectly support the valid ac-tions of government. Examples whose connection to such validactions is close include research aimed at developing usefultechnologiesand research conducted to train people.Exampleswhose connection is real but more distant include research inimproved computer architectures and basic research in anyarea, as history shows that one cannot predict which basicresearch will produce an important breakthrough for defense.

There is no reason to stop at this point in drawing indirectconnections. An example whose connection is even more dis-tant would be research into the sources of happiness (happypeople are more productive, and a more productive society ismore defensible). This is specific to research, but one couldmake similar arguments relating to a very wide range of humanactivity. A productive society of happy individuals can morereadily defend itself. In effect, one could drive all the activity



justified by the entire General Welfare clause through the tun-nel created by the national defense mission. This might be animprovement as compared to the present situation, in whichpromoting the general welfare is explicitly identified as a pur-pose of government, but it is not at all where a classical liberalargument would be expected to lead.

Returning to research, in the discussion above our effort tofind a simple principle that sets the limits of legitimacy hasfailed. There appears to be no inherent limit to the range ofscientific research that the government could legitimately sup-port beyond those that apply to all government action. Havingfailed to find such simple rules, we must seek wisdom. Moreformally, we should try to identify the contextual limits togovernment support of scientific research that are required bythe practice of good government. This is a much harder task,and we will not come close to completing it. In particular,much of the necessary analysis in political science probablyhas yet to be undertaken. We can, however, make some pro-gress.

the principles of wisdom

Our goal here is to identify principles that provide a guide towise government action. These will not be the sort of nearlyinviolable principles that state the fundamental purposes andlimitations of governmental actions but rather will be “rulesof thumb,” identifying the best course in the absence of com-pelling reasons to do otherwise. Technically, such principlescan be described as ceteris paribus principles, which are prin-ciples that apply with “other things constant,” and thus aresubject to context. Though they are not absolute, these prin-ciples are tremendously important. Failing to adhere to themopens the door to many kinds of corruption and to the growth


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of vast, unmanageable bureaucracies that are very hard to kill.The consequences can be much greater than those involved incorrecting a modest error regarding the proper limits of gov-ernment action. Here is the list of principles that we will discussand apply below.

1. Minimize government action.

2. Avoid governmental competition with private efforts.

3. Avoid sinecures.

4. Privatize as much as possible.

5. Avoid political control in awarding governmentfunds.

6. Avoid political influence on research outcomes.

7. Specify only deliverables; avoid government involve-ment in process.

I make no claim that this list is complete, and some importantprinciples may not be included. Indeed, my own view is thatthere is a severe need for thorough, scholarly work in classical-liberal political science. While there is substantial agreementregarding the fundamental natural rights, and that “to securethese rights, governments are instituted among men,” there isa staggering absence of fundamental work regarding how gov-ernment really ought to function.Allwe can do here is to brieflyelucidate the significance of the principles listed above.

Minimize government action. This principle reflects the factthat it should be the actions of the citizens and not of govern-ment that secure the general welfare. Government has a fun-damentally defensive and reactive role. It is quite clear, histor-ically, that attempts by government to undertake organizedhuman activities, from subways to social work, tend to pro-duce politically driven, inefficient bureaucracies. The fact that



only political action, and not profitability, can restrain suchefforts allows many such organizations to continue indefi-nitely, consuming resources far in excess of any value theyproduce.

Avoid governmental competition with private efforts. Thisprinciple reflects the fact that the government exists to protectprivate action, not to supplant it. If the government sells someproduct or service to the public, from research to rocketlaunches to lunch, this interfereswith the potential for a privateindividual or group to form a business that provides that sameproduct or service. In this regard, the government can actimproperly in several ways. These include (a) production bythe government of a needed item that is already being producedprivately, (b) entering into direct competition with an existingbusiness, and (c) selling something at below cost, since thispractically precludes the development of private alternatives.

Avoid sinecures. The principle reflects the fact that the gov-ernment can, but should not, create inherently unproductivecircumstances. The government can place an individual or anorganization in a position that is so secure that there is nomotivation for productivity or efficiency. Some organizationsstaffed by civil service employees are of this type, since suchemployees effectively cannot be laid off. In science, there areseveral motivationsbeyond tomorrow’spaycheck that providean incentive toward productivity, including the competitionfor supplemental funding for research projects. Nonetheless,providing indefinite funding for a research program conductedby government employees within a government laboratory isa recipe for lack of focus and low productivity, because lackof focus and inefficiency will have no adverse consequences.

Privatize as much as possible.This principle could be viewedas a consequence of the first three. It reflects the fact that anyactivity done in a competitivemarket tends to be more efficient,


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and vastly more innovative, than it would be if done by gov-ernment. As we said above, recognition of this has led to thewave of privatization that has been sweeping the world duringthe past two decades.

Avoid political control in awarding government funds. Thisprinciple reflects the fact that one must work to prevent polit-ical incentives from taking precedence over the accomplish-ment of valid ends of the government. While political actionis inherent in deciding which type of research to support andhow much, just as it is inherent in deciding when to build anew courthouse, it is important in all such cases to awardgovernment funds using objective standards whose purpose isto obtain quality results. The classic examples of unwise actioninvolve Congressmen who seek big federal construction pro-jects for their districts. In recent years, however, scientific andacademic pork have become common.7 Each year, Congressearmarks an increasing fraction of the federal scientific budgetfor specific institutions. This practice, discussed further below,is most definitely not wise. The opponents of earmarking typ-ically call for the use of peer review, which has been the tra-ditional method. Peer review is often the best approach buthas limitations, although we will not examine this issue here.A more general statement of wise policy is the following: inawarding government funds, use competitive methods withreview mechanisms that employ objective evaluation pro-cesses.

Avoid political influence on research outcomes. This prin-ciple reflects the fact that the only worthwhile research out-comes are objective, but that governmental officials very oftenhave political reasons to desire specific results. Vice President

7. James D. Savage, Funding Science in America (Cambridge: Cam-bridge University Press, 1999).



Gore very much desired anthropogenic global warming to bea certain, looming catastrophe while President Bush wouldprefer that it be small or absent. This principle complementsthe previous one. It is necessary, but not sufficient, to keeppolitics out of funding decisions. Beyond this, it is essential tothe integrity of the scientific process that researchers do notfeel that their conclusions will impact their future viability.Regulatory agencies routinelyviolate thisprinciple—aswe willdiscuss at length later.

Specify only deliverables; avoid government involvement inprocess. This principle reflects the fact that government shouldtreat those it supports as independent contractors, not as gov-ernment agents. The public has a right to know a great dealabout its government agents, so there is merit in close moni-toring of government agents by both the government itself andthe press. The result is the emergence of a bureaucracy tomonitor and regulate the actions of government agents. How-ever, suppliers of goods or services, including research, areproperly treated as independent trading partners in an openmarket. If they are treated instead as government agents, thenthe result will be (and has been) large bureaucracies that stifletheir efforts at substantial cost to the taxpayers.

This completes our identification and survey of the princi-ples of wise government that are relevant to government sup-port of research. Each of them, and doubtless others, could bethe subject of a chapter-length or book-length exposition. Ihope that someone will undertake this and look forward toseeing the results.

At this point we have set the stage for a more specific dis-cussion and will begin with a discussion of basic research anduniversity research (these are closely coupled). This will returnus to discussion of the Cold War expansion in the 1960s, inthe following section. Uunfortunately, we will have to ignore


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funding for health research, although this is an interestingissue. The degree to which government action is appropriate,in response to disease, deserves a serious analysis. On the onehand, the bubonic plague killed a large fraction of the popu-lation of Europe8 and the potential for a similar disaster cer-tainly exists today. This would seem to justify some level ofgovernment activity. On the other hand, the common coldseems pretty clearly beyond the classical liberal province ofgovernment. Beyond this, there are complications in this topicrelated to government support and government regulation ofthe health industry. Overall, health research and related issuesis too large a can of worms for us to open here. We will leavethis to others.

historical basic anduniversity research

In the area of basic and university research, two developmentsprior to World War II are worth examining. The first is gov-ernment funding of research during this period.9 Before thewar, the primary justifications for government-funded re-search in the United States were defense and commerce, al-though health was also significant. From our classical-liberalperspective, we approve of defense as a motivation but not of

8. Norman F. Cantor, In the Wake of the Plague: The Black Deathand the World it Made (New York: Free Press, 2001).

9. Daniel J. Kevles, The Physicists (Cambridge, Mass.: Harvard Uni-versity Press, 1987); James D. Savage, Funding Science in America (Cam-bridge: Cambridge University Press, 1999); A. Hunter Dupree, Science inthe Federal Government (Baltimore: Johns Hopkins University Press,1986); Bruce L. R. Smith, American Science Policy Since World War II(Washington D.C.: Brookings Institution, 1990); Harold Orlans, ed., Sci-ence Policy and the University (Washington, D.C.: Brookings Institution,1968).



commerce, viewing this as outside the proper role of govern-ment. However, the methods of accomplishing funded re-search during this period were distinctly unwise. There waslittle and reluctant funding of research by nongovernment em-ployees. By World War II, organizations such as the WeatherService, the Geological Survey, and the National Bureau ofStandards had long histories. It would have been wiser toprivatize these efforts in ways that were consistent with ourother principles.

Beyond the direct federal effort, much of the other fundingthat did exist was institutional in nature. The Hatch Act of1887 and the Smith-Lever Act of 1914 established agriculturalresearch and agriculturalextensionservices that involved long-term support of politically distributed institutions.10 If youhave reminisced with farmers who were active in the mid-twentieth century, you probably know that the extension ser-vices did a lot of good work. However, from a classical-liberalperspective these efforts were wrong in two respects. First,they were undertaken to support the general welfare, ratherthan for a purpose connected with the rights of the citizens.Second, the way they were supported was unwise. It preventedthe development of private alternatives and the innovationsthat would have resulted.

Meanwhile, certain U.S. universities were inadvertently pre-paring themselves to play a much larger role in research forthe nation. “On the eve of World War II, the unplanned evo-lution of higher education in the United States had produceda loose, sprawling, largely unregulated system that was decen-tralized, pluralistic, competitive, and vast.”11 This was a direct

10. James D. Savage, Funding Science in America (Cambridge: Cam-bridge University Press, 1999), 33.



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result of decentralizedmarket competition.Private institutionshad always played a major role, and the institutions that werepublicly funded by the states competed with the private insti-tutions and one another. This remains true today. This marketin higher education differed sharply from the centralized andnationally controlled system in place in Europe, where thefraction of students advancing to the universities was threetimes smaller at the outbreak of World War II.

Two consequences were important. First, the best U.S. in-stitutions (about three dozen out of more than 600) resultingfrom this brisk competition were extremely capable. Theseinstitutions became the research-oriented graduate schools,and there was a need for them. “The sheer size of Americanhigher education created huge communities of scientists inevery discipline and field. Although much of the instructiongiven at American colleges and universities took place at lessthan an advanced level, teaching itself created secure profes-sional employment for thousands of scientists and scholars;and training these cadres gave work of a higher order to thegraduate schools.”12

With the advent World War II, the government needed farmore research than its captive scientists could provide. Thefederal government was forced to rely upon project grants tosupport the research it needed. Christian Arnold13 reports: “Atthe beginning of our involvement in the war, our militarytechnology and machinery were almost hopelessly inadequateand obsolete. Therefore the military agencies did what theyhad to do—they bought the information, engineering, and‘hardware’ they needed by negotiating contracts with organi-

12. Roger L. Geiger, “Organized Research Units—Their Role in theDevelopment of University Research,” Journal of Higher Education 61(1990): 2.

13. ChristianK. Arnold, in Science Policyand the University, ed. HaroldOrlans (Washington D.C.: Brookings Institution, 1968), 89–90, 91.



zations and individuals that seemed likely to do the best jobfor them.” Our response is that this was wise, and was theapproach that should have been used previously. Although thetop universities had the intellectual resources to undertake theneeded research, in the university arena this approach led topolitical problems after the war. The most competent institu-tions won the lion’s share of the work, and these institutionswere concentrated in only a few states.

After World War II, the relation of government to researchdid not return to the prewar condition. Graham and Diamondsummarize the change in perspective as follows.14 “World WarII convinced American society . . . that . . . the link betweenresearch universities and the nation’s economic strength andnational security was too vital for the national government toleave unattended.” From a classical-liberal perspective, onewould challenge this assertion with regard to the nation’s eco-nomic strength, which is typically hurt by federal efforts toimprove it, but one would agree that national security is theresponsibility of the national government. World War II pro-vided very clear evidence that research plays a key role innational security and in the ability to win wars. Those whoanalyze such matters believe that “any power that lags signif-icantly in military technology, no matter how large its militarybudget or how efficiently it allocates resources, is likely to beat the mercy of a more progressive enemy.”15 The experienceof the Gulf War provides recent evidence in support of thisstatement from 1960.

There ensued a five-year battle over the method by which


15. Charles J. Hitch and RolandN. McKeon, The Economicsof Defensein the Nuclear Age (Santa Monica, Calif.: RAND, 1960), 243.


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the federal government should support research.16 One group,led by Senator Kilgore from West Virginia, favored a geo-graphically distributed approach modeled on the agriculturalextension service. They were opposed by another group, ledby Vannevar Bush, who was the director of the Office of Sci-entific Research and Development both during and after thewar. Through his wartime experience, Bush17 “grew leery ofwhat might happen to the independence of university researchif, after the war, government directly managed the conduct ofacademic science.” He advocated the competitive distributionof research funds by individual contracts and grants. After fiveyears, Bush and his colleagues finally won this battle, andPresident Truman signed legislation creating the National Sci-ence Foundation.

Equally important, though, was what happened in the in-terim. Several other federal agencies had filled the policy voidby beginning to support research that they needed, seeking tomeet their needs from the (academic and other) research mar-ketplace, and not by means of geographic or institutional for-mulae. This continued through the 1960s, so that “whatemerged from the 1950s and 1960s is a relatively decentralizedfederal science establishment, although one dominated by na-tional security interests, in which academic research supportcomes in the form of project grants awarded to individualuniversity researchers.”18 We can see here that during thisperiod, and from the point of view of the wise conduct ofgovernment, the good guys won. Using private resources and

16. James D. Savage, Funding Science in America (Cambridge: Cam-bridge University Press, 1999), 334–35; Hugh Davis Graham and NancyDiamond, The Rise of American Research Universities (Baltimore: JohnsHopkins University Press, 1997), 28–30.

17. Ibid., 35.18. Ibid., 36.



methods that minimized political influence was a wise way tosupport the research that the nation chose to undertake.

the cold war and beyond

This returns us to the beginning of the Cold War and to themassive expansion of federal support for scientific researchduring the 1960s. This expansion has been characterized aspart of the general expansionof proactive government involve-ment in society during this period. I believe, however, that thisviewpoint is incorrect. This immense expansion, with the as-sociated increase in facilities and in number of students, wasdriven in large measure by the perceived need for the UnitedStates to be strong and capable in the face of the Soviet threat.This need went far beyond the need to develop specific weap-ons or related technologies; it reflected the need to be ready torespond to any discovery that mattered for defense, in any areaof human endeavor. Research progress in psychology was po-tentially as important as research in explosive chemistry. In areal sense the United States was at war, and the battlegroundwas war-related technical capability. The Soviets understoodthis and spoke of it. Soviet Chairman Leonid Brezhnev pointedout in the late 1970s that the “center of gravity in the compe-tition between the two systems [U.S. and U.S.S.R.] is now tobe found precisely in [the field of science and technology].”19

Of course, such research also can be (and was) justified for thesake of the general welfare. But this was a case where thegeneral welfare and the needs of national defense walked hand

19. Quoted in Amos A. Jordan, William J. Taylor, and Michael J. Ma-zarr, American National Security (Baltimore: Johns Hopkins UniversityPress, 1998), 321.


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in hand. It is not surprising, in this light, that the U.S. Congressfound it easy to support these efforts.

Politicians will give every reason that has a constituency asgrounds for their actions, but one can sometimes find the com-pelling reasons by seeing which events lead to changes in theiractions. It is very informative to trace the parallel evolution ofnational security concerns20 and of university research.21 Dur-ing the 1950s and 1960s the Soviet threat was viewed as severeand immediate. In weapons (such as hydrogen bombs) andtechnology (Sputnik) they appeared to be even with or aheadof the United States. It is no coincidence that the 1960s aredescribed as the Golden Decade for university research. By thelate 1960s to early 1970s, there was a consensus among U.S.security experts that the Soviet threat had been exaggerated.The congressional response with regard to university researchin the 1970s caused it to be called the Stagnant Decade. TheUnited States de-emphasized defense in many ways during thisdecade, while the Soviet Union used this period to accomplisha massive buildup of its military establishment. “By the early1980s, the enormous momentum of the Soviet buildup yieldedsome clear elements of Soviet superiority.”22 Again the U.S.responded, with the “Reagan buildup” of the 1980s, includingthe Strategic Defense Initiative. It should not be a surprise thatthe 1980s are characterized as a second golden age for univer-sity research.

Our focus in the above discussion has been on the United

20. Ibid., chap. 16.21. Hugh Davis Graham and Nancy Diamond, The Rise of Amer-

ican Research Universities (Baltimore: Johns Hopkins University Press,1997).

22. Amos A. Jordan, William J. Taylor, and Michael J. Mazarr, Amer-ican National Security (Baltimore: Johns Hopkins University Press, 1998),345.



States. At least one analyst of worldwide research funding(Terence Kealey) believes23 that “governments fund education,science, universities, and technology for military, not human-itarian, reasons.” He and I might differ, however, over thelegitimacy of this. My view is that in many cases researchfunding by the U.S. government, and likely by other Westerngovernments, has been justified and reasonable for defensereasons. Even so, much of this support has been carried outunwisely, and the needs of defense are smaller now than theywere through the end of the Cold War.24

In the United States, things changed in the early 1990s. Afterthe collapse of the Berlin wall and the fall of the Soviet Union,broad congressional support for university research collapsed.There was a period of substantial confusion and large fluctu-ations as Congress wrestled with the question of whether the“peace dividend” should include a large reduction in federalsupport for such research. Since that time, congressional sup-port for science has been much less certain and far more con-tentious. As an active scientist, I have seen an enormous in-crease in the level of lobbying activity by scientificorganizations and in appeals to me to contact Congress insupport of some objective. Science, once coddled as essentialto the nationaldefense, has become just another interestgroup.

23. Terence Kealy, The Economic Laws of Scientific Research (NewYork: St. Martin’s Press, 1996), 118.

24. Kealy also argues, with statistical supporting evidence, that govern-ment funding of research disproportionately displaces private researchfunding, leading to a net decrease in research progress. Even if he werecorrect in this, though, there are times when the real needs of defense wouldbe worth the cost.However, I am skepticalof his conclusionfor two reasons.First, like many scientists I am skeptical of studies that turn out to supporta conclusion which the author knows in advance. Second, Kealey’s analysisdoes not allow for whether the research is funded and managed wisely. Inmy view this will make a difference.


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Meanwhile, Congress, perceiving various kinds of value inscientific efforts, is evolving toward a system of support inwhich the general welfare is a much larger motivation. Simul-taneously science is increasingly part of federal “pork.” Ear-marking of academic and other research funds so that they goto specific institutions in specific congressional districts issteadily on the increase. Such funds have increased from $17million in 1980 to $328 million in 1996.25 This is not surpris-ing. As it becomes less urgent to make research progress forthe sake of defense, science funding becomes more like anyother goody that Congress hands out. The classical liberalassessment of this is rather negative. Science funding is becom-ing less legitimate as its connection with the national defenseweakens, and less wise, as earmarking becomes more signifi-cant. In this context there are many examples of programswith a plausible defense justification during the Cold War forwhich such a justification is much harder to support now. TheInternet is an excellent example. In the early 1960s, long beforeAl Gore “invented” the Internet, the agency then known asARPA (the Advanced Research Projects Agency, which lateradded Defense to become DARPA) focused on the problem ofimproving the military use of computer technology.26 Defenselaboratories and the military had a serious, unmet need forwhat would now be known as broadband communication. Atthat time, there were no commercial enterprises devoted tobroadbandcommunication.The leaderof thisARPAprogram,Dr. J.C.R. Licklider, decided that this need could most effec-tively be met by work within the universities. He supportedthe foundation of the ARPANET, which initially connected a

25. James D. Savage, Funding Science in America (Cambridge: Cam-bridge University Press, 1999), 3.

26. This history is described at www.netvalley.com/intval.html.



number of universities. The great breakthrough came whenresearchers using a computer at UCLA tried to log in to acomputer at Stanford. The system crashed after two letterswere transferred, but nonetheless “a revolution had begun.”27

We can be pleased that this work laid the foundations fortoday’s Internet, which is of great benefit and commercial im-portance despite the recent (as of 2001) dot.com madness.Nonetheless, at the time, it made sense for the federal govern-ment to support this work.

Today there is a follow-on project, the Internet-II, throughwhich a number of universities are receiving support to createa next-generation Internet. One probably could justify such aproject for defense reasons because everybody needs morebandwidth, including the military. But today there is a vast,commercially driven, telecommunications industry. This in-dustry is also starving for bandwidth. I do not see why, froma classical-liberal perspective, there remains a strong justifi-cation for further federal funding of Internet development.

The space program provides another example, but with adifferent, more nuanced outcome. In my view, there is noquestion that the early space program was fully justified bydefense needs. The conquest of space and development of theability to put weapons and humans in space was essential inresponse to Soviet activities. Even now, there are still defense-related reasons for some space activity by the government. Forexample, flying and improving spy satellites remains impor-tant. In addition, as mentioned above, sustaining some astro-physics research contributes to the manpower-training andbasic science needs of nuclear defense activities. However, theUnited States and NASA have violated our principles of wis-dom in several respects. As one example, NASA should have

27. Sacramento Bee, May 1, 1996, D1.


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encouraged the development of a private launch industry, inappropriate ways, instead of developing the space shuttle.

The reader should not conclude, however, that Congressadopted a strict, classical-liberal approach to research fundingthroughout the Cold War, and that this has now changed.Congress has always supported the General Welfare clause(and most definitely its local welfare corollary). Support forresearch in agriculture, for example, has endured since thenineteenth century.

Before leaving this subject, we should discuss the funding ofresearch in settings other than universities, such as privatelaboratories. From the standpoint of validity and of wisdom,there is no general reason to prefer one over the other. Inpractice, much of research funding (and nearly all funding ofbasic research) has been supported primarily for the purposeof training students. Basic research only produces results ofimmediate and substantial value unpredictably and sporadi-cally, but it produces trained scientists with high reliabilitywhen it is done in a university. This is a legitimate motivationfor using universities for basic research. However, wheneverthis motivation is not important, it would be perfectly reason-able to support such research within other organizations.

laboratories forlarge-scale research

We have discussed research funded in universities, and similarresearch funded in private laboratory environments. In addi-tion there is a category of research projects for which univer-sities are ill-suited. These are projects that are of a substantialsize (involving more than about ten people) or are stronglyinterdisciplinary(involving in an essential way more than threeor four scientific disciplines). They are our subject here, be-



cause a need for them can arise in many areas of research, andbecause the United States has handled them quite poorly. Suchprojects are very difficult to accomplish in a university envi-ronment and are not very appropriate for universities, as theyrequire tight management and a programmatic focus inconsis-tent with the educational context of a university. It might makesense for a university to set up a laboratory that can accomplishsuch projects, especially if the projects tie in to the scientificand educational purposes of the university—in fact, I now runsuch a laboratory. But such situations are exceptional, and theneed for large-scale, interdisciplinary research projects is not.

The need for such projects led to the emergence of numerouslarge research laboratories during the 1950s and 1960s. Themotivation for their research was the same as that for researchin universities, so our above conclusions apply to the legiti-macy of their research. Unfortunately, the advent and growthof these laboratories was not handled wisely. Most of themare of two types, both of which are very strongly controlledby the federal government. Some, notably including most ofthe NASA centers and the military laboratories (some of whichare much older) are federal laboratories. In these labs, all ofthe property is government property and all of the employ-ees are Civil Service employees. Other laboratories, includingNASA’s Jet Propulsion Laboratory (JPL) and all of the De-partment of Energy (DOE) labs such as Lawrence Livermore,are Federally Funded Research and Development Centers(FFRDCs). In FFRDCs, nearly all of the funding is federal, butsome other organization hires the employees and manages thelaboratory under a contract with the federal government. TheUniversity of California, for example, manages Livermorewhile Cal Tech manages JPL. The managing organization isnot always a university; for example, the Sandia Laboratoriesare managed by Lockheed Martin. A few private research


52 / R. Paul Drake

centers are large enough to qualify as laboratories in this sense,including SouthWest Research Institute (which builds spacehardware and conducts space missions), but these are the ex-ception.

Both the federal laboratories and the FFRDCs embody theworst features of a bureaucratic environment. Specifically, asthere are no constraints related to profit, the only fundamentalmotivation of any individual involved in monitoring these lab-oratories, or in performing support functions within them, isto avoid adverse publicity. The most secure way to accomplishthis is to do nothing and prevent the scientists from doinganything. Bureaucrats and rules proliferate without limit insuch an environment. As I know from personal experience andfrom many discussions with employees of these institutions,the scientists working there end up facing a terrible choice. Onthe one hand, they can try to follow the rules. They won’tsucceed, but they absolutely will not accomplish anything. Onthe other hand, they can try to do meaningful work for thecountry. This requires that they routinely break the bureau-cratic rules. In such an environment, it becomes very difficultto retain good judgment regarding which rules matter. In myown view, both the Wen Ho Lee incident and the missing tapesincident at Los Alamos in the late 1990s were consequencesof this fundamental problem.

One specific example of bureaucratic irrationality was pro-vided when a colleague of mine was responsible for shippingsome hazardous waste from the Livermore Lab to a safe dis-posal site. He had three choices. He could follow DOE rulesin doing so, which would require violating both federal andstate laws. Or he could follow federal law, which would re-quire violating state law and DOE rules. Or he could followstate law, which would require violating federal law and DOE



rules. His situation was in addition a “Catch-22.” Doing noth-ing would have violated the laws and rules as well.

My interactions with a few Russians illustrated more gen-erally just how irrational the environment within such labo-ratories has become. During the early 1990s there was a sub-stantial migration of Russian scientists to the United States.Some of them became affiliated with the Livermore Lab, aswas I at the time. These individuals, experienced with theSoviet state, often had a great deal of difficulty understandingAmerican culture and society. In contrast, they found it veryeasy to understand the workings of the DOE labs. It is trulyironic that we developed a Soviet-style environment in ourattempt to counter the Soviet nuclear threat.

A more chilling example of the adverse consequences ofdirect federal control was provided during the Clinton admin-istration. Vice President Gore would ask leading climate sci-entists, such as James Hansen and Tom Wigley, to share thestage with him while he made ludicrous statements aboutglobal warming. What the press did not report, however, wasthat these scientists held leadership positions in federally con-trolled laboratories. They had no choice but to attend thisevent. When the boss (or the vice boss) calls, one must go. Thisis the one thing I have seen, in more than twenty years ofinvolvement with federally funded science, that reminded meof the State Science Institute as it was portrayed in AtlasShrugged.

It should be clear that the development of federally con-trolled research laboratories was extremely unwise. It violatesnumbers 1 through 4 and 7 of our principles of wisdom, andsometimes also 5 and 6. Any large-scale research that is legit-imately required by the nation should be undertakenby privatelaboratories, which should work under competitivelyawardedcontracts, requiring no more than that they accomplish the


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research and obey the relevant laws while doing so. In myopinion, the federally controlled laboratories should be phasedout and their assets should be sold.

research, regulation,and the unknown

Our discussion so far has focused principally upon researchwhose purpose is national defense. Much of what we havesaid, however, would apply equally well to research conductedfor other purposes. For example, police agencies might chooseto support research aimed at computerizing fingerprint detec-tion or research aimed at developing psychological profiles ofterrorists. These would be legitimate, as they both support thevalid purposes of government, and both could be done wisely.Beyond these defense and police functions, government mightneed to support research for other reasons related to the othervalid purposes of government discussed above in the secondsection. It is unfortunate that we do not have space to explorethis as a general subject here, because the specific subject ofregulation is of great practical importance.

It is unclear to me whether regulation is a necessary com-ponent of a classical-liberal government. Many classical lib-erals advocate the use of the courts to deal with all circum-stances in which citizens can harm one another. Some wouldallow statutory law to play a role as well. However, what isnow known as the environment is in many respects a naturalcommons. Problems such as air pollution, ocean pollution,and harmful-insect propagation do harm citizens and theirproperty but do not obviously lend themselves to strict judicialsolutions. Much work in political science is needed here. It isvery unclear in what sense and to what extent a citizen has aright to clean air or a right to the present climate. It is even



more uncertain whether and to what extent regulation will beneeded to secure these rights.

It is very clear, however, that governments will be usingregulatory mechanisms for the foreseeable future. Because ofthis, work is also needed on how regulation can be done wisely.Libertarian think tanks are doing some of this today, for spe-cific applications. We can hope that someone is undertaking(or soonwill) a more general analysisof howto regulatewisely,which is outside our scope here. A related and interesting ques-tion is whether the government ever should engage in regula-tion of some activity when research about its effects has notyet produced certain results. The answer here might be yes, ifthe plausible or probable consequences are large enough. Inany event, governments today routinely implement regulationsunder such uncertain circumstances. As a result, the implica-tions of this situation for research deserve our attention.

In considering the interplay of research and regulation, it iscrucial to note that the mindset and the incentives for thesetwo activities are completely different. The mindset of theresearcher is to discover how reality works. This includes theneed to identify and focus on areas of uncertainty, and tocontinually question what seems to be well known. The mind-set of the regulator is to devise a practical means of restrictinghuman action, to achieve some simply stated goal. The goaloften reflects scientific work, but cannot respect scientific un-certainty. For example, the decision to regulate often requiresthat an acceptable concentration or rate of emission of somepollutant must be established. For two reasons, the establishedlimit very often will be based on uncertain science. First, thequestion, “how small is small enough?” is often difficult forscience to answer. Second, the political process produces adrive to act NOW, in response to whatever threat is perceived.The incentive for the regulator is to specify some standard and


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to implement a regulation. Politically, it matters much lesswhether the regulation is soundly based.

There are two implications for research. First, research willvery often be needed and important after a regulation is en-acted. The continued development of scientific knowledge willoften show that the decisions made when enacting the regu-lation should be revisited. The science will sometimes showthat the regulation is very wrong. Yet there has been a cleartrend for government agencies to cease supporting research assoon as a regulation is in place. The Department of Transpor-tation stopped its support of stratospheric ozone research assoon as regulations were in place regarding chlorofluorocar-bons. The interagency acid rain program was terminated assoon as emission controls, intended as a response to acid rain,were in place. After the EPA proposed regulating hydrocar-bons to control ground-based ozone, research at Georgia Techshowed that this is often impossible. The conclusion to drawhere is that regulation requires research. The governmentshould assure that there is continued development of the sci-ence in any area in which it chooses to regulate. This may meanthat the government should fund such research, if it will notbe accomplished by other means. It should do so in order toassure that the regulation is achieving its stated goal of pro-tecting the citizens in some way and to assure that the freedomof action of the citizens is not being restricted unnecessarily.

Second, the incentive of the regulator is to oppose suchfurther research. It makes the regulator look bad when theregulation needs to be changed. Dealing with such issues alsodistracts the regulator from the process of developing otherneeded regulations. An example from California illustrates theincompatibility of regulation and research. California gave theproblems of both regulating air pollution and supporting re-search to its California Air Resources Board. The board estab-



lished an advisory committee of scientists to advise it on re-search directions, and then proceeded to blatantly ignore theadvice of the committee. The committee felt that its advice wasnot taken seriously, and disbanded in protest.

One can conclude from the above that one must separateresearch and regulation. Only this can provide a system ofchecks and balances that will dampen the tendency to regulateexcessively and unreasonably. If one establishes a regulatoryagency, one should also establish independent research withinsome other agency. The task of the independent researchagency should be to advance the science related to the regu-lations without regard for the political consequences. (Thiswill be politically practical only if the research agency supportsresearch by others, through grants and contracts, but does noresearch itself.) The United States combines research and reg-ulation in several cases, notably including the EnvironmentalProtection Agency and the Food and Drug Administration.Based on the above discussion, this is a colossal mistake di-rectly responsible for many of the bad regulator decisions thatone hears about from these agencies. One does not hear aboutmany other cases, in which further research, never undertaken,would have shown that some regulation ought to be amendedor scrapped.

conclusions

We have seen that the General Welfare clause in the U.S. Con-stitution is the underlying principle that justifies governmentsupport of research today. Some of this research is done wisely;some of it is not. However, once we reject the General Welfareclause, and seek a government based on the defense of individ-ual rights, we still find that the government should supportresearch. Unfortunately, it does not prove trivial to place limits


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on which research should be supported, and we end with theproblem of needing to proceed wisely in the face of complextrade-offs. A historical review suggests that much of the re-search supported during the twentieth century was appropri-ate for defense reasons, although only some of the methods ofsupport were wise. In particular, both federal labs with CivilService employees and Federally Funded Research and Devel-opment Centers ought to be phased out and replaced by privatealternatives. We have also seen that regulation and researchare conflicting missions. In consequence, a government thatwould regulate wisely must separate regulation and research.28

28. The author acknowledges useful discussions with David Kelley,Joyce Penner, Patrick Stephens, and Roger Donway.



Documents

The Limits of Government-Funded Research: What Should They Be?