I think the author is close, but doesn't quite capture the entire reasoning behind "cure cancer" versus "disrupt dry-cleaning" or "new car manufacturer". The disparity between these things is not just a matter of probability of success, but also of the timeline over which success is realized.
When I was just over a year-and-a-half into my Ph.D. training, I had something of an epiphany. At the time, I was designing an experiment that would be part of a larger research course. As part of the work, I scaffolded out the entire research course to its eventual conclusion. Having finished this, I took a figurative step back...and realized that I would be long dead before the entire project could be finished.
I was 24 at the time.
Graduate school, and scientific research in general, has a way of slapping you upside the head with your own finite lifespan. The resulting problem, of course, is how do you convey to a non-scientist that the work you are doing is important, despite the fact that you will not live to see its conclusion?
I've often thought this is the great unsolved problem with capitalism. How do you convince shareholders to invest their money if you can only promise returns on a 100+ year schedule? I think the insurance industry might have some insights here, but I still haven't quite cracked this nut...
This is actually the best reason for government funding of basic and applied research. Society has to take the long view since individuals and corporations can not.
This is why it is scary that politics has degenerated to the point where even 4 year plans are becoming difficult.
While capitalism is quite successful, it has shortcomings. These should be addressed by the society as a whole, and the State is THE organization that is participated in by the whole society. Major categories of capitalism faults:
- It does not guard against negative externalities: pollution, long term degrading employee health and safety, value extraction with no value creation (think stealing and other crimes). Here, laws and police/justice are needed to guarantee an even playing field.
- It does not guard against value capture by monopoly, be it natural or artificial monopoly. Here, state companies and anti-monopoly regulation are needed.
- It does not invest in positive externalities (think fundamental investigation in generic areas like math). Here, government funding of investigation is a good target.
- It does not guarantee its own persistence, when attacked by a different ideology (think national security). This is what justifies having the military.
Having the State intervene in the market to reduce these shortcomings should never be viewed as anti-capitalist, much to the contrary: it is essential to preserve capitalism.
For a very vivid example: large banks are capturing an exceedingly large added value from the market, and are creating negative externalities through risky behaviour. We have done nothing to contain this problem. Worse, we are generally failing to take the long view in planning government intervention in the areas government must operate, and are having the government act in areas where it shouldn't.
All of these are the result of unregulated and unrestrained capitalism. I'm confused that the majority has somehow been convinced that it is a good thing that corporations are socipathic entities that will parasitically consume its host (society) if allowed.
I was going to point out the opposite, that most of these traits are attributable generally to "crony capitalism". First, his example is about banks that have had the worst of it. Second, the government protects individuals and entities from negative externalities in a way not originally contemplated by the founders. Essentially cronyism protected railroads from being sued for negative externalities, and that presented today's regime. It is not a "natural" component of capitalism.
While these are some textbook examples of claimed shortcomings of Capitalism, but in reality, it is not that straightforward.
- Soviet Russia and Communist China had massive men-made environmental disasters.
- Most monopolies are created by the state sanctioned environment. Not all monopolies are bad. If anything that remotely resemble monopoly arise in relatively free market, it is because it serves the needs of the customers so well that it has out-competed all the other companies.
- If you dump hundreds of billions of dollars in something, sure, you might get some good out of it, but no one can quite measure if it was done efficiently or not. There's no good reason to assume to that such things would be have been only funded by government.
The fact that other society models are worse isn't relevant to my analysis. Capitalism is so far the best societal model, but that does not imply perfection.
Monopolies arising naturally do not imply that, for the society, the monopolistic status is the most efficient. It is the most efficient for the monopolist. Think of it as a local maximum. This is microeconomics 101.
If an investment in investigation produces mostly positive externalities, then the investor will not recoup his investment, even if the end result is better for the society as a whole. As such, these investments will not occur in free form capitalism, even though they would be positive for the society as a whole. I'm purposely removing risk from the analysis, as it does not affect the conclusion.
A refreshing comment on a message board where it's so fashionable to write government off as inherently corrupt and inferior. It's corrupt because we allow it to be, and its inferiority/superiority vs. the private sector is situational.
How do you convince shareholders to invest their money if you can only promise returns on a 100+ year schedule?
Genuinely curious: what specific returns do you promise on this schedule, if you could obtain all the resources you envision? If this question is unfair, could you be more specific on a 50- or 20-year schedule?
From the bit of science history I've read, it seems rare for any successful investigator to have a 100-year plan. They work on the problems that are of current interest, and later researchers do the same, and it's only in long hindsight that we see any sort of logical path.
When I was just over a year-and-a-half into my Ph.D. training, I had something of an epiphany. At the time, I was designing an experiment that would be part of a larger research course. As part of the work, I scaffolded out the entire research course to its eventual conclusion. Having finished this, I took a figurative step back...and realized that I would be long dead before the entire project could be finished.
I was 24 at the time.
Graduate school, and scientific research in general, has a way of slapping you upside the head with your own finite lifespan. The resulting problem, of course, is how do you convey to a non-scientist that the work you are doing is important, despite the fact that you will not live to see its conclusion?
I've often thought this is the great unsolved problem with capitalism. How do you convince shareholders to invest their money if you can only promise returns on a 100+ year schedule? I think the insurance industry might have some insights here, but I still haven't quite cracked this nut...