The Economic Laws of Scientific Research by Terence Kealey

The Market Outperforms Statist Alternatives in Science, Too


New York: St. Martin’s Press • 1996 • 396 pages • $75.00 cloth; $19.95 paperback

Americans have come to accept that a vast number of important functions can only be done if they are run by or at least subsidized by the state. According to conventional wisdom, government has to provide lighthouses, bus service, income security, schools, disaster relief, and much more. To that list we should add scientific research. Scientific research, it is generally assumed, is a “public good” that would be underprovided if left up to the market. Therefore, the government needs to supply enough funds to make sure that we don’t miss out on scientific breakthroughs.

Like much that passes for conventional wisdom, this belief is mistaken, so argues Terence Kealey in The Economic Laws of Scientific Research. Kealey, a clinical biochemist at Cambridge University, has penned a thought-provoking book that blends economic theory with the history of science to challenge the idea that we need or even benefit from government support for scientific research. It is a book that buttresses free-market theoreticians, who will no longer have to say, “Well, in theory, there is no reason to believe that we need to subsidize scientific research.” Kealey’s book gives us a detailed treatment of the issue that should prove to be extremely valuable in arguing against this use of tax dollars.

Government funding of science turns out to be no better than government funding of business; the political system can no more pick winners and losers in scientific research than it can in markets for goods and services. A case in point: In 1833, Charles Babbage came up with an idea for a mechanical computing device, and managed to persuade the British government to give him P17,000 for the construction of his so-called “Difference Engine.” After squandering the funds and having produced nothing, Babbage asked the government for more money for a different project, his “Analytical Engine.” When it denied his request, he denounced the government for its “indifference toward science.” Twenty years later, two Swedish engineers managed to build the “Difference Engine” with a grant of less than 5 percent of what Babbage spent. But they found that there was no market for the invention. Politicized science turns out to be just as wasteful as politicized housing, education, transportation, or anything else.

But if government doesn’t fund scientific research, won’t the “free rider” effect kick in and give us too little science? Won’t organizations sit back and wait for others to undertake the basic research and then jump in to capitalize on it, getting a “free ride”? Like other claimed “free rider” problems that ostensibly call for some coercive “solution,” the supposed need for government involvement in science disappears upon close examination. Kealey argues that scientific knowledge is never free. A firm can’t keep up with, much less utilize current science unless it maintains a scientific staff that is working in the field. And there is no more need for the state to subsidize a firm’s costs of acquiring scientific knowledge that might prove profitable than there is for it to subsidize the acquisition of any other kind of useful knowledge.

Moreover, the author argues, government funding of science may well be a negative-sum game. Governmental money does not augment private scientific spending; it replaces it, often at more than a one-to-one ratio. Thus, we get less scientific research that someone thought held enough promise to justify voluntary expenditure (i.e., was expected to pass the test of the market) and more scientific research of the sort that appeals to federal grant administrators. That is a bad trade-off indeed.

The Economic Laws of Scientific Research also obliterates the “market failure” argument used to justify government intervention. There is no defect in the market for scientific information that requires us to tax the populace, send money off to Washington, and then rely on bureaucratic granting agencies to make the optimal use of it by shipping it off to scientists who want support. We would be better off if we took the government out of the loop.

Terence Kealey has written a witty, well-argued book showing for the nth time that the market outperforms its statist alternative. An excellent addition to the literature of market success and government failure.


October 1997



George Leef is the former book review editor of The Freeman. He is director of research at the John W. Pope Center for Higher Education Policy.

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