Grand Game: Government Investment Edition
It's been a while, for the Grand Game. That's where I put up a link, and you bright and good-looking KPC readers look for unintentional hilarity. Today's edition: Government investment in science!
I'll go first! My favorite part is where the government shill "proves" that these are worthwhile investments....
Success is probably 10 to 20 years away, said Arun Mujamdar, director of the program, which is called the Advanced Research Projects Agency-Energy.
But the private investment is “a good sign, an endorsement of some sort,” he said. “The best thing the government can do is to catalyze investment.”
While 31 projects have not yet attracted outside help, all are continuing, according to the department. Josh Lerner, a professor at the Harvard Business School and an expert on venture capital, said he would have been surprised if most of the projects had attracted private financing quickly.
If all the projects had quickly drawn private money, it would have suggested that the projects would have happened without government intervention, Mr. Lerner said.
With a track record of six of 37 being picked up, “it’s hard not to feel it’s a reasonable indicator that they’re doing something right,” he said.
So, to cut to the chase, there are three possible outcomes:
1. These are silly wasteful boondoggles. Nonetheless, private capital might be attracted because the research is backed up with huge artificial subsidies, as is the case with ethanol. The only reason ethanol is a fuel additive is that we spend $1.50 per gallon in subsidies. Still, it's true you can "profit" in this industry, because govt policy is distorting price.
2. These are good projects, but would have been invested in by private capital, precisely because they are good projects.
3. These are good projects, but because of imperfect capital markets or basic public goods problems in research no private firm would have invested in them.
I say they are mostly #1. Sure, by dumb luck some of them would have been useful anyway, but then they are category #2.
Note the genius move of the description in the article: We know that some are not #1, because a few have attracted some private investment. And we know that the rest are not #2 because...MOST OF THEM HAVE NO PRIVATE INVESTEMENT!
He actually claims "If all the projects had quickly drawn private money, it would have suggested that the projects would have happened without government intervention."
Brilliant. The lack of private investment PROVES that the public investment is justified, and in fact foresighted and even visionary. Unfortunately, nowhere is it explained why the fact that there is no private investment doesn't imply that these are blue sky bullshit pork projects.
Now, your turn, folks!
(nod to Anonyman)