Government As A Source of Innovation

There are some comments in one of Mitchell’s recent posts about the European Commission that I think are worth discussing more in depth. In the post, there is a statement that ‘There’s no disagreement that technology is best developed by technologists and entrepreneurs rather than government.’ I actually disagree with this and it looks like at least one other person does too.

Governments have been a source of an enormous amount of innovation (for example, radar, nuclear energy, aviation, adaptive optics, computers…*). Very often the source of the innovation is from military applications that find their way into civilian uses over time. A brief history of the Global Positioning System provides a great example of why working with governments is a smart idea.

GPS was created by the military starting in the 1960s. Due to advocacy from civilian agencies and the public who saw the value of this technology for their own uses, the government was persuaded to change their policy in 2000 and make the full signal available to non-military users. Thanks to that we have cool iPhone apps and cool Firefox extensions. There’s also a separate issue with this example. Governments are often the only ones able to provide certain technologies. For GPS, no company would have been able to pay for a 40 year R&D cycle that involved developing and launching a series of satellites before the service could be in place.

The reason I want to highlight this is to make sure we remain open to bringing new members in to our community. If we accepted the assumption that governments are inept and are best avoided, then we’d be missing out on bringing in a new partner to help us with our community’s goals. I believe that governments, at their best, can make enormous changes for the better in people’s lives. Certainly governments don’t always play a positive role, but we’re less likely to have negative outcomes if a bunch of enthustiastic people who believe strongly in something get engaged in the process.

* I spent two years studying science and technology policy recently and I could go on and on about this topic but I’ll stop the list here.

7 thoughts on “Government As A Source of Innovation

  1. I’m not totally familiar with the whole GPS and government involvement, so I have a bunch of questions.

    Would we not have something like GPS if the government wasn’t involved? Would there not be any companies that see a potential use of a GPS-like system to generate revenue?

    Is GPS the best we can have? Are advances for GPS-like technology prevented? Are 3rd parties happy using the current GPS system or would they find more utility if things could have been changed slightly?

    1. I imagine that a GPS system would have been developed by the private sector eventually if the government never got involved in this area, but it would have taken much longer to develop. A similiar technology that serves as an example is spaceflight — the government sent people to the Moon 40 years ago and private companies are just now sending people on suborbital flights.

      When it comes to R&D the government has a few advantages over for-profit companies — they have a much longer time horizon, they can operate on a much larger scale and they are not worried about making a profit (note that a for-profit GPS system would require that people somehow pay for the service, but the US allows people to use GPS signals for free since the government is concerned about military utility and not profit).

      In practice this means that governments are very good at doing research and development. One good current example of this is nuclear fusion research. For nuclear fusion, utility companies may have good reasons to fund research but the costs are staggering, the time horizon is too long and there’s a lot of risk that nothing will come of the research. So not surprisingly, it is national governments that are pushing the state of the art forward in fusion research.

      http://www.iter.org/

      Science, the Endless Frontier (link below) is a good thing to read that goes more into the theories of why governments are good at R&D and why it is beneficial for them to spend significant amounts of money on science. It was written right after World War II when the country was putting together a science and technology policy that focused heavily on promoting basic research that could then feed into more applied R&D by the private sector.

      http://www.nsf.gov/about/history/vbush1945.htm

      One excerpt: Almost all Government scientific work has ultimate practical objectives but, in many fields of broad national concern, it commonly involves long-term investigation of a fundamental nature. Generally speaking, the scientific agencies of Government are not so concerned with immediate practical objectives as are the laboratories of industry nor, on the other hand, are they as free to explore any natural phenomena without regard to possible economic applications as are the educational and private research institutions. Government scientific agencies have splendid records of achievement, but they are limited in function.

      I think this answers your first set of questions. For the second set of questions, I’d say that GPS isn’t the best of all possible systems and that the private sector will probably be the one to drive many further improvements. This fits in with the concepts above though. Governments break ground and then should hand things over and move on to pursue basic research in new areas. (It’s worth noting that the concepts of basic vs. applied research have blurred a bit since the 1940s but I think the general idea still applies).

  2. > A similiar technology that serves as an example is spaceflight
    I don’t think this is similar at all. What consumer benefit is there for private companies to go to the moon or even just space. Right now it’s space tourism. There’s no *need* to send people into space. The race to the moon was more for bragging rights than anything. Why hasn’t NASA continued its moon program? Somewhere along the way it was considered not cost effective.

    Companies have been launching satellites for a while. I wonder what’s preventing companies from making a GPS-like system.. Laws for “national security?” GPS is “good enough” because ..

    > US allows people to use GPS signals for free
    .. the alternate cost/benefit would be worse. Sure, there would probably initially be a closed access fee like making a MPEG decoder. But consumers are willing to pay for the benefit, e.g., mp3 players.

    > governments are very good at doing research and development
    I would be more interested in their ability to do the R&D *efficiently*. How much have tax payers spent on these projects?

    Is government the reason why companies aren’t able to do this R&D? Bell Labs invented a lot of great things because they had the money to do so.

    > nuclear fusion, utility companies may have good reasons to fund research
    In what regions? I suppose the context I’ve been assuming is USA. Again it’s an economics questions. If the local environment has cheap access to coal, gas, oil (perhaps by government influence) and if there are laws restricting development or deployment of nuclear facilities.. the cost/benefit there is altered.

    Other countries have had a greater need for nuclear research and are ahead in research and actual use. And if there’s more need for something, more money will be pushed towards it for academic research, private research, and government research.

    > Governments break ground and then should hand things over
    I suppose this is slightly going into other territories now, but private companies can do “basic research” but it’s likely to get patented. Do patents promote innovation? But I suppose if companies want it enough, they’ll license it or make something similar but not covered by the patents.

  3. There is no doubt that any entity can “do innovation” whatever that means. The point is that government is the most cost-ineffective place and way to do it.

    If you look at Space, there is now a burgeoning industry trying to get into space in a private sector way. So far, their numbers are ridiculously cheap compared to the NASA equivelants. The problem they complain most about is that NASA works hard to clobber their efforts. Yet the industry is alive and kicking, they’ve passed their first milestone, even with no purchasers, and no direct cost to the taxpayer.

    If you look at most of the government “innovations” the same pattern emerges: already the cost was shifted to the public, and a “without cost impact” freedom to experiment occurred. Of course, successes emerge when there is no cost limitation. Nuclear, GPS and radar are not innovations, they are military spin-offs, and if we were to do them today as a private sector result, we’d probably do it simpler and cheaper. Oh wait, we already did: the cell phone.

  4. There are a few things in the last two points to respond to:

    – ‘What consumer benefit is there for private companies to go to the moon or even just space.’ That’s exactly the point. Governments can step in and create markets. There is not much of a market in space now, but there’s enormous market potential (space solar power, helium-3 mining…). There are plenty of examples where governments have gotten a market on it’s feet and then let private industry take over. Historically there is the airmail service that helped get commercial aviation going. Currently there is NASA’s Commercial Orbital Transportation Services that is helping private industry transition into making money in space.

    http://en.wikipedia.org/wiki/Airmails_of_the_United_States#U.S._Government_flown_Air_Mail

    http://en.wikipedia.org/wiki/Commercial_Orbital_Transportation_Services

    To go back to the GPS example, this is exactly what happened. After the commercial uses of this military technology became apparent private industry was brought in. The important point though is that no market for this service was apparent at the time the military started development. The following quote is from a RAND study of GPS:

    Decisionmakers are being challenged not only by the dual-use nature of GPS, but by the fact that whenever a useful technology comes on the market, people find multiple unexpected applications for it. It is impossible to know in advance what these applications will be or how they will affect the technology’s original intended use. In the case of GPS, the DoD was the prime mover behind the system and continues to give first priority to national security considerations, but commercial and civil applications appear to be growing so fast they eclipse military applications in importance. The unexpected spread of GPS creates tension among U.S. Government agencies, industry, and foreign governments.

    http://www.rand.org/pubs/monograph_reports/MR614/

    – Both responses reference that government is inefficient at spending R&D money. I think this is a counterfactual condition and it is impossible in many cases to make this conclusion. Would it have been more efficient for private industry to have created a GPS system? There were no parallel efforts to do this at the time, so who knows? It seems that the argument is that other efforts didn’t happen because the government was somehow stopping people from pursuing this research. I think it’s more reasonable to assume that private industry wasn’t in a position to spend the money to develop and launch over two dozen satellites to get an operational system in place. The fact that the government can scale up to create a Manhattan Project seems to me to indicate that, even if it costs tons of money, they can innovate in some areas where no one else can at that time.

    – ‘Do patents promote innovation?’ Patents certainly are meant to be used to encourage innovations but they are not the only way. Particularly when you’re dealing with public goods then it makes sense for the government to get involved. The example used by wikipedia is street lights. Does it make sense for private industry to go in and set up street lights and then try to charge people individually for the amount of light they are consuming?

    http://en.wikipedia.org/wiki/Public_goods#Examples

    GPS as a system works better for users when treated as a public good instead of something that industry is trying to monetize. As far as the Internet is concerned, we view that as a public good so it only seems natural to at least consider how governments can help us achieve our goals of keeping it open as it evolves.

  5. > That’s exactly the point. Governments can step in and create markets.
    The idea of going to space isn’t a new idea. Same thing for air travel. Some people want to fly and get around, and if there’s the desire, people will work towards it.

    You gave some energy related examples of space solar power and helium-3 mining. Again, what’s the trade-off companies are comparing? Should we continue using cheap coal and pollute while paying for externalities or send expensive satellites and figure out ways to transfer the energy. Same for mining the helium-3 or just manufacture it?

    > Historically there is the airmail service that helped get commercial aviation going.
    It’s interesting that you brought up mail service. At least for the USPS, it’s a government enforced monopoly. Other carriers like FedEx and UPS are legally not allowed to send first class mail cheaper than a certain amount (I believe ~$3?), and it’s illegal for anybody other than USPS to touch your mailbox.

    I don’t disagree that government projects have resulted in innovative end-user benefits. Long distance communication, battery-powered tools, water filters, safety grooving, etc. But it’s not hard to imagine that people would want better ways to communicate to people from afar or not be tied to a wall. Or that consumers might want cleaner water than.. what’s provided by the government. Or safer roads.. made by the government.

    The question is more so that if the government didn’t collect all this money, e.g., through taxes, companies would likely have the money instead, and wouldn’t they be able to come up with innovation as well like transistors?

    Sure, the government provides universities with research funding through outlets like NSF, but what percentage is that of the government’s expenses?

  6. Ed, I agree with a lot of your points, but I think we may be talking about two different things. I originally wrote this post because it seemed like the conversation about the EC was going in a direction where people were saying that government had no business getting involved in technology issues. I wanted to point out that governments in fact have been the source of much of the technology we use today and should be treated as potential partners.

    That’s not to say that governments haven’t done some things to inhibit innovation and that’s not to say that government should always be involved in technology programs.

    I think it’s also important to point out that this isn’t a zero-sum game. Just because governments may be involved in nuclear fusion research (just to pick an example) doesn’t mean that other people are necessarily prevented from doing the same research. Take a look at this list of scramjet research programs — some are government funded and some are funded by private organizations.

    http://en.wikipedia.org/wiki/Scramjet_Programs

    There seems to be a current of thought that the best government is no government and that by definition anything that a government does is going to be an expensive boondoggle. I think it’s important to push back against that assumption.

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