How government funding of science rewards U.S. taxpayers

It’s hard to find any good economic news these days. Europe is teetering on the brink; emerging markets such as China, Brazil and India are slowing down; and the United States is in a slump.

There is one bright spot on the American landscape: technology, particularly biotechnology. The cost of sequencing a human genome is down to $1,000, and the process now takes two hours — a pace that is much faster than “Moore’s Law,” which says that computing power doubles while its costs drop by half every 18 months. This technology revolution is already transforming whole industries. It is a reminder that, as we confront difficulties across the economic landscape, the one area where the United States can still move from strength to strength is science and technology — if we make the right decisions.

Take, for instance, the decision to map the human genome. The federal government funded that project at a whopping $3.8 billion cost, over a 15-year period. But consider the payback. One study — funded by the industry — calculates that the Human Genome Project has helped drive $796 billion in economic activity and raised $244 billion in personal income; it supported 310,000 jobs in 2010 alone. These numbers may be exaggerated, but the scale of the impact is clear across such vast fields as agriculture and medicine and new areas such as gene therapy.

A lot has been said about the government’s $500 million loan to Solyndra, which was indeed a bust. But how often do you hear about the Human Genome Project? “From a simple return on investment, the financial stake made in mapping the entire human genome is clearly one of the best uses of taxpayer dollars the U.S. government has ever made,” says Greg Lucier, chief executive of Life Technologies, whose foundation sponsored the study cited above and whose company produces the $1,000 gene-sequencing technology. Lucier, and many scientists, argue that we’re at the beginning of a new wave of biotechnologies that could be applied to produce food, fuels and medicines, and to counteract problems such as pollution and climate change.

Federal funding for research and development — a drop in the bucket compared with farm subsidies — has long been in decline. From 1970 to 1995, it fell as a percentage of gross domestic product by 54 percent in physical sciences and 51 percent in engineering. Federal R&D funding increased slightly in recent years but has resumed its long-term slump — just as China and South Korea are increasing their funding 10 percent year over year. The budget for Turkey’s government agency for science and technology is slated to grow 15-fold over the next 15 years. In a knowledge economy, American jobs will depend more on scientific research than they did in the 1950s, yet we spend much less as a share of GDP.

Government investment in basic science has had huge commercial payoffs. For example, 13 Nobel laureates had devoted major parts of their careers to cholesterol research before cholesterol-reducing statins came to market. Now it is the largest-selling class of drugs in the world: More than 40 million people take them.

Funding existing technologies is more complicated. Sometimes it works. The Air Force and NASA were the only buyers of semiconductor chips when they were first manufactured in the 1950s and through the early 1960s — when costs started plummeting and private industry got interested. Or consider “fracking,” a technology that was developed using Energy Department grants and loans starting in the late 1970s.

On the other hand, there are Solyndra and many flops like it. Even here, however, the case for funding basic science is unimpeachable. If solar panels are to become a subsidy-free form of energy, the breakthrough will come at the level of basic science, in cheaply producing highly efficient alternatives to silicon. Several companies have started using compounds that are now expensive, one of which, Alta Devices, occupies an office building that once served as the headquarters for Solyndra.

There is more to encouraging science and technology than simply funding. Government rules and regulations play a large role. Kiran Mazumdar Shaw, the dynamic founder of one of India’s powerhouse pharmaceutical companies, Biocon, argues that the entire American-style set of regulations, clinical trials and lengthy waiting periods are now a serious deterrent to innovation in drugs and pharmaceuticals more generally. “It takes 12 years to get a drug from conception to market,” she says, “while it took six years to get the Airbus A380 from the drawing board to flying in the skies.”

The science and economics of large-scale increases in support of science and technology are clear. As usual, the politics is the problem.