Spending on various kinds of energy R&D versus spending in Iraq.
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Priorities
13 Nov 2007 09:24 am
Comments (16)
Matt, why do you hate america? USA, USA, USA!
The graphs left out the private sector.
"The graphs left out the private sector."
While irrelevant to public (versus private) investment in national security, I am curious as to whether private sector expenditures on "war-related activities" R&D also dwarf private sector investment in alternative energy technologies research.
Is there a shortage of R&D going into energy? Silicon Valley is full of solar power start-ups. If the federal government decided to spend anything close to what it's spending on the Iraq war on energy R&D, it would probably go into research for politically-connected dead-end technologies like corn-based ethanol.
Also, rather than disappearing, most of the money spent on the Iraq War is getting recycled into the U.S. economy: in manufacturing jobs and R&D at companies like Force Protection; in retention bonuses spent in military communities, etc.
This morning on c-span the Minnesota guv (R) was talking alternative energy as if it was a brilliant new idea.
A caller called in and asked him why the oil companies recieve so many billions (while reaping record profits) in federal sudsidies of one form or another while the alternative fuel industry is lucky to get any at all. The guv stumbled about when confronted with the absolute wrong-headedness of this policy.
This should be HUGE in the general election.
Also, rather than disappearing, most of the money spent on the Iraq War is getting recycled into the U.S. economy: in manufacturing jobs and R&D at companies like Force Protection; in retention bonuses spent in military communities, etc
Shorter Fred: they didn't cover the Broken Window Fallacy in Christian Economics 101 at Regency U.
Re Fred's comment "Also, rather than disappearing, most of the money spent on the Iraq War is getting recycled into the U.S. economy: in manufacturing jobs and R&D at companies like Force Protection; in retention bonuses spent in military communities, etc"
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Yep. Fred left out the economic boom among undertakers, coffin builders, and manufacturers of artifical legs, artifical arms and wheelchairs.
Good that we have Fred here and George W to keep things in perspective.
I know what you mean! Hillary has promised $50 billion for climate change initiatives. Wow - $50 billion! (Most of it will serve to ease the price impact of change for the middle class?)
What about cutting farm subsidies for the rich and welfare for the middle-class and putting $250 billion into the environment (the future of our children)? There would be enough money left to finally help the very poor as well?
And who knows - rather than making it worse - we could also invest more into health care (prevention) and less into sick-care (treatment)? We invest $ 50 million in prevention and $ 500 billion in treatment each year? Hmm?
What the right is doing abroad with fiscal budgets - the left is doing at home? Both parties have a knack for wasting trillions over short periods of time?
PS: Spending on R&D is not efficient! It involves too much red tape. Better to make prices of polluters transparent to reflect the real costs (externalities tax) and to make prices of clean energy cheaper (subsidies). Then companies will have more than enough incentives to invest in private R&D than through red tape and Government lobbying. (As long as there are Government pies to be divided - lobbying will grow strong. The less money a government has to play with - the less lobbying?)
We have great VC industries in the US. Why use an inefficient R&D government policy that pretends that we do not have strong financial institutions in place? I tell you why. Because it feels good when people have to come to you and when people need you.
First, am I the only one who's noticed that their graph is actually off by about 20%? 102,000 million would only be 102 billion. So: as bad as it looks, it's worse.
To Hugo's point, re: R&D. It's not clear to me that some additional red tape as inefficiency outweighs the higher probability (because more projects, and riskier ones, would be funded w/o being tied to ROI) that we might make a significant gain.
Venture capital and entrepreneurship are great, but government funded research has given us some pretty amazing things, not least of which was the Internet. Also, there have been good studies that show that, in general, government subsidized R&D actually stimulates private R&D to the tune of about $1.25 for every $1.00 invested by the government.
RE Hugo Pottisch's comment "PS: Spending on R&D is not efficient! It involves too much red tape. Better to make prices of polluters transparent to reflect the real costs (externalities tax) and to make prices of clean energy cheaper (subsidies). Then companies will have more than enough incentives to invest in private R&D than through red tape and Government lobbying"
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Fine. All you have to do is make the price of gasoline $40 at the pump to reflect the real cost -- including military spending to control the Middle East, protect Big Oil's foreign investments, subsidize sales of Big Defense to Middle Eastern nations, etc.
Of course, if you did so you would not only be kicked out of office -- you would probably be swinging from a lamppost shortly thereafter.
Right wing complaints about "government programs" always seem very hypocritical to me -- very wealthy groups give over $1 Billion every two years to our politicians in order to buy the benefits of those government programs.
They are not opposed to Big Government -- so long as it is a Big Government which protects/gives favors to the superrich and fucks the other 99 percent of the population.
joel
Government funded projects during the Cold War have indeed helped the development and deployment of mainframes but the PC revolution (Apple / Microsoft) and the Internet revolution (Google, Amazon, etc) had nothing to do with government controlled red-taped spending which would lead to lobbying.
In fact - Americans most important and strategic industry, Information Technology, has been underrepresented in Washington compared to industries that depend on government spending (pharma, etc.). It was only after government interventions that Microsoft & Co have opened offices.
I have done business in Europe and in the US. In Europe there are state-funded R&D budgets that can be tapped. But it takes at least as much time as raising VC in the US and you get less bug per dollar in worth and less flexibility.
Price incentives via tax/subsidies of dirty/clean kWh are a more efficient mechanism to reach the same goal.
In fact The Grist agrees and so does Lomborg (and I am no fan of both parties as they do not show enough ecological understanding for my taste).
(BTW - it is true that we raise X amounts of tax via the income tax. But the true costs are:
"X - the cost of raising the tax to the government and the public"
This is one of many reasons why Value Added Tax or consumptions tax gives tax payers more power for their money than income tax.)
Government centered spending further favors monolithic solutions such as nuclear plants or huge hydro dams, etc. or mainframes. Market solutions by nature tend to be more organic (like PCs and Internet), more distributed, etc.
Don Williams
I am not certain I have understood your point well enough to comment. Can you rephrase it somehow differently?
Hugo,
Your distinctions between what government funded spending and VC funded spending create are not consistent with reality. Government-funded spending is generally on more basic research, which doesn't necessarily have to be "big." I would cite pervasive computing or solid state lighting as examples of extremely small research explorations but there is simply no predetermination to big.
As a rule, VC's won't touch something unless it has a clear path to a liquidity event (IPO or acquisition) in 5-7 years. The do not touch what they pejoratively call "research projects" or "science projects."
By the way, none of this addresses the merits or demerits of taxes on externalities and other government supported constraints. These have been successful with SOx. I have every reason to suspect they will be helpful with alternative energy as well.
Re Hugo's comment "I am not certain I have understood your point well enough to comment. Can you rephrase it somehow differently?"
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Very well.
1) The idea that you can have a free market independent of --and superior to -- the government is false.
2) Commerce cannot exist without government -- to set the rules, define the laws, enforce contracts, maintain law and order. But as soon as you establish a government with the necessary powers, you open the door to abuse and corruption.
3) Republicans abuse government --and the public treasury -- just as much as do Democrats , just in different ways. Instead of buying the votes of the many, they buy the support of the wealthy few.
4) A lobbyist I know once told me that the American public doesn't realize that Members of Congress are really just 550 small businessmen. Each with a product to sell -- legislative favors. Each facing bankruptcy --loss of office -- if he can't raise enough money to run a campaign for reelection.
5) Republican claims to support limited government are false. Newt Gingrich was happy to "move power back to the states" when it involved absolving the Republican Congress of any responsibility for the poor, the sick or the elderly.
But pigs will fly before you will ever see a Republican Member of Congress willing to give up his power to favor rich patrons -- i.e, to "regulate interstate commerce" by writing laws that favor special interests.
6) For example, the news media told us of a "Dot.com bubble" in the late 1990s which collapsed during the years of virtue of the Bush Administration.
But this is false. What happened was that companies which had laid long distance fiber optic networks wanted to deliver advanced high-bandwidth services to American Households --but could not do so because Baby Bells controlled the local switchboards.
The Republican Congress should have settled the regulations promptly but instead chose to let the matter stew for several years without resolution --because the Members of Congress were getting massive donations from increasingly desperate telecoms and Baby Bells and saw no reason to halt the gravy train.
This regulatory delay, of course, was fatal to many startups. As was the rolling blackouts in electrical service in Silicon Valley caused by Enron squeezing Governor Gray by the nuts.
7) During the past six years in which all three branches of government were controlled by Republicans, the US government spending still accounted for well over 20 percent of US GDP. And those massive sums are not expended by philosopher-kings favoring the national interest.
Nor are they spend in a "free market" -- anyone who has worked on US government contracts knows that the kitty is divided up by a process not greatly different from the "central planning" of the communist Politburo in the Soviet Union.
8) As a result, the US government spends more on military operations than the next 23 major military powers COMBINED --even though we are separated from any potential enemies by two large oceans. Indeed, most of those other major powers are our friends -- our NATO allies,etc.
9) Why? To protect our global empire. But why have an empire? Paul Kennedy ,after all, showed that empires bankrupt nations because the costs of protecting them exceed their profits. Well, because the profits of empire go to a superrich few (who pass some crumbs on to the Congressmen allocating defense funds) while the staggering costs are dumped off onto the common citizen.
10) For example, we do not spend $3/gallon for gasoline -- we spend more like $40/gallon for Middle Eastern gasoline when the costs of our military operations in the Middle East are divided by the number of barrels of oil we import.
11) The market would certainly develop alternatives if gasoline was $40 /gallon at the pump. But the protectors of Big Oil in Congress and the White House kneecap any market reactions -- any competition for Big Oil's product -- by keeping the price seen by the consumer extremely low ($3 /gal) while collecting the other $37/gal as an income tax. In essence, giving Big Oil a $37/gal subsidy.
"We have great VC industries in the US. Why use an inefficient R&D government policy that pretends that we do not have strong financial institutions in place?"
It seems to me that basic research is almost always inefficient and has much longer investment recovery period (in most cases, no recovery) than what VC's are willing to undertake. Having worked in research in both the private and public spheres, I'm not convinced that the private sector devotes sufficient resources to R&D (as opposed to resources spent on say, advertising the latest "new" feature of the same technology) or that the private sector is any more or less efficient at R&D than university research programs (where you have a lot of dedicated people working long hours for little pay, read: grad students and post docs).
The question is whether we need to begin implementing alternative energies (a good argument for subsidies and VC) or developing alternative energy technology (basic research that does and should continue receiving government funding). I'd prefer doing both and believe we need to begin investing heavily in both.
Wow, I am pleasantly surprised by the quality of commentry on this issue. I think it's safe to say that Don and Rihilism have found my POV re Iraq and GW to be distasteful. I am pleasantly surprised to find common ground here.
As Rihilism, Joel, and z adura rightly note the downside to VC is the need for ROI within a short time frame.
Hugo has a good point regarding VC and efficiency. I think it is related to the obsession with ROI & the resulting creative destruciton. However, important/useful R&D can be ignored because of the risk or time frame.
As an R&D professional who lives off government contracts, I can say that the red tape is not insurmountable, and can be less than VC in some circumstances. Competent, constructive oversight is useful, if uncommon.
MY's original point was priorities, suggesting that the stupidly wasteful Iraq spending could serve better in Energy R&D. I am silly enough to hold hope that Iraq may become a significantly better place through catharsis, but I do agree that the sheer disparity between budgets shows that we could do more Energy R&D.
I like Hugo's idea to find other places to cut like Farm subsidies, or health care efficiencies. Entitlement reform is critical over the long term, but indulging in my ideas there would probably just distract. Big programs with no incentive for efficiency (like profit) make excellent targets for cost reduction.
I think that the renewable energies are underrepresented in R&D dollars, but I would also double Nuclear research. MCF (magnetically confined fusion) research sufers from a lack of urgency. I would pump some money into IEC (Inertial electrostatic confinement) for competition -- it may be more risky than the more mainstream MCF, but it may also have more potential for smaller & cleaner reactors.
http://en.wikipedia.org/wiki/Inertial_electrostatic_confinement
Fission can be done more safely than it is now. An inherently safe design may reduce the cost of power and allow more $$ to deal with the expended fuel issues.
Social policy R&D might be another area that could revolutionize government. Imagine the Federal Government giving R&D grants to cities or counties with competing revolutionary ideas. Education reform 'R&D' could create studies that include vouchers, classroom size and/or curriculum adjstments. The same could be tried with medical care, poverty, drug addiction, etc.
NASA is an obvious candidate for more money, but has shown how wasteful government can be with BIG programs like Space Shuttle. I would promote concepts to reduce cost to orbit and emphasize exploration & earth science. NASA is experimenting with commercial space & competition:
http://en.wikipedia.org/wiki/Commercial_Orbital_Transportation_Services
Comments closed November 27, 2007.
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Heads in the Sand
So THAT'S the giant sucking sound emanating from the Middle East.
Posted by ProfD | November 13, 2007 9:38 AM