Basic Research

Knowledge is created through research. In evaluating the appropriate public policy toward knowledge creation, it is important to distinguish general knowledge from specific technological  knowledge. Specific technological knowledge, such as the invention of a longer lasting battery, a smaller microchip, or a better digital music player, can be patented. The patent gives the inventor the exclusive right to the knowledge he has created for a period of time. Anyone else who wants to use the patented information has to pay the inventor for the right to do so. In other words, the patent makes the knowledge created by the inventor excludable.

By contrast, general knowledge is a public good. For example, a mathematician cannot patent a theorem. Once Ia theorem is proved, the knowledge is not excludable. The theorem enters society’s general pool of knowledge that anyone can use without charge. The theorem is also not rival in consumption: One person’s use of the theorem does not prevent any other person from using the theorem.

Profit seeking firms spend a lot on research trying to develop new products that they can patent and sell, but they do not spend much on basic research. ‘their incentive, instead, is to free ride on the general knowledge created by others. As a result, in the absence of any public policy, society would devote too few resources to creating new knowledge.

The government tries to provide the public good of general knowledge in various ways. Government agencies, such as the National Institutes of Health and the National Science Foundation, subsidize basic research in medicine, mathematics, physics, chemistry, biology, and even economics. Some people justify government funding of the space program on the grounds that it adds to society’s pool of knowledge (although many scientists are skeptical of the scientific value of manned space travel). Determining the appropriate level of government support for these endeavors is difficult because the benefits are hard to measure. Moreover, the members of Congress who appropriate funds for research usually have little expertise “in science and, therefore, are not in the best position to judge what lines of research will produce.

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