## Business Earmarks or Merit Competition: Which is the Better Federal Research Strategy?

Investments by governments to support research and development are crucial to economic prosperity, job creation, scientific advancement, and improvements to the future to be inherited by children. How should these investments be selected?

• Merit review is a competitive process leveraging the expertise of a specially qualified panel to direct investments in research and development.
• Earmarks are appropriations given to specific recipients or targeted areas, without competition, to satisfy the intent of government.

When viewed over the time scale on which benefits of research occur (decades), the merit review process is the better strategy. When viewed over the time scale of election cycles (years), governments often consider earmarks to be the better strategy. Visionary governments who followed the advice of scientists like Francis Bacon and Vannevar Bush built research systems that spawned the industrial revolution, the space and electronics industries, the internet, …. Canadian governments of the past who listened to John Charles Fields and Maurice Lamontaigne launched Canadian industries through the NRC and NSERC.

“The wealth of a nation once depended on its natural resources or the sheer size of its land, or its potential labour force; but now it is coming to depend more on its reservoirs of knowledge and its ability to organize and utilize them than on the older criteria.” –A Science Policy for Canada, Lamontagne Report, v. 3, (1976)

(Concerning the allocation of research funds) “It is folly to use as one’s guide in the selection of fundamental science the criterion of utility. Not because (scientists)… despise utility. But because. .. useful outcomes are best identified after the making of discoveries, rather than before.” — John Polanyi, Speech to the Canadian Society for the Weizmann Institute of Science, Toronto (1996-06-02)

“Faced with the admitted difficulty of managing the creative process, we are doubling our efforts to do so. Is this because science has failed to deliver, having given us nothing more than nuclear power, penicillin, space travel, genetic engineering, transistors, and superconductors? Or is it because governments everywhere regard as a reproach activities they cannot advantageously control? They felt that way about the marketplace for goods, but trillions of wasted dollars later, they have come to recognize the efficiency of this self-regulating system. Not so, however, with the marketplace for ideas.” — John Polanyi, Quoted in Martin Moskovits (ed.), Science and Society, the John C. Polanyi Nobel Lareates Lectures (1995)

Instead of listening to today’s voice along this lineage, John Polanyi, Canada’s current federal1 government listens to Dean Roger Martin.

“What makes a country prosperous is not investment in science and technology. It is businesses producing high paying jobs by having unique products and processes that a customer needs.” — Roger Martin, Canada will shrivel under business-school neglect, dean says , The Globe and Mail (2011-03-16)

The report of the expert panel, the “Jenkins Report”, advising the government on the effectiveness of federal support of business research and development recommended2 the creation of a new Industrial Research and Innovation Council (IRIC) and separately recommended3 that the NRC be ramified “into a constellation” of new R&D centres, a natural progression following the birth of the Tri-council. Rather than constellating the NRC, Budget 2012 does the opposite with plans for the role of the proposed IRIC to be carried out by a more centralized, business-focused, NRC:

…the Government will consider ways to better focus the National Research Council on demand-driven research, consistent with the recommendations
of the Expert Panel. – Budget 2012

The policy implementations of Budget 2012 for CIHR, NSERC, SSHRC will be announced today in a meeting to Vice Presidents [Research] of Canadian universities. Drifting along a decade-long trend, a transfer of funds away from research investment programs distributed through competitive merit review toward new programs aimed at business recipients without competitive review is anticipated. Canadian business innovation gaps will not be solved by cutting funds supporting academic research and education activities.

The wisest investment strategy of federal dollars should rest upon systems involving the best expertise and considerations of the disruptive impact of basic research.

Footnotes:

1. The current government of Ontario is similar: after earmarking \$50M to the Perimeter Institute in 2011, \$42M was cut out of research in 2012.
2. “Recommendation 1: Create an Industrial Research and Innovation Council (IRIC), with a clear business innovation mandate (including delivery of business-facing innovation programs, development of a business innovation talent strategy, and other duties over time), and enhance the impact of programs through consolidation and improved whole-of-government evaluation.”
3. “Recommendation 4: Transform the institutes of the National Research Council (NRC) into a constellation of large-scale, sectoral collaborative R&D centres involving business, the university sector and the provinces, while transferring NRC public policy-related research activity to the appropriate federal agencies.”

Resources:

## Misaligned Incentives in Canadian Science Policy

Budget 2012 continues to shift Canadian federal investment away from basic research toward industrial applied research. This shift is politically expedient: the redirection of funds can be discussed with tantalizing justifications based on job creation, targeted investment, streamlining discovery, and so forth. The shift resonates with a public concerned about frivolous expenditures of dollars collected through taxation. The late Senator from Wisconsin, William Proxmire, advanced this line of political rhetoric by issuing Golden Fleece Awards for science projects he lampooned as unworthy of government investment. Why should the government waste taxpayer money so that scientists can pursue their curiosity? Although slightly slanted with the operative verb “waste”, this is an entirely reasonable question which the scientific community must strive to answer.

## Why should the government invest in basic research?

This question was eloquently answered by Vannevar Bush in his report Science: The Endless Frontier to President Roosevelt from July 1945. After my reading of the 2012 Budget, I thought it timely to share some relevant extractions (all emphasis added):

Basic research leads to new knowledge. It provides scientific capital. It creates the fund from which the practical applications of knowledge must be drawn. New products and new processes do not appear full-grown. They are founded on new principles and new conceptions, which in turn are painstakingly developed by research in the purest realms of science. (p. 16)

The simplest and most effective way in which the Government can strengthen industrial research is to support basic research and to develop scientific talent. (p. 17)

One of the peculiarities of basic science is the variety of paths which lead to productive advance. Many of the most important discoveries have come as a result of experiments undertaken with very different purposes in mind. Statistically it is certain that important and highly useful discoveries will result from some fraction of the undertakings in basic science; but the results of any one particular investigation cannot be predicted with accuracy. (p. 15)

Basic research is performed without thought of practical ends. It results in general knowledge and an understanding of nature and its laws. This general knowledge provides the means of answering a large number of important practical problems, though it may not give a complete specific answer to any one of them. The function of applied research is to provide such complete answers. The scientist doing basic research may not be at all interested in the practical applications of his work, yet the further progress of industrial development would eventually stagnate if basic scientific research were long neglected. (p. 15)

## Industrial incentive systems are misaligned with basic research

Basic research is the soil from which “innovation” and “commercialization” grow. Where should these foundational studies take place? Should they be carried out by industry or by some cleverly designed industrial-academic partnership? The answers according to Vannevar Bush are illuminating. The incentive systems for industry are rarely aligned with basic research. (A notable exception was Bell Labs, where scientists free to explore basic research produced stunning advances.)

Industry is generally inhibited by preconceived goals, by its own clearly defined standards, and by the constant pressure of commercial necessity. Satisfactory progress in basic science seldom occurs under conditions prevailing in the normal industrial laboratory. There are some notable exceptions, it is true, but even in such cases it is rarely possible to match the universities in respect to the freedom which is so important to scientific discovery. (p. 16)

Research is the exploration of the unknown and is necessarily speculative. It is inhibited by conventional approaches, traditions, and standards. It cannot be satisfactorily conducted in an atmosphere where it is gauged and tested by operating or production standards. Basic scientific research should not, therefore, be placed under an operating agency whose paramount concern is anything other than research. Research will always suffer when put in competition with operations. (p. 26)

The benefits of basic research do not reach all industries equally or at the same speed. Some small enterprises never receive any of the benefits. (p. 17)

## Budget 2012 and the prior decade of mission drift

Over the past decade, there has been a shift in the federal investment in science. The new system aims to industrialize the research activities of university and government scientists. Commercialization, innovation, job creation, whatever you want to call it, is a preconceived goal which constrains the freedom necessary for the unanticipated, the disruptive breakthroughs brought by basic research advances. Despite the recent assurances by Ministers Flaherty and Goodyear that “blue sky” research will continue to receive federal investment, there has been a steady shift toward a system with explicit commercialization incentives instead of one with the freedom open to transformational discovery.

The publicly and privately supported colleges, universities, and research institutes are the centers of basic research. They are the wellsprings of knowledge and understanding. As long as they are vigorous and healthy and their scientists are free to pursue the truth wherever it may lead, there will be a flow of new scientific knowledge to those who can apply it to practical problems in Government, in industry, or elsewhere. (p. 10)

The history of medical science teaches clearly the supreme importance of affording the prepared mind complete freedom for the exercise of initiative. It is the special province of the medical schools and universities to foster medical research in this way – a duty which cannot be shifted to government agencies, industrial organizations, or to any other institutions. (p. 13)

## Canada’s Research Policy is Misaligned with Scientist’s Incentives

The intense desire to deeply understand is the incentive for scientists, especially young scientists, to carry out research. Newton did not have to anticipate the industrialization of space to justify his study of gravity. Darwin did not have to anticipate applications of his studies in the pharmaceutical industry. Einstein did not have to forecast the Global Positioning System to justify investment in the theory of relativity. Canadian scientists aren’t free to pursue their breakthroughs. Instead, we are expected to cultivate relationships with industrial partners through government funded “first dates” and plan commercialization of our ideas in advance of their discovery. Instead of the freedom to pursue the curiosity that emerged from tens of thousands of hours of study, NRC scientists have been promoted and can now play the role of “business concierge”.

Where will these new products come from? How will we find ways to make better products at lower cost? The answer is clear. There must be a stream of new scientific knowledge to turn the wheels of private and public enterprise. There must be plenty of men and women trained in science and technology for upon them depend both the creation of new knowledge and its application to practical purposes. (p. 15)

To serve effectively as the centers of basic research these institutions must be strong and healthy. They must attract our best scientists as teachers and investigators. They must offer research opportunities and sufficient compensation to enable them to compete with industry and government for the cream of scientific talent. (p. 16)

The federal government’s research incentive system is no longer aligned with the intrinsic motivations of scientists.

## Vannevar Bush: inventor of government research funding strategy

Vannevar Bush was the inventor of government investment in research innovation. He was founder of the US National Science Foundation, founder of Raytheon, main organizer of the Manhattan Project which influenced Berkeley leading to Silicon Valley, etc. Here is a timely extract from his letter to President Roosevelt entitled Science: the endless frontier:

Five Fundamentals

There are certain basic principles which must underlie the program of Government support for scientific research and education if such support is to be effective and if it is to avoid impairing the very things we seek to foster. These principles are as follows:

1. Whatever the extent of support may be, there must be stability of funds over a period of years so that long-range programs may be undertaken.
2. The agency to administer such funds should be composed of citizens selected only on the basis of their interest in and capacity to promote the work of the agency. They should be persons of broad interest in and understanding of the peculiarities of scientific research and education.
3. The agency should promote research through contracts or grants to organizations outside the Federal Government. It should not operate any laboratories of its own.
4. Support of basic research in the public and private colleges, universities, and research institutes must leave the internal control of policy, personnel, and the method and scope of the research to the institutions themselves. This is of the utmost importance.
5. While assuring complete independence and freedom for the nature, scope, and methodology of research carried on in the institutions receiving public funds, and while retaining discretion in the allocation of funds among such institutions, the Foundation proposed herein must be responsible to the President and the Congress. Only through such responsibility can we maintain the proper relationship between science and other aspects of a democratic system. The usual controls of audits, reports, budgeting, and the like, should, of course, apply to the administrative and fiscal operations of the Foundation, subject, however, to such adjustments in procedure as are necessary to meet the special requirements of research.

Basic research is a long-term process – it ceases to be basic if immediate results are expected on short-term support. Methods should therefore be found which will permit the agency to make commitments of funds from current appropriations for programs of five years duration or longer. Continuity and stability of the program and its support may be expected (a) from the growing realization by the Congress of the benefits to the public from scientific research, and (b) from the conviction which will grow among those who conduct research under the auspices of the agency that good quality work will be followed by continuing support.