Friday, November 04, 2011

Rewarding Proven Success with Competitive Prizes vs. Subsidizing Failure with Government Subsidies

From Julian Morris and Adam Peshek at the Reason Foundation (emphasis mine):

"The Obama administration should be examining a recent example that shows how to spur environmental innovation and progress – without putting any taxpayer money at risk. Last year, the X Prize Foundation and Wendy Schmidt partnered to create the Oil Cleanup X Challenge to “develop innovative, rapidly deployable, and highly efficient methods of capturing crude oil from the ocean surface.”

The Deep Water Horizon explosion and oil spill off the coast of Louisiana in 2010 demonstrated how little improvement in oil cleanup technology had been made since the Exxon Valdez spill in 1989. So the Oil Cleanup X Challenge’s goal was straightforward:  whoever could create the most efficient method of removing oil from the surface of sea water, meeting a minimum oil recovery rate of 2,500 gallons per minute, would receive $1 million.  
Second- and third-place would get $300,000 and $100,000 respectively. 

This $1.4 million call to action prompted over 350 teams to pre-register and the results, announced October 11, were impressive. Seven of the final 10 teams doubled the standard oil recovery rate of 1,100 gallons per minute.  The winner, privately-held Elastec/American Marine of Illinois produced an oil recovery rate of nearly 4,700 gallons a minute. In a single year, without any federal funding, the X Prize had identified a problem, incentivized a solution, and produced a more efficient and cheaper technology that more than quadrupled the industry standard for cleaning oil spills.

The primary difference between the Oil Cleanup X Challenge and the disastrous federal loan program that gave Solyndra over half a billion dollars is clear:  The government program wasn’t based on results. It loaned money to the companies, like Solyndra, that had the most lobbying influence and best political connections. The oil cleanup contest awarded money for outcomes.  It was an even playing field open to all comers. Companies didn’t compete through grant applications or lobbying. The best products won."

MP: Rather than promoting crony capitalism and subsidizing Solyndra's failure with $500 million of taxpayer money, maybe the federal government should have instead created a $500 million "Solar Challenge" that would have provided financial incentives for private companies and researchers to develop cost-effective, market-based solar solutions?

60 Comments:

At 11/04/2011 7:47 AM, OpenID moneyjihad said...

"The Obama administration should be examining a recent example that shows how to spur environmental innovation and progress – without putting any taxpayer money at risk."

A policy without a tax? Washington won't understand it.

 
At 11/04/2011 8:00 AM, OpenID Sprewell said...

Your critical mistake is in assuming the politicians and govt want results. They could give a shit about results, they just want "to spread the wealth around" to their buddies and enjoy the power that comes from their largesse with other people's money.

 
At 11/04/2011 8:18 AM, Blogger Trey said...

Mark, $500,000 is off by 3 orders of magnitude ;)

 
At 11/04/2011 8:22 AM, Blogger Larry G said...

yet more anti-govt propaganda..and revisionist history....

where do you think the funds for Ohmsett and it's test facilities come from?

" Ohmsett is the National Oil Spill Response Test Facility, located in Leonardo, New Jersey. The name Ohmsett is an acronym for "Oil and Hazardous Materials Simulated Environmental Test Tank".
This is the only facility of its kind where full-scale oil spill response equipment testing, research, and training can be conducted in a marine environment with oil under controlled environmental conditions. Variables such as waves, temperature, and oil types are able to be controlled. A benefit of this facility is that it provides an environmentally safe place to conduct objective testing and to develop devices and techniques for the control of oil and hazardous material spills.
The mission of Ohmsett is to strengthen awareness of oil spill pollution prevention and response methods, while at the same time remaining committed to the well being of its customers, employees, and associates.
The facility, located an hour south of New York City, in Leonardo, New Jersey, is maintained and operated by the Minerals Management Service (MMS), a bureau in the U.S. Department of the Interior (which is a Federal agency) that manages the nation's natural gas, oil and other mineral resources on the outer continental shelf (OCS). They do this through a contract with MAR, Incorporated[1].
[edit]History



Ohmsett schematic map
The Ohmsett facility was originally built by the U.S. Environmental Protection Agency (EPA) in 1974 and was operated by that same agency until 1987. At that time, it was known as the Oil and Hazardous Materials Simulated Environmental Test Tank, or OHMSETT. It is now just referred to by the acronym. In 1989, Ohmsett, as it was known then, was closed and responsibility for the facility was transferred to the U.S. Navy (USN). This was done because the facility is located on the Naval Weapons Station Earle in Leonardo, NJ"

 
At 11/04/2011 8:48 AM, Blogger AIG said...

"yet more anti-govt propaganda..and revisionist history...."

No its not. He's talking about more efficient ways to incentivise innovation.

PS: You're missing a few zeros on those Solyndra numbers, Mark.

 
At 11/04/2011 9:07 AM, Blogger Larry G said...

here's what the title says:

"The Obama administration should be examining a recent example that shows how to spur environmental innovation and progress – without putting any taxpayer money at risk."

so there are a couple of problems here.

The Obama Administration is in charge of the taxpayer-funded / govt-operated OHMSETT, the National Oil Spill Response Research & Renewable Energy Test Facility where testing is taking place.

So the govt is, in effect, subsidizing this research.

but it's being promoted as an alternative to govt approaches to the problem.

which is totally disingenuous but fairly typical of the narrative that comes out of right wing organizations like the Reason Foundation these days.

it totally misrepresents what is going on and how the govt IS involved and essentially working with private industry to develop more cost-effective approaches to oil spills.

why is it so hard for the simple truth to be told these days?

OHMSETT itself came about from govt regulation.

" Funding for operation and maintenance costs of Ohmsett are covered by the Oil Spill Liability Trust Fund (OSTLF). The OSTLF derives its funds from a tax on companies that produce or transport oil."

http://www.boemre.gov/tarprojectcategories/ohmsett.htm

the folks at Reason would probably be among the first to advocate that the OSTLF is an onerous and costly regulation that should be repealed -right?

but you'd have no test facility for The Wendy Schmidt Oil Cleanup X CHALLENGE without the govt and regulation.

how about some "fair and balanced" reporting here in CD?

 
At 11/04/2011 10:24 AM, Blogger Gale L. Pooley said...

Wasn't it 500 million not 500 thousand?

 
At 11/04/2011 10:28 AM, Blogger Mark J. Perry said...

Sorry, it should have been $500 million, not $500,000, it's corrected now.

 
At 11/04/2011 11:08 AM, Blogger Buddy R Pacifico said...

Who is the benefactor of the X-Prize?

It's Wendy Schmidt.

This is great idea and thanks to Mrs. Schmidt.

 
At 11/04/2011 11:19 AM, Blogger Unknown Blogger said...

@Larry G:

If government research is so amazing and so self-incentivized, why did it take the X Prize to push them to quadruple the effectiveness of the current technology?

 
At 11/04/2011 11:26 AM, Blogger Che is dead said...

"So the govt is, in effect, subsidizing this research ... but it's being promoted as an alternative to govt approaches to the problem." -- Larry

Uh, I think that you are, not surprisingly, missing the point, which is that the government should be providing financial incentives for specific productive outcomes and not simply awarding grants to politically connected companies and hoping for the best.

"The OSTLF derives its funds from a tax on companies that produce or transport oil." -- Larry

WHAT??? I thought you said that the government was providing this facility? Why is it so hard for the simple truth to be told these days?

 
At 11/04/2011 11:37 AM, Blogger Larry G said...

" If government research is so amazing and so self-incentivized, why did it take the X Prize to push them to quadruple the effectiveness of the current technology? "

no one said that the govt research was so amazing...

the narrative said that the govt could LEARN from the private initiative when it turns out that the private initiative is depending on govt facilities to backstop the "X" challenge.

the other thing to observe is that the oil companies themselves did not organize this and instead it was Wendy Schmidt - a classic liberal do-gooder...who is also on the board of NRDC - a hated environmental group from the right wing folks like Reason.

look at the supporters of the X challenge... there is but one oil company - Shell...where are the other companies?

so the Reason folks very carefully separate the facts from the point they want to make - as a pretext to hammer the govt about Solyndra.

Turns out - that the govt taxes oil and from that tax - they (among other things) operate OHMSETT – The National Oil Spill Response Research & Renewable Energy Test Facility "

The oil companies like BP could have set up their own "challenge" that would also use the OHMSETT facility but what did they do ?

nothing.

so a liberal do-gooder sets up the Challenge and the Reason folks cite it as an example of a non-govt initiative....

and of course Mr. Perry here trumpets it as a libertarian approach to oil cleanups.

NOT!

it's almost laughable how folks like Reason twist around their elbow at times to generate a totally false narrative... that "believers" suck up without question and promote it in their blogs.

lord. lord.

 
At 11/04/2011 11:40 AM, Blogger Larry G said...

" WHAT??? I thought you said that the government was providing this facility? Why is it so hard for the simple truth to be told these days? "

no.

I said the govt was operating the facility from taxes collected from oil.

simple truth.

and I said also that if libertarians and Reason had their way , there would be no tax on oil and no govt-operated OHMSETT facility.

simple truth.

but rather than be truthful about the reality here - the Reason folks prefer to spin something that is essentially not true.

 
At 11/04/2011 12:13 PM, Blogger Hydra said...

"...in assuming the politicians and govt want results. They could give a shit about results, they just want "to spread the wealth around"

===================================

In forty yeas of working with the government I have NEVER had a COTAR that acted that way. My experience is that they want results.

What they could care less about is whether your company is able to amke a profit after they get through squezing you.

Sprewells rant is ften heard, but it is mostly wrong.

 
At 11/04/2011 12:20 PM, Blogger Hydra said...

I like the idea that there are better, market - based, ways for the government to make sure we don't have bad incentives.

But, if I put on my Juandos hat, I would have to ask why the government has to provide any sort of incentive. If there is money to be made inventing a technology, why do we need government involved?

 
At 11/04/2011 12:22 PM, Blogger Hydra said...

After it has been legally collected as taxes, appropriated and budgeted by overnment, then it is no longer "oher people s money".

 
At 11/04/2011 12:34 PM, Blogger Larry G said...

the most relevant points (from my point of view):

1. - the "proven success" is totally bogus because

A. - there are no private industry / oil companies involved in spearheading this effort; there is exactly ONE oil company supporter and it is not BP or EXXON - who presided over to of the biggest oil spills in the history of the country).

B. - the organization and person who IS spearheading this is a non-profit group concerned about the environment - your classic enviro-weenies... NRDC and others but not mentioned at all in the article.

2. - there would be no "challenge" at all without the govt test bed that is funded from taxes on oil.

I do not object to an honest difference in philosophies and I'm okay with libertarianism as a legitimate economic and political philosophy even if I don't agree with all aspects of it.

What I DO object to is these totally disingenuous narratives that are generated by folks like Reason and Heritage (and others) that simply are not the truth - at all.

That Govt test bed is totally critical to the X challenge and is is a govt-owned and operated (by contractors) facility funded by a tax that was instituted as law and regulation - that came out of the Exxon Valdez oil spill.

we have this continual spinning out of whole cloth by folks like Reason to construct a fictitious narrative that is basically picked up by their supporters (like Mr. Perry) and promoted as if it was true.

I would note also that OHMSETT used to be operated by the infamous MMS Minerals Management Service before it was reorganized into Bureau of Ocean Energy Management, Regulation and Enforcement (BOEMRE) which is 100% pure govt and regulation.

None of the X challenge came about because of oil companies and it's likely it could not have come about at all without the support and assistance of that big bad nasty regulating and taxing govt.

 
At 11/04/2011 1:42 PM, Blogger Benjamin said...

We ought to offer a $1 billion X prize to any private-sector firm that can develop a plan to provide for secure borders and national defense at 1 percent of GDP.

 
At 11/04/2011 2:19 PM, Blogger Larry G said...

well I bet if they put it out for bid that a Hispanic company would win!

;-)

 
At 11/04/2011 2:19 PM, Blogger Stan said...

As Instapundit says often, with a prize there aren't opportunities for graft, corruption and influence peddling. What's in it for the politician?

 
At 11/04/2011 2:27 PM, Blogger AtlantaDude said...

Mark,

Why do you respond to the $500K vs. $500MM comments, but not respond to Larry G's seemingly cogent argument about government support? It makes it look like you are conceding/avoiding his critique.

 
At 11/04/2011 2:40 PM, Blogger David said...

AtlantaDude,

Mark's style in this blog generally seems to be to make posts, and then only post comments regarding factual corrections. He tries to stay out of debate.

Regarding this particular matter, I would hope the others would concede that government actually did well here. I'm all for small government personally and generally agree with the right-wing commenters on this blog, but recognize that in some cases, government can achieve worthy goals that private enterprise is not incentivized to pursue.

 
At 11/04/2011 3:00 PM, Blogger Paul said...

David,

"..but recognize that in some cases, government can achieve worthy goals that private enterprise is not incentivized to pursue."

Maybe, but this is the exception, rather than the rule. Corrupt know-it-alls like Obama will always be trying to steer the funds and advantages to their cronies and politically correct industries. Better to keep their filthy mitts out of the picture altogether.

 
At 11/04/2011 4:13 PM, Blogger OBloodyHell said...

>>> would have provided financial incentives for private companies and researchers to develop cost-effective, market-based solar solutions?

I'm all for such an 'x' prize but for solar, it's doomed to failure right from the start. Solar is a useless dead end, with the possible exceptions of Ocean Thermal and (far, far less likely to be implemented) Solar Satellites.

The former makes use of the vast ocean surface as a solar collector, while the latter makes use of the almost** 24/7 nature of the sun in space (but generally requires an up-front investment in a major space presence)

Any other system is doomed to failure for reasons covered in depth in several previous solar power entries here on CD.

Solar IS and will always be a niche market, and no technological improvements will EVER change that.

===
** I say "almost" because pretty much any solar sat design is likely to be geosynchronous, and hence doomed to intersect with the earth's shadow. While it's quite possible to establish orbits which never fall under the earth's shadow, returning that power to the surface would be tricky without use of geosynch orbits. There could be tricks that involve relay satellites, I suppose.

 
At 11/04/2011 4:22 PM, Blogger OBloodyHell said...

>>> but you'd have no test facility for The Wendy Schmidt Oil Cleanup X CHALLENGE without the govt and regulation.

Your basic adjustment of the applicable facts is a valid and valuable addition, but
a) Does not undermine the primary point that the VAST MAJORITY of the impetus for this activity came from private interests. That the testing occurred at a government facility has nothing to do with what was developed, nor with why and/or how, only with how the different options were compared.
b) The above quote is flat-out ludicrously presumptuous. As though, say, automotive test-tracks would not exist without government assistance to develop and maintain them? If it's there, then people are likely to use it. So if the government builds a facility, there's a good chance it will see steady use. But private industry has a habit of doing quite well at producing test facilities without input from the government.

 
At 11/04/2011 4:30 PM, Blogger OBloodyHell said...

>>> After it has been legally collected as taxes, appropriated and budgeted by government, then it is no longer "other people s money".

No, it's STILL other people's money.

I don't "beg" to differ: I just flat out differ.

If I go into your house and steal something from you, and then sell it to someone else, that item is still yours, regardless of who has gained control over it.

What the government does with taxes is theft. It's legitimized theft, but still theft. It's money taken from the pocket of citizens by threat of force.

 
At 11/04/2011 4:35 PM, Blogger OBloodyHell said...

>>> Mark's style in this blog generally seems to be to make posts, and then only post comments regarding factual corrections. He tries to stay out of debate.

Indeed, this has always been his style for as far back as I can recall. This is akin to the master of a martial arts studio, who never takes on his students.

He finds enough adequately capable defenders of his PoV that he isn't yielding anything.

 
At 11/04/2011 4:53 PM, Blogger Buddy R Pacifico said...

The X Prize is based on Incentivized Compeition. The heritage, for the X Prize organization, begins with the British Parliment offering a reward for navigation in the 1700s.

The basis for the navigation prize is:

"In October 1707, the fleet of Admiral Sir Clowdisley Shovell were wrecked off the Scilly through not being able to gauge the correct longitude position of the fleet. Over two thousand men, including Shovell, were lost. This brought the subject to the fore and in July 1714, Parliament passed the Longitude Act. This convened a Board of Longitude to examine the problem and set up a £20,000 prize for the person who could invent a means of finding longitude to an accuracy of 30 miles after a six week voyage to the West Indies."

The winner was John Harrison who invented the Longitude Clock. Read Here about John Harrison's travails with the government in getting the prize money. This is one of the most important inventions of all of history.

 
At 11/04/2011 5:14 PM, Blogger Larry G said...

I think had the Reason article acknowledged that the innovative effort was basically in partnership with the govt it would have been more accurate but the Reason folks have this habit of taking things out of context to make their points.

You do not, for instance, see a consortium of oil companies collaborating together to build a test bed and offer "prizes" for the best cleanup technology.

that would have been a very legitimate non-govt approach that could have been used to demonstrate that you don't need govt for some of these things.

In fact, the article implied that but the underlying facts showed that it was not undertaken by the oil companies nor without govt support.

but if Reason had acknowledged the realities, it would have undercut their anti-govt narrative.

they and Heritage have a habit of doing this.

they'll extol the virtues of something they portray as a non-govt approach (like the Singapore Health Care system or the Chile Pension Plan system) when the facts are that there is fairly significant govt involvement.

 
At 11/04/2011 5:35 PM, Blogger Marko said...

Larry will next be arguing that since the X Prize people used public roads to drive to the prize location, enjoy the protection of the police and can rest assured that the meat they serve at the banquet was inspected by the USDA that this was whole thing was a public private partnership that proves that the private sector is incapable something something, blah blah blah. Tragedy of the commons.

Why should Chevron make a test facility on their own when the government already takes their money to make one? I bet if Cheveron made a test facility it would be cheaper to run and more accurate.

 
At 11/04/2011 5:50 PM, Blogger Larry G said...

" Why should Chevron make a test facility on their own when the government already takes their money to make one? I bet if Cheveron made a test facility it would be cheaper to run and more accurate. "

there's much more than the test bed that is funded from the oil tax - GOOGLE it.

http://www.uscg.mil/npfc/About_NPFC/opa.asp

http://www.uscg.mil/npfc/About_NPFC/nrf.asp

http://www.epa.gov/oem/content/learning/oilfund.htm

but to your question. There was no test bed until the Feds did it and the oil companies were free to pursue it as a consortium and did not and likely would not.

the tax, by the way came about AFTER the Valdez when the govt realized that there was virtually no way to assure a cleanup and return the area to it's original condition.

there was no oil company consortium for clean-ups prior to the law - even though the opportunity to set one up was there.

as it is with a lot of govt regulation - they had to become involved when it became obvious that the oil industry had little or no interest in doing so.

The Tax came about AFTER the oil companies demonstrated that the would not do what needed to be done.

Is the govt version big and costly and inefficient?

you betcha.

what's the alternative given the circumstances?

 
At 11/04/2011 6:54 PM, Blogger juandos said...

"The oil companies like BP could have set up their own "challenge" that would also use the OHMSETT facility but what did they do ?

nothing
"...

Not exactly... They wasted some of shareholder money on Obama...

 
At 11/04/2011 11:12 PM, Blogger Hydra said...

t the government should be providing financial incentives for specific productive outcomes and not simply awarding grants to politically connected companies and hoping for the best.

+++++++++++++++?/?

This presumes that the orgs in question can proceed without funding; that if they fail at something that is state of the art, they can take the loss; and ignores how many good ides result in initial failure that others capitalize on. A plan that only used such incentives would produce much less over all benefit

 
At 11/05/2011 6:57 AM, Blogger juandos said...

"A plan that only used such incentives would produce much less over all benefit"...

Sort of like Solyndra?

 
At 11/05/2011 8:50 AM, Blogger Hydra said...

I wasn't thinking of solyndra so much as the case of three labs with different approaches to synthesizing a family of chemicals. You don't know ahead of time which approach will work, and you may not be able to predict the yields of which chemicals you will get. Even if a prize is offered, the labs may not have the money to pursue it. Proposing reward only for performance assumes there already exists enough up front b&p money for the company to act on its own. Like any venture capitalist, a win might be worth a few failures.

But then, I'm sure you have never had one of those.

 
At 11/05/2011 8:58 AM, Blogger SeanMoney said...

Mark, I love your work but out of curiosity you made the claim that it was cheaper to run this more efficient system that won the contest. Is this true and how do you know this?

Just curious thanks.

 
At 11/05/2011 9:11 AM, Blogger juandos said...

"Like any venture capitalist, a win might be worth a few failures"...

hydra look at the history of venture capital and the computer sector (chips, boards, complete systems, software, etc) you'll see both infamous losses and amazing successes...

Then look at the recent history of 'venture socialism' as practiced by this administration and tell me which one you would rather place a bet on...

 
At 11/05/2011 12:28 PM, Blogger Ron H. said...

"I wasn't thinking of solyndra so much as the case of three labs with different approaches to synthesizing a family of chemicals. You don't know ahead of time which approach will work, and you may not be able to predict the yields of which chemicals you will get. Even if a prize is offered, the labs may not have the money to pursue it. Proposing reward only for performance assumes there already exists enough up front b&p money for the company to act on its own. Like any venture capitalist, a win might be worth a few failures. "

Let's consider for a moment the difference between an X prize and pre-funded research:

In a capitalist system, innovation most often occurs when someone has what they think is a good idea, one that will make them rich because people will like it and pay money for it. It may be necessary to convince others that they too can get rich by investing capital in the idea. This has worked well, as evidenced by the high standard of living we enjoy today in the US. People make our lives better, and we reward them.

If you think something is a good idea, you might encourage others to pursue it by offering an X-prize, perhaps $10 million for a perpetual motion machine. If no one claims the prize, it may be because it's not a practical idea, and you should give it up.

If someone does claim the prize, it's because they believed, as you did, that the machine could be built, and they believed strongly enough to make it happen the old fashioned way, by putting their own skin in the game, and perhaps convincing others to do the same.

When government offers to pre-fund research with taxpayer's money, the only skin in the game is that of taxpayers, who may or may not approve of the goal of the research, and wouldn't choose to fund it with their own money. Those in government doing the spending have nothing to lose.

You will get dozens or hundreds of great sounding proposals from those willing to do research on someone elses dime, for as long as the free money keeps flowing. Those working toward the goal have nothing to lose either. There may never be a positive outcome, as perversely, the researchers will only be funded as long as they are unsuccessful.

Incentives matter.

 
At 11/05/2011 2:25 PM, Blogger Larry G said...

" Those in government doing the spending have nothing to lose"

most of your modern weapon systems powered by things such as miniaturization, GPS, LED, even the internet were first developed through DARPA and DOD laboratories.

The problem is that the private sector has a more difficult time investing time and money with long-time frame results.

there is always the issue of throwing money down a rathole but the reality is that much of the modern world advancements were pioneered in govt labs.

 
At 11/05/2011 9:51 PM, Blogger Hydra said...

Juandos:

By this administration? Why qualify?

Ron, I agree but you still miss something:: if the private money is not there, it is not there.

Like the company that refused to invest in radio, saying " why would someone wish to send a message to no one in particular?"

If government funding is bad, then the form the funding takes makes little difference.

One other thing is that government may have a legitimate interest in development private entierpise has no interest in. Their time scales of reference are different.

 
At 11/06/2011 1:35 AM, Blogger Ron H. said...

"most of your modern weapon systems powered by things such as miniaturization, GPS, LED, even the internet were first developed through DARPA and DOD laboratories."

Are we discussing something new now? You have either missed my point completely, or you want to change subjects because you don't have any meaningful answers.

 
At 11/06/2011 1:59 AM, Blogger Ron H. said...

"Ron, I agree but you still miss something:: if the private money is not there, it is not there. "

If the private money isn't there, then there's no interest in developing that idea, and it shouldn't be pursued.

If private investors choose to risk their own money, fine. It's theirs to risk, and if they lose it, they lose it.

Who has the right to decide that money should be taken from private individuals and spent on research they don't choose to invest in themselves?

"One other thing is that government may have a legitimate interest in development private entierpise has no interest in. Their time scales of reference are
different.
"

The federal government has no legitimate interest that isn't specifically authorized by the Constitution. R & D isn't in there anywhere. Promoting particular business interests isn't in there. Picking business winners and losers isn't in there.

Read Article 1 Section 8.

All congressional authority, is spelled out there. There is nothing else.

 
At 11/06/2011 6:33 AM, Blogger juandos said...

"By this administration? Why qualify?"...

Simple hydra, how many other administrations have blatantly and unilaterally (sans Congress) wasted extorted tax dollars on greenie scams, especially those being floated by the administration's political and financial backers?

 
At 11/06/2011 1:23 PM, Blogger Hydra said...

Simple hydra, how many other administrations have blatantly and unilaterally (sans Congress) wasted extorted tax dollars on greenie scams, especially those being floated by the administration's political and financial backers?


=============================

All of them, I think. Alhthough the scams might not be greenie scams.

Wasted money is wasted money.

 
At 11/06/2011 1:34 PM, Blogger Hydra said...

The federal government has no legitimate interest that isn't specifically authorized by the Constitution.

================================


I think public welfare is covered in the preamble. Considering that a lot of researchis defense related you can capture the part about securing liberty for ourselves and posterity.


Govrnement might well invest in the design of defense systems that are decades in the making where private eneterprise has a a hard time seeing past the next quarter.


Look, I agree that reward for achievement is better that paying for blind alley research, but I don't see that it is the only valid method of achieving results.

Shoot, the government got two patents out of work I did, and they weren't even in the statement of work. Research grants are not all the dead loss you seem to think.

 
At 11/06/2011 1:38 PM, Blogger Hydra said...

If the private money isn't there, then there's no interest in developing that idea, and it shouldn't be pursued.

===================================

No. That only means there is no private interest in developing the idea. Private interests ususally cannot invest unless there is a substantial return in a short period of time.

The public interest might be different and still economically valid, because the goals are different and the timescale is different.

 
At 11/06/2011 4:19 PM, Blogger Ron H. said...

"I think public welfare is covered in the preamble. Considering that a lot of researchis defense related you can capture the part about securing liberty for ourselves and posterity."

Like most statists, you have a poor understanding of history, and believe that people who had just recently thrown off a tyrannical, oppressive government, and who feared strong government as they feared the plague, would be stupid enough to write something as vague as what you describe. Your interpretation means that those in government can do whatever they feel like, as long as they say it's in the interest of the general welfare.

In reality, the Founders tried very hard to create a very limited government as an agent of the states, to perform some functions they thought would be better handled in common. For instance, common defense might be more practical than 13 separate military forces.

When you quote the Preamble, you should understand that it's a statement of purpose. The question "Why are we here?" is answered. The Founders then go on in detail, to explain how those objectives will be accomplished.

The Constitution they wrote, in every way *limits* government power, and defines very specific powers that are being granted by the states. The Tenth Amendment even explains that if a power isn't specifically granted, then it is reserved to the states and to the people.

You might try carefully reading the short document some time, so you can understand what it really does, and so you won't make such asinine statements as you did above.

 
At 11/06/2011 5:47 PM, Blogger Ron H. said...

"No. That only means there is no private interest in developing the idea. Private interests ususally cannot invest unless there is a substantial return in a short period of time."

Then you will need to explain why pharmaceutical companies spend 10 years or so and billions of dollars developing new drugs, and the large buildings I see everywhere, and the ships and airplanes I see that look like they will be used well past the end of the quarter. You might try to explain Amazon.com that burned money for several years before making any profit, because Jeff Bezos convinced private investors that the business model was sound..

If there is no private interest, it's because there is no perceived "public interest" in the idea, or no realistic expectation of profit. Ethanol is a good example. The whole industry would die without government subsidies and mandates. The market has determined long ago that ethanol isn't a viable motor fuel, and we should just accept it.

"The public interest might be different and still economically valid, because the goals are different and the timescale is different."

You probably mean political interest, not public interest. They aren't the same thing, although politicians will tell you they are.

As I explained previously, there is no authority for any kind of government involvement in business.

 
At 11/06/2011 6:58 PM, Blogger Larry G said...

" You probably mean political interest, not public interest"

if one presumes that anything developed in govt labs that ultimately finds it's way into the public realm - say GPS satellites for example... is not in the public interest... maybe so...

or one might presume that ultimately the private sector would have developed such things anyhow but it would have take a longer more circuitous path... perhaps so.

GPS is probably as good example as any in the current time of something developed to support DOD and the defense that turned out to ultimately have enormous private sector potential.

Would the private sector have ever developed GPS instead of the military?

perhaps...

 
At 11/06/2011 7:52 PM, Blogger juandos said...

"GPS is probably as good example as any in the current time of something developed to support DOD and the defense that turned out to ultimately have enormous private sector potential"...

Well considering that the private sector paid for the development of GPS via taxation what's your point?

"Would the private sector have ever developed GPS instead of the military?"...

In a manner of speaking private industry did, its called cell phone service though presently its not as accurate...

 
At 11/06/2011 8:27 PM, Blogger Larry G said...

cell phones equate to GPS?

:-)

even where there are no cell towers?

;-)

 
At 11/06/2011 9:30 PM, Blogger juandos said...

"even where there are no cell towers?"...

Remember larry g at one time there were no satellites either...

In time there'll be a lot more cell towers even in the middle of nowhere...

 
At 11/07/2011 9:00 AM, Blogger Larry G said...

you could do GPS with land-based towers but to get coverage for the entire earth you'd have to have millions of them including on the oceans.

that makes no sense, guy.

the private sector pretty much demonstrates that it puts infrastructure only where it can make money off of it directly.

it does not look far into the future to see if they invested Trillions of dollars for sea-based cell towers that they could then sell that capability to marine shipping.

there are things that only the govt can really do - in a practical way.

Now that the taxpayer-funded GPS satellite system has been R&Ded, design,developed and deployed - you get the benefit of it from thousands of new companies that have sprung up to use it - for free.

What if the government had set it up so that each company would have to pay for GPS service - which is what the private sector would have done?

In fact, the govt originally had decided to limit access to GPS through SA - selective availability but then changed their minds.

If a Garmin GPS unit had depended on private-sector GPS system - all these GPS units would have required a monthly subscription, eh?

Perhaps that's what the govt should do to balance the budget and zero the debt - just start charging for access to GPS and you could choose from govt-provide global coverage or cell-phone company coverage wherever they had cell towers.

 
At 11/07/2011 12:34 PM, Blogger Ron H. said...

juandos: "In time there'll be a lot more cell towers even in the middle of nowhere..."

Thanks for the link. How often do we read about good news these days? It seems that most of the third world is bypassing land lines completely, and going directly to cell phones.

 
At 11/08/2011 6:37 PM, Blogger OBloodyHell said...

The heritage, for the X Prize organization, begins with the British Parliment offering a reward for navigation in the 1700s.

It also ties to the development in the early 1800s of modern canning techniques, after Napoleon almost got his ass handed to him at the battle of Merengo, when an Austrian army surprised him while a large percentage of his troops were out foraging for food.

One of his adjutants got back in time with sufficient force to save his ass, but the idea that a troop needed to carry a lot of its own food was made clear.

The French government offered a 12,000 franc prize, and Nicolas Appert won.

 
At 11/08/2011 6:45 PM, Blogger OBloodyHell said...

>>> The problem is that the private sector has a more difficult time investing time and money with long-time frame results.

Indeed, and this is one of those areas where an X-prize can make the difference, along with government contracts, by providing a longer-term incentive than the immediate returns might provide.

For example, a friend of mine noted, back during the M$ antitrust BS, that the Fed could do a far better job simply by requiring that a percentage of all newly-purchased Federal government computers(say, 25%) run, say, Linux, and that said systems be "data-intercompatible" with Windows.

You do that, and you'll see a sudden leap in development of both easier and better Linux implementations as well as good alternatives to M$ Office.

 
At 11/08/2011 6:52 PM, Blogger OBloodyHell said...

>>> If government funding is bad, then the form the funding takes makes little difference.

This isn't just wrong, it's wronger than wrong

Government funding that gets paid out only towards a goal when that goal is successfully achieved is, unless the overall goal itself is wrong, better than government funding that gets paid out regardless of success.

I mean, how much more ephing DUH can something be than that?


Since it's clearly not, let's paraphrase it:

1) I'll pay you $50 right now for mowing my lawn.
2) I'll pay you $50 for mowing my lawn as soon as you've mowed it.

Which of those deals sounds better? The first one doesn't even require you to own a lawn mower to collect.

Note: I don't even HAVE a lawn, so, while someone can collect on option 1, they'd have a hard time collecting on option 2.

 
At 11/08/2011 7:01 PM, Blogger OBloodyHell said...

Would the private sector have ever developed GPS instead of the military?

Considering the history of Iridium and Teledesic, this seems like a silly question to ask.

The fact that GPS has a lot of military uses is what caused the initial development. This is because the primary justification of new technologies, pornography, is hard to justify in a global positioning context.

But it would have been done eventually.

 
At 11/09/2011 8:53 PM, OpenID Sprewell said...

Hydra, I think you meant COTR. Of course they'd like "results" too, but the point is that a lot more of the money is doled out to the politically connected as a reward for votes than for "results." That's why the govt gets much fewer "results" than the private sector.

Larry, the only reason research into GPS or the early TCP/IP protocols was funded by DARPA (LEDS were actually privately researched) is because there wasn't a compelling commercial interest in those technologies for decades afterwards. I listened to an interview with some of the DARPA pioneers and they were confounded that the internet did not take off for decades in the private sector. One big reason that it couldn't take off is because it took enormous private innovation, everything from CMOS scaling of transistors by Intel to the realization of fiber-optic cable by Corning researchers, for the trivial DARPA-funded TCP/IP protocols to be remotely feasible in the real world.

When networking became feasible because of all this private innovation, private companies like Apple and Digital easily created their own networking protocols of AppleTalk and DECnet, that were technically superior but basically only lost to the older, govt-funded TCP/IP because they weren't free. The point is that the private sector doesn't waste money like the public sector, so it invents stuff when it's actually needed, not decades ahead when nobody can actually use it. So you can crow all you want about how one small piece of the internet, TCP/IP, was funded by a govt agency paying private contractors, but anyone not ignorant of the actual technology knows that that piece was practically irrelevant to all the innovation that goes into our internet today and which is mostly private.

 
At 11/09/2011 9:15 PM, Blogger Larry G said...

I think the legitimate role for govt is in basic research that has no short term prospects of financial return but the technology has promise.

Companies have to compete against one another and money spend on R&D is money not available for investment in current needs.

I acknowledge that Pharmaceuticals do work on longer term horizons because they are allowed temporary monopolies for new drugs.

In terms of tcp/ip protocol - it's no different than other competing protocols in the marketplace from beta-max vs VHS to cell phone protocols like CDMA, GSM, iDEN, TDMA, etc.

but do note that the govt has to decide which spectrum/frequencies are used for what purposes... and not industry.

 

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