The International Consortium on Agricultural Biotechnology Research (ICABR)

Non technical abstract

SCIENCE vs. PROFIT IN RESEARCH

by

Carlo Carraro[1], 
Alessandra Pomè[2], 
Domenico Siniscalco[3]

This paper deals with Science and Technology in research policy, trying to draw some lessons from recent and “hot” cases, such as the race to sequence the human genome and the controversy over GMO’s. The innovative feature of the paper is the analysis of Science and Technology, i.e. public and private research, in a single framework, while the existing literature on the economics of knowledge has usually examined R&D, or Intellectual property rights, in isolation from Science.

            In the proposed approach, Science and Technology are not defined according to the types of knowledge they produce (i.e. general principles vs. applied knowledge) nor on the methods of inquiry they adopt (focused vs. broader perspective). Rather, Science and Technology are defined according to the differences in the institutional arrangements involving the allocation of resources and efforts in the production of knowledge. Science is a non-market allocation mechanism, where knowledge is treated as a pure public good and where fixed compensation, together with research grants and the rule of priority, gives scientists an incentive to work and disclose their results. In such a mechanism, knowledge cannot be “owned”, but financial resources must come from outside (usually general taxation, but also philanthropy). Technology identifies the market allocation mechanism where intellectual property rights on knowledge exist and can be sold to users on the market for a profit (provided there is demand for it).       

Both Science (through the so called “priority” system) and Technology (through patents) reward discovery since “winners take all”. Unfortunately, both Science and Technology are institutional arrangements with their own shortcomings. Science, as an effort allocation mechanism, ensures full disclosure and positive externalities, but implies well-known agency problems (moral hazard, free riding, low effort). Technology, by nature, is a highly motivating allocation mechanism, but seizes the main results of research and prevents many positive spillovers related to the nature of knowledge. 

The above framework, which was set forth in two seminal papers by Dasgupta-David and Barba-Dasgupta-Maler-Siniscalco, is now formalised by means of a model where Science and Technology interact. The aim of the paper is to show that in some crucial research areas, where demand and knowledge externalities are important, Science and Technology do coexist and sometime must coexist even in the same research segment. 

The above model makes it possible to say that the present phase of co-existence of Science and Technology in certain fields of research (e.g. human genome sequencing, GMO’s, etc.) is not a transition phase, where Science is giving way to Technology, but reflects a stable and somehow optimal institutional setting, where the two institutions do and should coexist. 

The paper begins with the recollection of the race to sequence the human genome and the controversy over GMO’s development in agriculture. Such cases rise few fundamental questions: (i) why do researchers with similar backgrounds and education choose to do research in the same field but in different institutions (Science and Technology), thus revealing a deeply different attitude to work?  (ii) Is the co-existence of Science and Technology in similar research areas a transitory or permanent state of affairs? And finally, (iii) is the coexistence between Science and Technology socially desirable?           

To elaborate the proposed viewpoint, we firstly introduce the distinctive characteristics of the commodity that both scientists and technologists are engaged in producing, namely knowledge. Secondly, we discuss the resource allocation mechanisms that can sustain an efficient production and diffusion of knowledge.           

Under fairly reasonable assumptions, our model shows why even identical researchers choose to work in two different institutions (S,T) and why this state of affairs can be welfare maximising. In a nutshell, (i) we recognise that the production of knowledge involves several market failures and (ii) we argue that the two approaches to solve such market failure problems, namely Science and Technology, even within the same field, can mix optimally combining somehow the best of both worlds. 

Starting from this result, in the race for human genome sequencing neither public nor private researchers won the race. The real winners were research and social welfare. In the GMO’s story, due to the lack of a public funded counterpart, the real losers were research and social welfare.  


[1] University of Venice, CEPR, CESifo and Fondazione Eni E. Mattei.
[2] University of Turin and Fondazione Eni E. Mattei.
[3] University of Turin, CESifo and Fondazione Eni E. Mattei

 


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