by Alex Nowrasteh
February 13, 2008

The potential of nanotechnology is the focus of the Nanogovernance 2008 conference at George Washington University law school in February. Contemplating "Innovative Approaches to Environmental Nanotechnology Governance," the event will include law firms, congressmen, the Nanobusiness Alliance and regulators like the Environmental Protection Agency, and many more.

You're doubtless familiar with nanotech by now, given the hype. Ultra-microscopic particles are being integrated into a wide range of products, from life-saving medicines to sunglasses to tennis rackets. They are already contained in many of the manufactured items we enjoy, and uncertainties about safety have amplified calls for governmental oversight.

The conference will largely emphasize the safety risks of nanotechnology—everything from environmental contamination to the sci-fi "grey goo" scenario of runaway self-replication that consumes all—but downplay the corresponding risks and downsides of inappropriate "governance" of the technology and its lifesaving potential.

Sadly, much of the emerging nanotechnology industry has opted to embrace what we call "Little Brother" --- a regime of subsidy and regulation that, while benefiting certain well-positioned players adept at politics, poses real threats to both commerce and safety. It's no wonder, given the array of goodies such relationships have brought and will continue to bring, like the $1.44 billion in subsidies slated for 2008, or the possibility of immunity from liability for some subsidy and grant recipients—especially for defense-related projects.

Politically connected businesses can forgo many a headache when such "public-private partnerships" dominate a frontier industry. In the world of high-tech pork barreling, it's all too easy to be seduced by the prospect of skipping the hassles of securing private funding, managing liability, obtaining insurance, convincing a skeptical public that one's product is safe—all those annoying little market checks on bad ideas and reckless behavior that should characterize a healthy, self-disciplined industry and halt overly risky projects.

That these are market checks may strike some as paradoxical; aren't markets dog-eat-dog and consumers-be-damned? But substituting political discipline for the need to compete on grounds of safety can be—deadly.

For those interested in encouraging nanotechnologies that could clean the environment and lengthen our lives, removing barriers to and enhancing market institutions that discipline nascent private enterprises should not be an afterthought—whatever one's support for traditional regulation by the EPAs, OSHAs and FDAs of the beltway empire.

Entrepreneurship obviously drives innovation and creativity; but proper legal institutions, it promotes safety as well. Substituting the beltway agency alphabet soup and committee hearings can undermine those benefits.

History provides a sobering example. When nuclear energy was a new technology, the industry made a bargain called the Price Andersen Act. The federal government limited the liability for potential plant accidents but also seized regulatory control of nuclear power plants, largely removing the industry's evolution from normal market processes and evolution.

Instead of looking for ways to "govern" nanotech, Little Brother should avoid contradictory policies of subsidizing-while-regulating, and work to instead liberate the many competitive fronts: relaxation of antitrust restrictions and favorable tax and regulatory policies are good steps, but unleashing competition in safety features and professional ethics also matter .

Subsidizing and protecting parts of the industry from lawsuits and disciplinary effects of private insurance and risk-management mechanisms might save many managers headaches, but would not prevent a regulated industry from making mistakes. Indeed, a heavily regulated research facility may receive a government bailout and a new lease on life ("We didn't regulate enough!" as so-called entrepreneurs nod.)

Innovation matters. Consider how quickly computer and Internet companies developed free from the kind of government oversight that courts nanotechnology. Rather than mimicking the Internet revolution, nanotech could easily begin to resemble the tight regulatory regimes for drugs and medical devices. Some may think that a good idea, but we caution that today's complex and interminable drug approval processes will prove incompatible with the individually customized medicines that could otherwise be available to our descendants.

We will never know the possibilities lost when an industry is removed from the realm of competitive discipline; but we can strive not to repeat such errors. We regard market institutions as crucial not just in generating prosperity, but in compelling a potentially risky frontier industry to and adapt to the full range of consumer demands, including safety.

That's not likely to be the key lesson of Nanogovernance 2008, but there's always next time.