Testimony before the Subcommittee on Energy and Environment, House Committee on Science, Hearings on the Fiscal Year 1999 Budget

Testimony before the Subcommittee on Energy and Environment, House Committee on Science, Hearings on the Fiscal Year 1999 Budget

March 24, 1998

Good afternoon, my name is Fred Smith. As President of the Competitive Enterprise Institute, I welcome your invitation to discuss today federal science policy, specifically the research budgets of the DOE, EPA and NOAA. CEI is a non-profit, non-partisan public interest group established in 1984 with a current staff of 33 and an annual budget of about $2.5 million. Located in Washington, D.C., CEI works to educate and inform policymakers, journalists, and other opinion leaders on market-based alternatives to political programs and regulations. CEI also engages in public interest litigation to protect property rights and economic liberty. CEI is supported by the voluntary contributions of foundations, corporations and individuals. We accept no grants from any government agency, nor do we accept grants from any other party that would compromise the principled positions we espouse.

CEI is heavily involved in energy, science, and environmental policy -- the primary areas of responsibility of this subcommittee. I co-authored the energy and environment chapter of the book, Market Liberalism: A Paradigm for the 21st Century, and I am the co-editor of the book, Environmental Politics: Public Costs, Private Rewards, which explores how special interests use environmental issues to advance their own agenda. CEI also published a book, The True State of the Planet, a positive antidote to the doomsayer volume by Lester Brown and the Worldwatch Institute, The State of the World. Over a decade ago, I was involved in the efforts that led to the elimination of the DOE's Clinch River Breeder Reactor Project; my staff more recently played a key role in the effort to defund the Superconducting Super Collider.

I appreciate being invited to testify to a group that recognizes the value of science and technology. In recent years, pro-technology forces have too often ceded ground to anti-change Malthusian forces. Science and technology are "good" things and it is useful to point out that fact. Still, there are many good things that should not be done by government and there are many other things that the private sector does far better. Federally funded research and development falls into both these categories.

Our challenge is to find ways to encourage scientific and technological progress. That challenge is akin to efforts to improve the speed records at a racetrack. One approach – that often favored by your Committee in the past – has been to increase federal funding for promising technologies. This is akin to picking the horses that will run at the track; certainly that approach may yield some gains. However, the results also depend upon the condition of the track and the rewards available to the winner. Thus, faster speeds might also be encouraged by improving the track (for example, by eliminating barriers and filling in "potholes") and by allowing the jockeys to keep more of their earnings.

In the R&D sweepstakes, the federal government has tended to focus on selecting "winners" – on funding winning technological "horses." I would urge that you also review the option of reducing the many impediments that restrict private R&D. I suggest you slash the current federal R&D budget, that you examine and reform the incentives that now bias the scientific work of these regulatory agencies, and that you enact reforms that would encourage an expanded private science and technology role. There is no doubt that science and technology are critical to the future of the United States and the world – there is much doubt that they are best advanced here in Washington or that they are best financed by taxpayers.

I. A Careful Look at the Case For Federal R&D Funding

The intellectual case for taxpayer funding of science is based on the market failure argument. Research creates value but that value is not easily captured. It is all too easy, the argument goes, to duplicate a discovery in an area once someone has carved a path. Thus, all parties will hang back and await others to spend funds on basic research; then rush in to enjoy the fruits of this victory. Everyone will seek to free ride on the work of others, and therefore no one will take on the scientific and technological research tasks. As a result, the free market, it is argued, will underinvest in science and technology.

Note, however, that it is difficult to know – even if we accept this market failure thesis – the magnitude of the failure. What is the "optimal" amount and mix of research that should be done in our society? Is industry doing enough? Market failure enthusiasts say no, but what criteria leads them to that conclusion? Should we be spending relatively more on biological research? Relatively less on chemical research? How can we ever reach answers to these questions? Such problems are left unanswered by the market failure theorists.

And, in any event, what evidence suggests that government will succeed where markets have failed? After all, in the political arena, research funds are distributed according to political criteria, not objective determinations of need. Before we enthusiastically accept the existence of market failures we must acknowledge the risks inherent in government failure. Lacking any clear objective criteria for selecting specific projects, science funding will often become another form of pork barrel spending. Some regional or interest group constituency has the political clout to extract higher taxes from the American public to advance its special interest agenda. The rhetoric of science and technology simply make it easier to achieve their goals. Renewable energy research is a good example of this type program.

The superiority of private over political R&D stems largely from the higher probability of government failure. Politicians face an impossible task of assigning priorities to the very large number of "significant" research projects. Not surprisingly, they tend to select those enjoying popular support ("politically correct" science and technology) or those benefiting their local constituency. There is little reason to suspect that the programs favored under these rules are those that would most effectively advance human welfare. In contrast, private innovators are guided by price signals to seek out those research challenges that, if solved, would most reward them. This incentive structure encourages them to explore those options that (directly or indirectly) advance our capacity to meet human needs.

This fact has often been overlooked. Consider, for example, the energy efficiency and alternative energy research programs of the Department of Energy. DOE funds such research in the belief that markets do not do enough to increase energy efficiency or to find other sources of energy. This is a strange notion. If events were ever to require fossil fuel substitutes or greater energy efficiency, then as Simon Rottenberg has stated: "Producers have the incentive to find inexpensive, attractive, and efficient substitutes for fossil fuels; their earnings will rise if they do. Consumers have an incentive to substitute other fuels; they will reduce their costs if they do." We don’t need government to tell us to save money.

Markets (and the price signals that arise within them) allow society to better target scarce R&D talents and resources to maximum effect. Moreover, the entrepreneurs themselves have every reason to exercise due caution in seeking out those projects in which to invest their time and money; their economic welfare is directly affected by their success or failure. Also, unlike the political sector, private firms can gain great rewards by solving significant problems; a Bill Gates, for example, can become the richest person in the world by advancing society’s ability to process information. The lack of a residual claimant (that is, an individual that can garner such windfall returns) means that the political sector will be far more risk adverse and will invest fewer resources in high value, low probability projects.

Over time, this greater ability to target R&D resources has major impacts on the rate of technological progress. Empirical evidence that markets are better, for example, at encouraging energy efficiency over time than government, abounds. Mikhail Bernstam has shown in comparisons of East and West Germany and North and South Korea that where government intervention is relatively less, energy efficiency is greater. He shows that per dollar of GNP, socialist economies use nearly three times as much energy as market economies. Former East Germany consumed 40 percent more energy per person and more than 3.5 times as much energy per dollar of GNP as West Germany. North Korea uses 70 percent more energy per capita than South Korea. Because market economies use resources more efficiently, they meet human needs with less environmental stress. In contrast, such federal energy projects as Synfuels have been disasters.

Another rationale for federal R&D is the "me too" argument. America must fund such projects because other nations do. Unless America invests as heavily in R&D as do Japan and Germany, we will fall behind in the international competitive sweepstakes. There is much wrong with this argument. First, countries do not lose if their neighbors find more efficient ways of producing some good or service. All mankind benefits when knowledge is increased anywhere. To view such gains as losses is to replicate the old mercantilist idea that international trade and commerce are like war.

Moreover, experience suggests modest expectations for such massive political investments. The Japanese investments in high-resolution TV, for example, have not proven valuable. Indeed, a recent book by Terence Kealey, The Economic Laws of Scientific Research, suggests that total R&D expenditures may not vary, despite varying national policies. He finds that total R&D spending seems to relate closely to national GDP. In nations with low government funded R&D, the private sector pays more of the bill. In nations where government provides ready funding, the private sector reduces its investments accordingly. In the United States and the UK more funding is from private sources; in France and Japan, more is from government. This argument for a strong displacement/substitution effect suggests that taxpayers gain little from political R&D expenditures; we simply create a new form of corporate welfare.

The "insurance" argument for federal R&D is an especially common piece of rhetorical chicanery. We are told, for example, that federal investment in renewable energy technologies is a small price to pay for protection from the potentially catastrophic risks of global warming, or of Mid-East oil supply disruptions. Let’s leave aside the question of whether greater use of wind and solar power really can mitigate climate change, or substitute for petroleum-based energy. A more fundamental problem is that individuals and societies face countless risks, many of them potentially catastrophic. If we were to try to insure against all of them, we would go broke. So the real issue is not whether insurance is a good idea but which kind to have and how much. Why should we consider the "insurance" provided by DOE energy programs more valuable than that provided by defense spending, police and fire protection, or cancer research? More pertinently, why should anyone believe DOE energy research would better protect families than simply allowing taxpayers to keep more of their hard-earned dollars?

II. Picking A Better Team of Horses: Assessing Specific R&D Programs

Let us now turn to the management of the federal R&D budget. A first point is that federal research should be used to inform science policy, not defend it. Unfortunately, that is not the current practice. Consider, for example, climate change research. This portion of the federal R&D budget is projected to grow rapidly. The goal should be to seek a better understanding of the complex links between man’s activities and potential climate change effects. Our knowledge remains very imprecise, as illustrated by the unexplained differences between the results predicted by current models and the empirical data recorded from satellites. For example, why does satellite data show almost no warming even though the amount of CO2 in the atmosphere has increased by almost 50 percent over the last decades?

Unfortunately, but understandably, EPA is increasingly focusing efforts away from such knowledge creating work, focusing instead on the more politically relevant work of creating realistic scare scenarios of the downside impacts that might occur were climatic change to be a reality. This is not surprising; President Clinton and others in the Administration suggest that the time for scientific debate is now over; it is time to act. Research that might undermine current anti-energy use policies is therefore discouraged; data collection that suggests problems with current climate change models is assigned lower priority. Instead, the Administration has focused on Impact Analysis, a type of scenario analysis that asks what horrible results might occur in various fields (public health, flood control, agricultural output) if the worst fears of the catastrophists become reality. There is an element of intellectual creativity in all this, of course, but authors like Stephen King are more appropriate than are scientists for this type work.

A different but related abuse is the funneling of R&D funds into political advocacy and lobbying. A quick look at DOE’s on-line Procurement and Assistance Data Systems (PADS) reveals some curious "R&D" projects. DOE awarded:

  • $1.6 million to the Solar Industries Association for "Solar Energy Market Promotion and Technology Transfer";
  • $157,000 to the American Solar Energy Society for a "White Paper and Long-Term Media Campaign to Publicize Solar Energy Success Stories and Advances in Technology and Market Pentration";
  • $427,810 to the Geothermal Energy Industry for "Support of U.S. Geothermal Industry";
  • $1.75 million to the Alliance to Save Energy to "Promote Efficient Use of Energy"; and
  • $160,119 to the American Council for an Energy Efficient Economy to "Review State Energy Research, Development, and Demonstration Programs."

DOE categorizes all these commercial and political promotion efforts as "research and development." Under the guise of supporting energy R&D, DOE is funding those who lobby for bigger DOE budgets.

The institutional structure of most regulatory agencies gives them little reason to engage in balanced, objective scientific research. An agency is locked into a set of issues; if objective research were to suggest that these issues are improving or that their urgency is less than once believed, then the agency will decline. Thus, an agency can be expected to avoid any research that might threaten its existence or powers. EPA is especially subject to this problem; thus the Committee should strip from the current budget such politically motivated research funding. EPA should not be allowed to waste taxpayer resources on propaganda designed to garner additional support for its regulatory imperialism. Congress should seek outside advisors to assess whether human-induced global climate change is (or is not) occurring, and, if so, whether such changes are likely to prove beneficial or harmful. Alternatively, as discussed later, the Committee might divert current funds to an Office of Technology Advocacy independent of EPA’s authority.

Sound science should play a key role in guiding EPA’s policies and priorities. It does not. EPA’s major problem is not that it does sensible things foolishly, but rather that it does too many foolish things. EPA finds it very hard to conduct good research when that research might well threaten the very existence of the agency or one of its growth programs. An example of this abuse of science is the National Acid Precipitation Assessment Study (NAPAP) conducted by EPA to determine the risks associated with acid rain. The NAPAP study was massive (ten years of research and $600 million in funding); unfortunately, the results failed to support the alarmist arguments that EPA and others had been using to advance their policy agenda. As a result, the study was suppressed and ignored while Congress and the Administration proceeded to enact (without analysis) major new air pollution legislation. That legislation included an acid rain program, which costs $2.5 billion per year, and which is now being touted as a model for emissions trading under the as-yet unsigned, non-ratified global warming treaty. NAPAP had suggested that this program was largely unnecessary, that its minor potential benefits could readily be attained by minor remediation measures. But at EPA, politics and agency objectives, not sound science, dictate policy.

There are other reasons why politically selected R&D projects are less likely to yield significant gains. Ideas likely to prove successful will already have attracted private champions. These private researchers and investors will resist efforts to intrude on their established turf. Thus, the projects available for government support are likely to be well beyond the current technology frontier. Yet, no one knows in which direction that frontier is moving; thus, projects selected in this way are unlikely to succeed. Private long-range investors in the high-tech area also face an uncertain future. However, the fact that they can benefit appreciably if their projects prove successful, allows them to rationally invest in a portfolio of low probability projects, counting on the large profits from the rare success to offset the costs of the many. Political R&D managers have no such opportunity.

Factor Efficiency Often Isn’t Very Efficient: Energy efficiency R&D proponents fail to distinguish between factor efficiency and overall efficiency. DOE and its allies tend to assume that firms do not use the most energy-efficient heating, lighting, and equipment because of ignorance, inertia, or short-sightedness. However, energy use decisions often reflect instead the differential factor prices, the usefulness of "obsolete" technologies, or the availability of superior investment opportunities elsewhere. After all, "energy inefficient" technologies may be economically more efficient – if modernization costs are high or energy prices are low, for example. America’s early chair-making industry, for example, used far more wood than its English competitors; however, it used less skilled labor. The reason, of course, was that wood was plentiful, skilled labor scarce. Both societies selected those technologies that were appropriate to the economic realities they faced – a scheme forcing American producers to be more "wood efficient" would have cost the colonists dearly. The regulator’s goal of a Lake Woebegone world where all businesses attain factor efficiency levels above the average is silly – and deserves ridicule, not respect.

Nor is it reasonable to argue, as regulatory enthusiasts often do, that Americans "waste" energy because they use more per capita than do Europeans or Japanese. America has more abundant energy resources than Europe and Japan, so energy tends to be less expensive here. America has a lower population density, so we must consume more energy for transportation. Americans enjoy 50 percent to 80 percent more living space, per capita, than do Europeans, and 250 percent more than do the Japanese. Larger domiciles require more energy to heat and cool. More living space also means more and larger household appliances such as refrigerators and washing machines. To enjoy the benefits of economic progress and prosperity is not necessarily to "waste" energy.

Technology Forcing May Create Costly Unintended Consequences (CAFE): Technology forcing mandates may seem reasonable but they often carry with them unintended and very costly consequences. Take the Corporate Average Fuel Economy (CAFE) mandate that forced automobile manufacturers to increase the average fuel efficiency of their fleet. The regulation certainly lowered average car fuel consumption figures, but it had many unanticipated consequences. First, the lower fuel consumption lowered the costs of driving, encouraging greater vehicle miles of travel. This offset reduced the anticipated energy conservation gains; but, more significantly, CAFE massively affected the ability of auto makers to produce, and consumers to purchase, vehicles more to their liking. CAFE accelerated the decline of the basic family automobile – the station wagon – and the emergence of new-style vehicles, passenger vans and suburban utility vehicles. (These vehicles, classified as light trucks, escaped the stringent standards imposed on cars.) These latter vehicles tend to be more expensive and less fuel efficient than the vehicles they replaced.

Another impact was to delay fleet turnover and thus to delay the safety, environmental and fuel efficiency gains from newer technologies. An even more significant fact was to force automobile manufacturers to drastically lower vehicle weight, reducing crash-worthiness. The effect is to increase highway fatalities sharply -- an additional 2,500 to 4,000 highway fatalities per year! Indeed, CAFE has more than negated the protection from air bags or any other feature adopted to improve auto safety. Yet, neither DOT nor those agencies most concerned with energy conservation addressed this offset. They seek to avoid the painful safety analysis entailed in such a blood for oil tradeoff. Thus, none of these agencies have devoted any research dollars to analyzing the unintended but painfully real consequences of their regulatory policies.

"Technology as Magic" Problem: One additional problem is the way in which technology comes to be viewed by advocacy agencies – R&D is to produce answers to the costly problems created by the agency’s policies. Cars are to be safe – and fuel efficient. Renewable fuels must be produced at costs no higher than those of conventional fuels. Electric cars must be as convenient and cost-effective as conventional gasoline powered vehicles. Reducing fossil fuel emissions almost 40 percent below baseline projections must not cost much – or must produce net economic gains! Science is viewed as a Genie in the Bottle, able to achieve any miracle as long as properly coerced. That idea that science will deliver any politically desired result is extremely dangerous.

The Regulatory Bias Problem: The science programs of EPA and DOE both suffer from a major bias in that their charters encourage them to consider only certain risks, certain benefits. Consider, for example, energy efficiency research. DOE and EPA both view energy efficiency as a "good thing" rather than as one element of a product – an energy efficient car that is less safe may be a "bad thing" but that fact is not relevant to these agencies. Their charter encourages them to consider some factors (for example, the gains possible via energy conservation) and to ignore others (for example, the negative impacts of less safe cars). That problem has become far more serious in recent years as "good government" reformers have succeeded in eliminating what has been called conflict of interest from many regulatory agencies.

For example, USDA once regulated pesticides; that agency was responsible for promoting agricultural interests and ensuring safe food. That charter required them to research both the gains and losses associated with more restrictive regulation of pesticides; now that pesticide regulation has largely been transferred to EPA, that balanced research is no longer achieved. EPA ignores the "natural" carcinogens, while placing great weight on the risks associated with trace residuals. This bias problem means that R&D seeks only evidence for ever-more stringent regulation; there is no support for research on the unintended consequences of regulation. This calls for reforms that would force the agency to consider the risks of over-regulation as well as under-regulation.

One way this might be achieved is to create the equivalent of an Ombudsman Office in all regulatory advocacy agencies. This Office would be responsible for making the most effective case possible against all regulations suggested by the Agency. Such an Ombudsman group should be granted a research budget and be evaluated by its success in finding unanticipated negative consequences of the regulation. The Catholic Church long ago created exactly such an internal tension in reforming the canonization process (the procedure by which an individual is classified as a saint). The Church established two offices: an Advocatus Dei and an Advocatus Diablo – the one to argue the case for canonization, the other the case against. EPA’s efforts to demonize technology deserve the same level of scrutiny.

  1. Selected Comments on the DOE Research Budget:

Privatize the Government Labs: One of my first jobs was in a research laboratory, the Cornell Aeronautical Laboratory in Buffalo, New York. The Cornell Lab had been the Curtis Wright military laboratory during WWII. After the war, it and many other facilities were quickly privatized -- a model that this committee should consider employing to eliminate the federal role in energy R&D. That privatization model is long overdue for federal research facilities. Linking research to human needs is a highly complex process and one not well suited for a political bureaucracy. Study after study has found that political research facilities rarely produce valued product. A National Academy of Engineering study in the mid-1970s stated:

With a few exceptions, the vast technology developed by federally funded programs since World War II has not resulted in widespread 'spin-offs' or secondary or additional applications of practical products, processes and services that have made an impact on the nation's economic growth, industrial productivity, employment gains and foreign trade.

More recently, Professor Joseph Martino author of Science Funding: Politics and Porkbarrel studied the efficacy of politically funded R&D and found the record equally disappointing.

I suggest that the military aspects of these labs be transferred to the Department of Defense (along with all programs related to weapon development and production). The commercial aspects should be privatized either by offering them to the industries they supposedly benefit or by allowing the current research staffs to take them over via an employee buyout approach. Linking research to human needs is a good idea -- but very difficult to achieve in a political framework.

Eliminate All Energy Research Programs: Rescind DOE funding for energy R&D. The DOE has no business engaging in energy R&D. This activity should be left entirely to the market. The argument that business will not develop new beneficial technologies and therefore government should take up the slack has no basis in fact. As noted in the CBO's "Reducing the Deficit" report, major new technologies for enhanced oil recovery have come from private industry, not DOE. The most important fact that Congress must remember when thinking about R&D is that for a new technology to be socially beneficial, it must be profitable. If it is profitable, industry will develop it. If it is not, industry will not develop it nor should taxpayers pay to develop it.

The CBO states in its report "DOE continues to develop technologies in which the market clearly has no interest." For example "DOE spent hundreds of millions of dollars on coal-powered magneto-hydrodynamics – without any indication of who was interested in the product." The FY 1999 budget requests $227 million – a $50 million or 22 percent funding increase – for the Partnership for a New Generation of Vehicles (PNVG). The goal is to produce cars with double and triple the fuel economy of today’s models. Rather than expand this program, Congress should eliminate it. If it is technologically feasible to produce cars that get 80-plus miles per gallon without sacrificing comfort, safety, style, and affordability, auto makers have incentive enough to do so without dipping into the taxpayer’s pocket. Programs like PNVG are a direct subsidy to corporate America. If the Republican Congress wishes to demonstrate its commitment to spending reductions, it should cut all corporate subsidies. All government funded energy R&D should be abolished.

Such subsidies rarely improve the health of the targeted industries. Recall that nuclear power was long the most subsidized form of power; yet, its special status also encouraged politicians to regulate it fiercely. There are no free subsidies. Today, nuclear power is the most financially troubled source of power – in large part because of such restrictive regulation. Would a more market-oriented development path have made nuclear power more viable? We will never know. For such reasons, solar and wind power enthusiasts should think twice. The effort devoted to gaining political support comes at a high price, not the least of which is that one may well lose track of economic reality. As soon as preferences change, and some new energy source becomes the "flavor of the day," such hothouse energy sources wither away. Having never been required to meet a market test, they often find themselves non-economic, overly complex, and poorly matched to the types of energy needed by consumers.

The federal government has spent billions on research on energy efficiency technologies and renewable energy sources. Yet as Robert Bradley notes in a recent Cato Institute monograph, renewable energy remains about twice as expensive as new capacity from gas-fired electricity, and triple the cost of surplus electricity. And after some two decades of subsidies and favorable tax treatment, wind and solar combined supply less than half of one percent of total U.S. electricity needs. The market is trying to tell us something. Such programs represent corporate welfare, plain and simple; they should be ended.

Climate Change Technology Initiative: The President’s FY 1999 budget proposes a five-year, $2.7 billion research and development initiative to reduce emissions from the combustion of fossil fuels. Like the $3.6 billion package of tax credits with which it is paired, the proposed R&D initiative has two political objectives. One is to modify business and consumer behavior so as to begin implementing the emissions reduction targets of the Kyoto Protocol. The other is to divide and conquer the business coalition opposing the Kyoto Protocol by vastly expanding a new form of corporate welfare – greenhouse pork. Since the Kyoto Protocol has not even been signed by the President, much less ratified by the U.S. Senate; and since the Senate, in the 95-0 Byrd-Hagel resolution, has already made clear its disapproval of the type of agreement negotiated in Kyoto, the Climate Change Technology Initiative is highly premature. The proposed $6.3 billion package of subsidies and tax breaks is lubricant for a political strategy of Implementation without Ratification – a strategy to bypass the Senate’s constitutional role in treaty making. If only to defend its own institutional prerogatives, Congress should give global warming pork the cold shoulder.

IV. EPA Research Programs

Environmental Science Has Become An Oxymoron: EPA sets the standard for politicized science. A friend there once called to say that he thought I was too harsh; EPA bureaucrats, he asserted, believed in good science; they just weren’t allowed to practice it. One of the first reviews of EPA, Asking the Wrong Questions, made this point very effectively. The book noted that EPA should not really be viewed as a public health agency; few of the policies that fall under EPA’s ambit can positively affect the health of the American people.

EPA’s campaign for more stringent ozone and particulate matter standards is a case in point. EPA cowed policy makers into accepting the new standards by posing as the defender of asthmatic children. Yet although childhood asthma rates are increasing, urban air quality has been steadily improving. The balance of evidence suggests that outdoor air pollution is not responsible for the rise in childhood asthma. A more likely culprit is exposure to cockroach dust and other indoor air pollutants that build up in poorly ventilated (or as EPA might say, energy-efficient) homes. EPA is widely perceived to be a public health agency, and undoubtedly EPA’s support would decline if Americans were fully informed on the role it plays in our society.

Thus, for EPA to do good science would be for EPA to admit that much of its current support is based on confusion and misinformation. Few agencies could be trusted to conduct such research and EPA certainly cannot. EPA has consistently sought studies that justified its actions; rather than studies which sought to clarify what is known and what is not known about the affect on humans of various materials at varying levels in diverse environments. EPA has rarely conducted research on the adverse consequences of its regulations, even when the impact was environmental.

As but one example, EPA seeks to reduce tropospheric ozone; yet, such reduced ozone levels will lead to increased ultraviolet beta radiation exposures and consequently (by the logic that EPA has used in justifying its CFC control policies) to additional cancers. Thus, one might expect a risk/risk analysis of the gains possible by ozone reduction compared with the new risks created by higher radiation exposure. EPA has neglected this research. Ironically, the DOE, an agency responsible for expanded energy use, has done work of this type. This illustrates once again that the institutional framework of the agency is critical if sound science is to be encouraged. Even when EPA has conducted sound scientific research – a key example being the National Acid Precipitation Assessment Program or NAPAP – it has felt free to ignore the results when the results were not to its liking.

Zero-out Superfund Research: Many private studies of Superfund sites have determined that the best solution is to put a fence around them. EPA research has focused on new technologies to make clean sites ever cleaner; EPA has done minimal research on whether such sites pose risks of a level making such costly expenditures reasonable at all. Again, this lack of balance, of focus, relates to EPA’s incentives; shifting Superfund sites to the private sector would encourage more meaningful research. We might expect more research on capping sites, on ensuring reliable childproof barriers around sites, on pumping strategies that would minimize off-site migration of leachate. Such research would be far more useful than that now underway at EPA.

Eliminate the Radon Action Program - The EPA is running an alarmist campaign on the purported threats of radon gas to homeowners. The EPA wastes $5 million on this program, and spends an additional $8 million on related grants to states. If the EPA's testing and redemption guidelines were followed, it would cost American homeowners $44 billion, for no conceivable health benefit.

V. Improving the Race Track: Strengthening Private R&D

The most meaningful thing that Congress could do to improve science and technology would be to reduce the federal tax and regulatory burden. Policies should also move to expand private property arrangements over hazardous waste sites, underground water supplies, ocean and other water resources. It is no accident that our knowledge of fish biology has massively expanded in recent years along with the increasing importance of aquaculture. People have reasons to become smart about things that will benefit them; the expanded property rights role over fishing resources has given many more people an incentive to conduct R&D in this area. The results are showing up in our supermarkets – lower priced salmon and catfish, for example.

Repeal Anti-Trust Laws: A specific regulatory policy that should be reformed is antitrust. U.S. antitrust policy was slightly modified in the 1980s but it has rebounded and remains one of the major barriers to a flowering of cooperative business efforts including cooperative R&D. The antitrust laws that inhibit joint ventures in high-tech industries should be repealed. It is exactly in such industries that standard setting, joint research projects, and other risk sharing arrangements are most likely to advance societal welfare. Such less restrictive policies would also encourage more investment in private R&D.

Repeal the "Right to Know" Laws: Another barrier to private R&D is the proliferation of so-called right to know laws. These laws treat information as a free and public good and thus discourage its private creation. Government should perhaps not expend vast resources in protecting information – emulation is often the most effective way of promulgating technological innovations; however, government should do nothing to make it easier to free ride. Companies spend vast sums to achieve marginal efficiency gains in production processes. Were all inputs and outputs of all processes made public, as current Toxic Release Inventory laws intend, then reverse engineering would make many "trade secrets" public knowledge. If we wish to encourage innovation, then the TRI rules should be repealed. How much and what kinds of information companies disclose about their production processes should be determined by consumer choice, not government edict. TRI rules are all too akin to requiring people to cry fire in a crowded theater – or perhaps to a law requiring chemical products to wear the equivalent of a regulatory cross-and-bones emblem. EPA trivializes the real risks of society.

  1. Conclusion

Property rights are still the greatest incentive to conduct scientific research. The science of seismology was created because property owners wanted to know whether or not wealth lay buried underneath their land. As a result an entire field of science was created, which has other welfare enhancing applications such as earthquake detection. The problem with research isn’t market failure but the failure to have markets. Property rights, the rule of law and free markets are still the best means to improve our economy, the ecology and human welfare.