Government should spend nanodollars on nanotechnology.

At least that’s how my former colleague Tom Miller, now at the American Enterprise Institute, used to put it. Still another government/business funded report, this one called “Nanotechnology: a UK Industry View” reaches yet again the same conclusions about nanotechnology as the ones that pop out occasionally like the U.S. Environmental Protection Agency’s “Nanotechnology White Paper” or the Food and Drug Administration’s “Nanotechnology“.

The conclusions always imply an open-ended role for political bodies to govern private endeavors, and since the business parties are so dependent on political funding, they have to go along with it, cut off from envisioning an alternative approach.

The reports say–brace for it–that governments should fund nanotechnology and study nanotechnology’s risks; and that they should then regulate the technology’s undefined and unknown risks besides. This approach, so different from, say, the way software is produced and marketed, assures that there will never be a “Bill Gates of nanotechnology” (or in another sector, a Bill Gates of biotechnology, as CEI’s Fred Smith often puts it). If every single new advance requires FDA medical-device-style approvals, this is an industry that cannot begin to reach its potential.

As for nanotech’s genuine risks, government exacerbates them since it pushes technology in lurching, non-market directions, all subject to future political rug-pulls, and since its funding model tends to indemnify companies for the hazards they create. Free enterprise actually requires disciplinary institutions like liability and insurance to evolve alongside to assuage investors and the public. Markets and capitalism should and do bring risky products to the fore (finanacial instruments, electricity, nuclear energy, behavioral advertising, cybersecurity for sensitive-information networking, emergent low-earth-orbit space touring), but only government subsidies and indemnification can short circuit the disciplines that must emerge alongside.

As for the gray goo catastrophe scenario, in every other instance, enviromentalists say an organism needs an eco-system to survive, so I’ll leave it at that, since the scenarios are silly anyway, and since there’s no shortage of proposed solutions to the problem were it genuine anyway.

The govennment-picking-technologies model undermines economic liberty, innovation, wealth creation, national competitiveness (the endless and tiresome rationale for government R&D) and consumer benefits, and is itself the source of most risk, no matter how many white papers produced. Rather than picking the winning horses (or worse, as is the case now, actually being one of the horses), government’s legitimate role is to improve the track on which all the horses run; that means liberalizing the tax and regulatory environment within which nanotech entrepreneurs operate, for starters.

I remember debating these points over the pre-requisites for risk management and over governement’s stance toward technology with the Nanobusiness Alliance in Congressional Quarterly. Government’s proper stance is one of indifference or neutrality, since nanotech is one of many technologies competing for investment dollars; indeed we used to call it “chemistry.” To the extent it insists upon “promoting” technology, government should work tirelessly to remove barriers to private research. A recent Financial Times article noted that over 800 research institutes are involved. And that’s only in the UK. What this reveals is an industry crying out for consolidation into perhaps a few large-scale research enterprises. So antitrust liberalization should occur to political authories, for example, but you may rest assured that it has not. The same government-steers-while-the-market-rows dominates in the U.S.; nanotech funding is spread out not according to market pressures, but across dozens of congressional districts on purpose.