Nanotech’s Choice: Pork or Innovation?

Business advocates of nanotechnology—the cutting-edge field of small science and technology with the potential to revolutionize everything from computing to manufacturing to medicine—face a choice.  They can seek to keep their industry as unregulated, entrepreneurial, and innovative as possible.  Or they can seek government funding and promotion, which will bring heavy regulation and distort the technology’s evolution.

Unfortunately, the industry seems to have chosen the latter, as evidenced by its support for the recently enacted 21st Century Nanotechnology Research and Development Act, which authorizes $3.7 billion over four years for nanotech R&D.

The industry already has its hands full fighting nanotech’s opponents, who advocate the precautionary principle, which, in the extreme, would halt nanotechnology’s development to avoid any possible risk.  Yes, nanotechnology poses risks, but it also promises to reduce risks by making our environment cleaner, and affording untold material comforts to the world’s needy.

We cannot eliminate the potential hazards of frontier technologies, but we can sensibly manage them. A key strategy for this is the development of healthy liability insurance markets. But government promotion of new technologies threatens to undermine this evolution. Homeland security legislation already indemnifies some companies from liability when their “security technologies” fail. Such interventions could preempt the evolution of a private liability market for nascent nanotechnology. Yet such risk-management instruments are crucial to incentivize the development of new safety procedures and technologies to offset emergent risks.

As CEI President Fred Smith points out, federal promotion of new technologies is akin to trying to improve the speed records at a racetrack by picking the horses to run, when it is the race alone that reveals which horses are fastest. But faster speeds might also be had by improving the track. Likewise, rather than trying to pick winners, government should work to improve the business, tax, and regulatory environment.

Possible improvements include privatization of federal nanotech research (with essential military aspects vetted by the Defense Department), changing accounting standards that treat R&D as an investment to amortize rather than an immediate expense, and a clarifi cation of new discoveries’ intellectual property status.

In a rational world, innovators might pool efforts or devise sophisticated technology sharing agreements—arrangements that can help attract more investment and speed technological progress. Such cooperation is stifl ed both by antitrust regulation against so-called “collusion” and by government investment, which scatters nanotech research across multiple universities. Improved private standard setting, joint research, and other risk sharing arrangements could overcome the very “market failures”—such as overly long “time to market”—that seem to justify government funding.

Markets trump the government appropriations process in linking research to human needs. To truly promote technological progress, we should turn away from federal promotion of nanotechnology—or any technology, for that matter.