The notion that science is a public good seems obvious considering the benefits science has fueled into our lives. But what is the rationale behind this argument from an economic/market perspective? Inspired by the 2017 conference on Economics of Innovation, Prof. Marie Thursby from Georgia Institute of Technology, USA, reviews this question and shows its finely-shaded terms in relation to invention and innovation.
Two interpretations of the question “Is saying “science is a public good“, a wrong assumption?” immediately come to mind. “Is science good for the public?” — well worth answering since most basic science is publicly funded — to which the answer is “yes, it is good for the public.” Virtually all studies of GDP growth cite technological innovation or knowledge growth as primary drivers. But there is a second interpretation, more directly relevant to the economics of innovation, the topic of the recent conference in Geneva. “Is science a public good in the economic sense?” This is the interpretation I will address as it is often misunderstood, and it relates directly to many active debates around university science policy.
Science or knowledge (Latin scientia) is a public good, if not a pure public good
Economists classify goods into private and public goods. Private goods are rivalrous in the sense that consumption of a unit by one person prevents another from consuming it; and they are excludable in that the owners have private property rights, thus able to charge for use. By contrast pure public goods are non-rivalrous and non-excludable. Knowledge is non-rivalrous in the sense that once generated, it is neither depleted nor diminished by use. My knowledge does not decrease when you use it. Knowledge is also non-excludable since, once it is made available, in the absence of clearly defined property rights, users cannot be excluded from using it. Once I openly disclose my knowledge, anyone can use it without a fee. Of course, it may be possible to keep new knowledge secret, excluding use by others unless they, by chance, discover it. The use of scientific knowledge can also be precluded to the extent that publication of a scientific principle, for example, does not fully impart the tacit knowledge needed for its use.
It is the second criterion –non-exclusion – that is a questionable for science. Realistically, there are few pure public goods. Science is in the same realm as most public goods (such as clean air, public defence, parks) which have some, but not all, elements of non-rivalry and non-excludability. It would be difficult, at best, to argue that science does not meet the non-rivalry requirement.
Private market mechanisms to support science
The most important aspect of the question is the problems associated with public goods. The non-rivalrous and non-excludable aspects of science imply that private market mechanisms will not provide adequate incentives for knowledge creation. Producers will not invest in generation and commercialisation of knowledge if they cannot exclude unauthorized users and so collect a fee that would compensate their investment.
Three common solutions to this problem are government support, a system of prizes, and legal property rights. The first is quite straightforward; it is argument for government support for basic research. Industry simply cannot be expected to support basic science, such as that behind recombinant DNA, basic brain function, or laws of matter. The second, a system of prizes, is inherent in the scientific reward system where the lion’s share of reputational credit to scientific discoveries goes to the first to make the discoveries. This priority rule, in combination with a publication system in which only novel results are published, provides an incentive, not only for researchers to invent, but to disclose their discoveries as soon as they are sure of validity. This scientific reward system provides a “norm-based” system of property rights over scientific ideas. Third, in the case of scientific results with commercial potential, legal property rights such as patents are a solution. Laws such as the Bayh-Dole Act in the US (and similar laws elsewhere) allow research institutions to patent and license their faculty’s inventions, providing an incentive for commercial development of basic scientific results. Such laws provide two incentives—monopoly rights for the firms licensing and investing in development—and royalty income for the university inventor to assist in development.
Incentives for innovation
The topic of the 2017 conference in Geneva, the economics of innovation, brings to light an important distinction between the second and third solutions just discussed. Both priority rights in publication and patents (with royalties distributed to inventors) provide incentives for academic scientists. But the incentives differ in one important respect; publication provides an incentive for the basic discovery while patent rights provide development incentives.
Economists distinguish between invention and innovation; the former is discovery and the latter is the application of the discovery. The core argument for patent rights with Bayh-Dole in the US was to provide incentives for industry; and the royalty split with inventors provided the necessary involvement of inventors to provide tacit knowledge for implementation. Thus, one could argue there is little need for patents to provide public-sector scientists the proper incentives to invent or disclose, as the rewards associated with the norms of science encourage both invention and public disclosure. The incentive to innovate is a different matter and valid arguments can be made that patents provide needed incentives for firms, universities, and inventors to participate in commercialization.
Dr. Marie Thursby is a Regents’ Professor Emeritus of Strategy at Georgia Institute of Technology, with Adjunct appointments in the Owen Graduate School of Management at Vanderbilt University and the Economics Department at Emory University. She is a Research Associate of the National Bureau of Economic Research and a Fellow of the American Association for the Advancement of Science (AAAS). Her research is focused on the economics of innovation with emphasis on the role of universities in innovation systems, incentive problems in biomedical translational research and information sharing among academic researchers.