The LHC and the importance of pure research

As anyone who has read some of my more economics-focused blogs would know, I'm a strong proponent of leaving many economic decisions to markets. I base this on the principle that individuals, though lacking perfect information, at least have more information about their own particular economic needs and circumstances than a central bureaucrat can ever hope to assemble. The principle of "information deficit" was famed economist Ludwig von Mises' core criticism of socialism. Socialism doesn't work because central planners can't assemble the amount of information that individuals, on their own, naturally have when making buying and selling decisions.

On the other hand, I'm also very aware of the important role government plays in creating the environment within which capitalism can flourish. I attribute this awareness to Hernando de Soto, a Peruvian economist who argued that an essential component of any working capitalist system is a government that puts together sensible and coherent property and contract laws. This "structuralist" conception can easily include other functions. For instance, I consider it very important for governments to ensure that every citizen can read and write, as well as to provide each child the intellectual tools required to understand the important issues they must face as economic decision-makers and citizens. Universal education leads to an educated citizenry, and educated workers make better capitalists.

Consequently, that's the same reason why I favor universal health care as a government policy (though it doesn't have to copy the model of other country's national health systems). Healthy and living people make better capitalists, and an already entrepreneurial culture can only benefit from removing the health of one's children as a risk factor when striking out on one's own.

The dichotomy of decentralized decision making and centralized, government-created structure creates much confusion in the realm of economic policy. Europe leans to the the "structuralist" side, as European governments tend to believe that the state should provide more of the "framework" of economic activity than Mises would likely consider rational. That makes it a lot easier for Europe to contemplate the funding of pure research, as Europe as a region has a history of large state-funded projects. Of course, not every project is equally successful. Though Airbus was successful (though not for the reasons European governments think), that doesn't mean the money spent on the creation of a Europe-based competitor to Google will be. That, in my opinion, is likely to be about as successful as France's effort to create a competitor to IBM in the shape of Bull Computer.

On the other hand, the United States has the opposite problem. America certainly takes a more market-oriented approach to economic policy, though self-perception often runs ahead of the reality. Many "economic conservatives" lamented the takeover of Fannie Mae and Freddie Mac this past weekend, while ignoring the fact that the US government essentially funded the concentration of mortgages in those two entities through loan guarantees that enabled them to acquire funds at lower rates than competitors. They also ignore that the mortgage industry has been goosed for decades by tax incentives in the form of interest-related deductions on tax returns, leading to a much increased willingness to speculate in real estate. The result is an industry structure that is far from a "natural" economic state.

In other words, we Americans often think our economic policies are exemplars of pure free market capitalism, when the reality is often far from it.

That self-perception mismatch is a legacy of the cold war. America taught itself that it was a bulwark against the creeping forces of communism. That ingrained belief now interferes with our ability to consider where government DOES truly add value. Most Americans go to public universities that exist in a system that is widely considered the best in the world (best university system, not so much primary school system), but speak about any government role in health care in terms reminiscent of "red scare" demagogues.

But, I'm wandering off-topic. As Richard Koman recently noted in his blog post, the completion of the Large Hadron Collider (LHC) projects moves the center of attention for cutting-edge physics definitively towards Europe. That is likely to have ramifications for decades, at least, as I can say from personal experience that Europe is a great place to live. Scientists drawn to Europe are likely to stay in Europe, thus providing an important injection of intellectual capital into European companies and universities.

As physicist Michio Kaku noted (the quote for which you can see in Koman's blog), those benefits could have accrued to the United States had the US government not cancelled the supercollider project back in 1993. I remember the arguments, coming as they did during my last year at a university in Texas (the planned site for the supercollider). The collider was too expensive. It was running over budget. The economy was just coming out of recession, and this was not the time to dump huge sums of money down physics "wells." How silly those arguments now sound, given that 1993 was the starting gate for a decade when tax revenues ballooned due to the Internet boom...an explosion, ironically enough, that had its roots in past government-funded research projects.

Pure research is often an area that private industry is more reluctant to fund, mostly because the time horizons for return on such investment are too long. That's why it is incredibly useful for government to invest the sums needed for pure research. In so doing, they serve as useful a role as they do when they ensure that every citizen can read and write.

Research funding, in other words, is no more anti-capitalist than public universities, or at a more fundamental level, property and contract law. I should hope that is a lesson we learn as a society as we watch our best minds troop over to Geneva to do work that, with sufficient foresight, would have been conducted in the United States.