NELSON: We have as our presenters David Mowery and Eugene Skolnikoff and as our panelists Ed Steinmuller from MERIT and John Zysman.

This first session is focused on the tension between two striking developments that have occurred in the era since the Vannevar Bush report, developments that have intensified significantly over the last decade. On the one hand, nations have become increasingly self-conscious about their own national innovation systems, whereas on the other hand, the system of science and technology and the web of interactions between the participants have become increasingly global.

David Mowery, our first presenter, is Professor of Business and Public Policy at the Haas School of Business at the University of California.

MOWERY: Thank you, Dick. Very pleased to be here and honored to be asked to open this conference with some remarks on the interaction conflict between international interdependence and domestic science and technology policy.

Obviously, much of what I say this morning will be familiar to many of you in the audience since so much of it reflects insights that I have learned from reading or working with various members of this audience. I think that certainly some historical context is useful to try to lay a foundation for an understanding of the issues we now confront as we move out into the next 50 years after the publication of Vannevar Bush's important report.

The extent of the transformation launched by World War II and the Cold War in the science and technology system within the U.S. reflected the vision of Bush if not his specific organizational recommendations. Indeed, perhaps the most enduring and important legacies of Bush for the post-war period were his report less its recommendations than its vision, but also his development of the device of institutional overhead as director of OSRD (Office of Scientific Research and Development) during the war, a major pillar of the university-government partnership that had propelled this system.

The system that developed in the decade following the Second World War was, as most of you know, highly de-centralized and reflected the operation and funding priorities of individual federal agencies rather than the more comprehensive science/scientist-driven priority setting and allocation mechanism that Bush outlined. Nevertheless, this uniquely American system did produce significant domestic economic payoffs, reflecting the operation of a number of factors during the 25 years following 1945: the importance of military technology in industries such as computers, commercial aircraft, and electronics; the wide gap that characterized the international economic, scientific, and technological landscape between the U.S. coming out of the Second World War and other industrial economies. This was reflected in part in a much slower pace of international diffusion and exploitation of the results of scientific research, much of which was performed in the U.S.

In addition, the early post-war period's spawning of important economic benefits from domestic investments, particularly by the federal government in science and technology, reflected policies that inadvertently or not – in the area of anti-trust, intellectual property rights, procurement – were highly supportive of the growth of new industries in the high-technology sector, particularly in the United States.

Finally, I think the political underpinnings of this policy structure within the U.S., dependent as they were in large part on the Cold War, imposed a set of priorities that gave a secondary weight to purely economic objectives and payoffs. I would argue that they also countered pressure on the system for purely redistributed objectives and politics within both the Executive and the Congressional branches’ resource allocation decisions in the area of R&D funding.

Beginning in the 1970s, again as most of you know, we see a series of trends developing that impose severe pressure on this U.S. domestic system and begin to induce change that comes about in a rather sporadic, piecemeal fashion and change that by and large I think reflects continuity more than significant breaks between Republican and Democratic Administrations, reflecting perhaps the fundamental nature of many of these trends.

First, obviously, is the very rapid – and I would underscore the term rapid– internationalization of the U.S. economy, which spans the flow of goods in trade, investment, and technology. And if you simply look at the numbers, this economy has undergone a much more rapid transition from a closed structure relative to international flows of goods and technology in the mid-1960s to a structure that by the mid- to late-1980s is substantially more open – a doubling, for example, of the share of GDP accounted for by imports and exports.

Related to this is the significantly increased importance of foreign markets for U.S. producers of high-technology products in areas such as commercial aircraft, semiconductors, and the like and the increased importance of foreign sources of technology and components and similar inputs to the products of these industries. Another change agreed upon by most observers is a decline in the economic significance of the flow of technological applications – technology benefits, if you will – from military to civilian R&D and procurement spending.

Finally, in the wake of the oil shocks of the 1970s and other structural changes, factors not yet fully understood, we have a transition from a period of what by historical standards were relatively high rates of productivity and income growth to a period of much lower growth in productivity and incomes. In response, we see a series of changes in the ground rules and in some of the terms of the debates over domestic science and technology policy that begin to spill into and affect the interactions between U.S. and other industrial economies’ S&T policies.

Particularly with the demise of the Cold War and slower growth in the economy, the terms by which the results and the payoffs and the outflows of federal science and technology programs were judged begin to change. Rather than being judged in terms of contributions to some mission of technological competition with another superpower as well as direct contributions to defense, the payoffs, the benefits now are judged much more in terms of their economic dimensions. Indeed, I think this shift in the criteria from more geopolitical, more purely defense driven to economic has been aided and abetted to a great extent by statements from leading political supporters for federal R&D spending as well as statements from leading beneficiaries, people like myself, university administrators, researchers, making the arguments for the near term economic benefits that flow from basic research spending.

So domestically, the nature of the criteria for evaluating these programs has changed, and that has important implications for the ways in which the interaction between the domestic and the international science and technology systems within the U.S. and other industrial economies are now judged and the politics through which the policies that influence these links are formulated.

And very important, I think you find as a result of the internationalization, the economic integration of the U.S. and other industrial economies, a much tighter link being forged between trade policy and technology policy and science policy. What we find particularly as we move into the Uruguay round of multilateral trade negotiations, for example, is that on the agenda of the multilateral and increasingly bilateral negotiations in which the U.S. trade policy community is engaged are more and more instruments of domestic science and technology policy. Subsidies, intellectual property rights, even to a great extent foreign investments, and competition policy are increasingly becoming important issues in trade policy.

So the trade policy agenda now spills much more into the domestic science and technology policy agenda and vice versa. With this as background, I think I would single out at least five broad challenges to U.S. policy makers and policy makers in other industrial economies in trying to manage within this new context and trying to address the changing demands and the changing criteria for evaluating these programs and arguably maintaining political support for many of them.

The first is that we have seen in response, certainly in the U. S., to the changing interaction between military and civilian technology development a shift in a number of defense-related R&D programs, from support that sees as its primary target the strengthening of military technology and applications to a much broader support for both civil and military technology and applications. This reflects a recognition, in many cases well founded, of the changing direction of these technology spillovers – formerly flowing from military to civilian applications, now in many sectors flowing from civilian to military applications – and a change in the importance of competitiveness in civilian technologies and markets for the economic viability of many suppliers of defense-related components.

In response to this, we've seen – beginning under the Reagan administration and moving through the Bush and Clinton administrations – the growth of R&D funded by the Defense Department, whose objectives are to support both sides of the house. This raises one of the first important challenges that policy makers face: preventing the increasing importance of the so-called dual use programs – support for R&D in civilian as well as military basic and in some cases applications research – from opening very large loopholes in existing international agreements on subsidies and procurement by invoking a national security rationale.

This is one part of the challenge to policy created by the growing importance of these dual use programs. A second part is that certainly the historical record, at least through 1990 or so, on the success of using military programs in procurement and in some cases in R&D to support civilian technology development is very mixed at best – and I think negative in the view of many, if we look particularly at the experience in many European economies.

A second major challenge is trying to prevent what has become a growing chorus of political demands that U.S. science and technology programs yield economic benefits that are captured by U.S. taxpayers. Policy makers face a real challenge in trying to prevent these demands from resulting in a profusion of what are in most cases ill advised and in many cases mutually inconsistent and contradictory barriers to foreign access. These restrictions create bad precedents for retaliation by other governments to U.S. multinationals operating offshore. In many cases, the ultimate effect of these restrictions are undercut or in come cases perhaps reversed by the private actions of U.S. and foreign firms.

One thing to keep in mind here is that governments remain sovereign, but in some dimension their sovereignty is modulated or mediated increasingly by the strategic behavior of multinational and transnational firms. So the issue of trying to prevent the balkanization, the erection of barriers to the free flow of scientific and technological information, is an important challenge and is one that I think remains to be addressed in a more systematic way.

A third challenge goes to the issue of the changing criteria by which the programs of federal support for science and technology are judged in the domestic politics of the 1990s – which is to say, trying to create a more realistic and perhaps a better informed view of the sources and the channels through which the economic benefits are realized. In many respects, we as a science community have been somewhat disingenuous in overselling the near-term economic benefits of basic research. In response, U.S. policy remains heavily tilted toward support for the creation of intellectual assets. But regardless of how many restrictions or laws or formal instruments of protection are imposed, these assets remain highly mobile internationally. Therefore, the emphasis on support for their creation in S&T policy does need to be balanced by a recognition that the bulk of the economic benefits from many of the technologies flows from their adoption within the U.S. economy.

And to the extent that U.S. policy can achieve a better sense of balance between the objectives of creation of intellectual assets and support for their adoption, I think we can begin to address some of the underlying issues between international interdependence and domestic support for S&T. And we can also develop domestic policies that do not result in the imposition of political demands for restrictions on international flows of scientific and technological information.

This implies some important responsibilities for universities as well. We have seen a view expressed that the U.S. universities and federal laboratories are somehow treasure chests of industrially relevant technology, commercialization of which is facilitated by the establishment of strong intellectual property rights and the creation of offices of technology licensing. While these programs may contribute to commercialization, this is a grossly over-simplified view of the channels through which university-based research results flow into the domestic economy. In the long run, advocating this view undercuts some of the broader sources of political support for the university research enterprise.

Fourth challenge: managing the system frictions that arise from differences between the structures of the innovation systems of the different industrial and increasingly newly industrializing economies and the continuing demand within the U.S. for economic payoffs. Significant differences in the structure of domestic R&D systems of capitalist economies – Japan, the U.S., Germany, France – have major implications for the creation of tensions in the trade and technology spheres as these economies become more tightly integrated. Yet, the structural differences – for example, the ease with which U.S. firms can acquire the intellectual property of firms in Japan or Germany relative to the ease with which the assets of U. S. firms can be acquired by foreign firms – have significant economic implications.

These structural differences are themselves the result of a complex historical evolution that involves the actions of governments and private institutions and domestic systems of industrial finance and governance. Therefore, they are enduring, and these tensions therefore are going to be with us for some time.

What we’ve seen in response is sort of a two prong set of policies. On one hand, industrial economies in particular have focused on negotiations covering specific instruments of policies, subsidies, intellectual property investment, and perhaps competition among them. On the other hand, we've seen a growth of sector agreements covering specific high-technology industries such as commercial aircraft, and perhaps we’re beginning to see the negotiation of a regime that covers the semiconductor industry.

There are pros and cons for each of these approaches, and the long-term viability of each remains to be seen. There are certainly serious implementation problems associated with reliance on sector agreements. At the same time, the use of functional agreements to try to control specific areas of behavior also encounters significant problems as clever governments, as clever firms rapidly develop responses that may work around these specific agreements or areas of policy.

Final challenge, a more domestically oriented one: development of stronger policy-making structures within both the U.S. Congress and the executive branch for integrating trade and technology policy. We've seen continuing tension and in some cases significant inconsistencies between trade and technology policy, in their formulation and implementation in the U.S. Much of this reflects I think continuing absence of reasonably robust structures for formulating, reviewing, allocating, and otherwise making decisions on the R&D budget across the board within both the executive branch and the U.S. Congress. So until we have a stronger mechanism for policy coordination in the technology policy area, these S&T policy areas will continue to see serious tensions.

In some respects, these problems flow from the failure to implement Vannevar Bush's original vision of a federal science board that was all encompassing – as well perhaps as insufficient allegiance at least by some political actors to his advocacy for the free international flow of scientific and technological information.

But the Bush solution is no longer feasible, if indeed it ever was. Others must be developed. Certainly, we've heard now fairly pessimistic diagnoses of the outlook. It's worth keeping in mind that the problems we face are in many cases the result of what has been a very successful set of policies implemented, many of them dating back to the immediate aftermath of the Second World War, in the international economic, international political, and arguably the domestic S&T systems. We face problems that in many respects flow from success rather than failure of economic reconstruction or political reconciliation during the Cold War period.

Given a choice between the problems that policy makers of 1946 faced and the problems that policy makers of 1996 face, I think I prefer 1996 to 1946. Thank you.

[top]

NELSON: Thank you very much, David. Yesterday afternoon, Jonathan Cole and Michael Crow and I looked over the list of people who had agreed to offer their thoughts, and our mutual reaction was, what a feast this is going to be! It's starting out that way.

Our second presenter, Eugene Skolnikoff, is Professor of Political Science at MIT, and Gene has been in the business of studying science and technology and international relations for a long, long time. I'm looking forward to your comments today, Gene.

SKOLNIKOFF: The subject of this article is international cooperation in science and technology. To summarize what I have to say, I would note that in focusing on design of the science and technology enterprise for the future, changes needed with regard to cooperation are long range, based fundamentally on the way both the international system and our government are structured. Neither is going to evolve rapidly from the pattern of today.

International cooperation in science and technology is one of those activities we all assume to be of undoubted worth, always good, with important economic, scientific, and political benefits. What could be more appropriate in this age of growing integration of national economies, global issues, and tighter resource constraints than the idea that international cooperation should be a valuable and welcome phenomenon? However, international cooperation in science and technology turns out to be a rather amorphous concept, and not all the activities under that umbrella are of unqualified benefit. In the current political lexicon, the concept of international cooperation can be a rather big tent. In one formulation it can include cross-border information exchange and contacts among scientists across borders. Under this definition, there is undoubtedly more international cooperation today than ever before for the obvious reason of the expansion of international communications and transportation.

But international cooperation can also include informal research planning, support for research in developing countries, research programs coordinated by governments or international organizations, cross national research and development programs of multinational firms or within firms, major projects carried out among governments by agreement; and that doesn't exhaust the list – there are many others. In fact, the Title V reports from the State Department to Congress, which in principle list all of the international activities of the U.S. government, include some 200 pages worth of programs, some of them legitimately considered to be international cooperation. It's a big tent, with a lot going on and not very well circumscribed.

I am going to focus on those areas of cooperation that involve explicit agreements and incremental funding, rather than on information exchanges and interaction among scientists. This is not because these areas are more important than others; in fact, they are probably less important, but they are the only ones that we really have any focus on and have any data about now.

I will discuss four areas of public sector science and technology: programs that include formal cooperation among scientists in basic research; those that involve cooperation around large, high-cost research equipment such as accelerators; programs that might be aimed at large technological objectives such as cooperation on the space station or fusion energy; and, those that grow out of emerging global scale problems such as ozone and greenhouse warming.

There are many reasons why we might expect that international cooperation in these public sector topics would be a prominent part of the world scene today, and that financial commitments, numbers of scientists and projects would be on the rise. But in fact, contrary to expectations, the extent of cooperation in these four areas is a smaller part of national commitments, at least for the large industrial nations, than the rationale for cooperation would justify. And it appears that the trend line is down and not up.

That conclusion may not seem obvious on quantitative grounds. First of all, some of the decisions and definitions are quite arbitrary and almost impossible to disaggregate credibly. Just a few benchmarks help make the point. European Union countries are probably those most committed to cooperation in science and technology across national boundaries: they have created the European Space Agency, Euratom, Eureka, and many others. But it is worth noting that the European Union’s Framework program for research, widely touted and given a lot of attention, actually accounts for less than 4 percent of the total R&D funds in the European Community. In other words, it is only a minor part of the R&D effort and there is little indication that it will increase substantially in the near future.

Germany recently announced that it will reduce its commitments to European science agencies by ten percent; that may mean they will violate their prior commitments. Both France and Germany have drawn back from offers to site an experimental fusion reactor on financial grounds, because the siting nation has to pay a larger proportion of the costs. The United States looks as though it is going to be cutting its budget for fusion research which will almost certainly mean that we are not able to participate, or at least participate fully, in this new experimental reactor.

The Title V report activities, though they look substantial, actually amount to a very small part of the nation’s $60-plus billion of federally-funded R&D. The reasons for expecting that international cooperation would be a larger part of the whole are quite commonplace. The most obvious one is cost-sharing. However, the difficult financial situation in many countries that has served to reduce the R&D budgets of most makes even substantial cost savings through cooperation irrelevant. If countries are deciding to eliminate projects completely, it doesn’t matter whether money can be saved by doing them jointly.

The emergence of global scale issues, clearly one of the hallmarks of the current era, is another incentive for cooperation. Many areas that can be studied independently will benefit from coordinated or joint research. In the long run, the most important aspect of joint cooperation on global issues is not so much the new knowledge as it is the involvement from countries all over the world, who later may be asked to make commitments of one kind or another based on the results of the research on those global scale issues. It makes a big difference if the nationals of the countries involved have been part of the process of determining what is necessary.

A third incentive is the diffusion of scientific competence around the world. No longer does one nation dominate as the U.S. did after World War II. Cooperation allows nations to tap competence wherever it exists.

A fourth motivation is foreign policy benefit. During the Cold War, we claimed the political benefits of cooperation, particularly east and west, as one of the most important reasons for joint programs. A lot of that has faded, but it still remains important.

A fifth motivation is the domestic political incentive: agencies of government have not been above using international commitments as a way of insulating projects from budget cutting. That is still going on, though in the inward-turning country we have today that's a less valuable device than it was in the past.

The question of building indigenous capacity is another important motivation for cooperation. If there is one thing that is agreed about the relation of technology to economic development, it is that nations have to have their own indigenous capacity to relate technology to development. Cooperation is one way of fostering this result.

With these incentives, why do I believe there is less cooperation than would be expected? The primary reason stems from the fundamental fact of the international political system: it is organized as a collective of nation states and it will remain so for the indefinite future. The consequence is that public sector science and technology are primarily supported by governments to further national goals and that decisions about projects are made in a national policy and budgetary process dominated by domestic pressures.

The observation that science and technology are largely national endeavors greatly complicates the process of developing international cooperation. National objectives are not identical, opportunity costs differ from country to country, criteria of choice among competing projects vary, government structures are not parallel, policy and budgetary processes are not only different in substance but also in timing, and domestic political pressures vary from country to country. Political goals, or goals that are to be served by cooperation, may not be identical.

All of those problems and incentives are as relevant to the United States as they are to other countries, but we have a series of special difficulties which stem primarily from the structure of our government. We have acquired a reputation – I don't think wholly justified – of being an unreliable partner in international cooperation. We change our mind too often. The fundamental structural issue is the nature of our government and the separation of powers, which has several effects. The executive negotiates agreements, but the Congress, not tied to the executive as is the case in Parliamentary systems, has to approve and appropriate the funding.

This is always a dicey proposition. There may be differences of views, politics may be different, or views may change and diverge over time. Annual budgets, which have become a staple of our system, mean that firm commitments cannot be made beyond the initial year. Through we have done it from time to time, we are not happy to appropriate the full cost of a project in its first year. That is difficult to do to begin with and particularly difficult in a tight budget time.

The bicameral legislature and the Congressional committee structure mean that projects are dependent on action by several committees, themselves comprising many different actors, personalities, and politics. Projects are vulnerable to the idiosyncratic views of individuals, views that may change over time as a project goes ahead. Individual members of Congress, because of their separate elective base from the Executive, are typically more dependent on the views of their constituents than are legislators of Parliamentary systems.

Domestic considerations tend to dominate, breeding skeptical attitudes towards international cooperation and, sometimes, direct hostility. Moreover, it is still true in American government that foreign travel has the atmosphere of a boondoggle, so foreign travel costs are typically much more constrained than domestic travel costs.

Separation of powers is not the only cause of America’s problematic performance. The relative isolation and self-sufficiency of the past makes it hard for us to recognize our growing dependence on other nations. As in many other matters, it is hard to accept when a project requires sacrifice of unilateral control. In short, perhaps for understandable but no longer viable reasons, we continue to reflect a parochial view toward cooperation. That is going to have to change, but it can only change gradually.

There is one other difficulty worth mentioning, which primarily affects smaller-size projects – our competitive process for approving projects. This is a much larger part of American science policy than it is of most other governments. The competitive peer review process makes it hard to allocate up-front money. Often, to develop an international project, even a small one, you have to have planning and travel money at the start. Secondly, you never can be sure that a project, once developed, will actually be approved in the American system. This makes it more difficult to build the individual collaborations necessary for cooperative research at the small scale.

Finally, there is an issue that is particularly important for larger projects: Who benefits? Is it a level playing field? When knowledge is developed that is presumably open to all participants, will that knowledge be turned into commercial products more readily and rapidly in other countries than in the United States? That question encompasses more than science and technology alone, but it relates to our general attitudes towards protectionism and towards our technology policies.

What can be done, what can be changed, and what is possible? If the judgment is correct that international cooperation in science and technology is well below the optimum, what can we do to change the atmosphere? The basic impediment to cooperation is one that cannot be removed. The nation-state system is alive and well, notwithstanding the rhetoric of the global village and the growing interdependence of nations and economies. The rhetoric is not wrong, but it will not bring about the end of this form of organization of international affairs.

And that organizational structure leads nations to ask about any potential cooperation: "What's in it for us?" The 'us' can be and should be seen as an entity that is larger than the nation itself. It is not normally seen that way, but if there was one long term recommendation one could make, it is that we have to recognize that our national interests are much closer to global interests than we tend to assume in our political process.

Somehow, scientists must find a way to convince the public that our nation's parochial interests need to reflect a much different view of the international scene and where our real goals and objectives in science and technology lie.

As far as more specific policies are concerned, one place to start is for the scientific community and universities to demonstrate to students the significance of international ties and knowledge of other communities, and how their work relates both to the work of others and to the larger community of nations. We have not done a terribly good job of that. Most research universities today talk about expanding the international dimension of their education, but it has yet to happen. Just a few years ago, only about two percent of all U.S. science and engineering Ph.D. recipients planned to work outside the United States, and this, NSF data said, had fallen by half in the previous two decades. Only the senior faculty and administrators of the universities can correct this situation by insisting on adequate attention to the international dimension. Change will be slow, but it must be done.

There are a few specific more steps that are possible, though in periods of tight budget, are unlikely. One is the willingness to appropriate funds on a multi-year basis for projects. Second is to recognize the need for up-front money, for small science cooperation at least, perhaps sequestering some funds so that the peer review process doesn’t throw out a project after it has been laboriously developed. Lastly, we need more support for the International Council of Scientific Unions which is probably the most cost-effective international organization that we have. And it works on a shoestring.

As far as the administration and the policy process is concerned, I think we need more focus, oversight, and planning at the center to make it clear throughout the government that international cooperation is in fact welcomed rather than something to be avoided. This requires leadership, planning, and oversight – things that neither the Department of State or any individual department can provide. That does not mean detailed oversight or detailed management. It does mean at least knowledgeable oversight. We do not have that capability today in the U.S. government, as agencies operate pretty much independently. That is necessary and overall probably a good thing, but there needs to be some type of oversight mechanism.

And finally, I note with regret that we do not have any intergovernmental organization concerned with or devoted to science and scientific cooperation. There is an S in UNESCO, but we are not members of UNESCO anymore, and it would not have made much difference if we had been – it was never a very successful organization. I think it is unfortunate that science was included in the creation of UNESCO at the last moment. If an international body had been devoted only to science, it might have made a substantial difference in this whole area of cooperation. But I would argue that it is too late.

In sum, international cooperation involving explicit projects and identified funding in public sector science and technology, though not automatically always desirable, appears to be operating at considerably less than optimum scale. The impediments are substantial, but they relate primarily to the dominance of national considerations when cooperation is considered. Those national issues are not inappropriate, but they are normally based on a narrow, short range of criteria that do not reflect the real needs and opportunities of an increasingly global society.

[top]

NELSON: Thank you very much, Gene, for a very interesting and thought-provoking presentation.

In each of our sessions, we have two presenters and two panelists. The panelists have had a chance to look at an outline of what the presenters were going to say, and their instructions are to begin their comments there but they are free to wander and to range. The panelists serve as a convenient vehicle for getting into a more general discussion involving all of you.

Our first panelist is Ed Steinmuller. Steinmuller is an economist by training at Stanford and spent a number of years there as Deputy Director of the Center for Economic Policy Research. When I was visiting Stanford a few years ago, he was clearly the guiding spirit and organizer behind a wonderful Stanford institution called STEW, the Science, Technology and Economics Workshop.

Ed Steinmuller, a couple of years ago, joined NERIT in the Netherlands as Professor of Economics. Just this year as part of this long-run program to teach at all the interesting places doing research on science and technology policy in the world, he is moving venue to the Science Policy Research Unit at the University of Sussex.

STEINMULLER: I indeed do have a world tour package, having come in just last night from Amsterdam. My comments are going to be free ranging in the sense that I have prepared to speak largely on the basis of what the written comments were.

One of the things that strikes me about this morning is the degree of contemporary-ness in which we are considering many of these problems, so perhaps part of my purpose is to step back a little bit from this. Science policy has passed through two great thresholds in which the vision of the role of science in society has been transformed.

The first of these began when Bush’s vision of demobilization and a civilian science establishment in a peaceful post-war world failed to occur. Instead, the atomic age was born out of the application of science to warfare, an application that was to result in expenditures equivalent to fighting three more world wars in the past half century. Those of us who were children of the atomic age found ourselves in a world of science in which the power of human invention was capable of reducing the cities we lived in to lakes of glass. It may seem paradoxical that so many of those born after the war joined the scientific community, but those years were marked by hope as well as dread.

The power unleashed in Hiroshima and Nagasaki and the industrial might that leveled Rotterdam and Dresden were of biblical proportions, but it was biblical proportions that might also feed the hungry, clothe the naked, and heal the sick. This was a message that Vannevar Bush preached, a hopeful message on the eve of a Cold War. Bush’s report was not only an instrumental plan for technology and science policy; it was also about values.

Now, for an economist to recollect visions of hellfire and salvation may seem unusual in this day and age, the fears and dreams of the atomic age have yielded to a different ethos and a different vision of science's role in society. The applications of science and the shortcomings of competing dreams have created a world in which the values of consumption and production, the economist's stock in trade, dominate.

For science, the second transformation – to a post-Cold War world – is a much more difficult challenge than the visions of hellfire and salvation offered by the atomic age. In dollars and cents terms, science must be justified as a public investment whose returns justify the scale of public expenditure devoted to it. That is the message of the commercial ethos of our age. Science may be defined broadly as the curiosity-driven pursuit of knowledge, and thus when I refer to it, I'm also including the engineering disciplines.

Economists have argued since Richard Nelson and Kenneth Arrow's seminal papers that the results of scientific investigation, to the extent that they are disclosed and others have the capability to apply them, are public goods. In this view, scientific results and the conduct of scientific research are indeed footloose across international boundaries, as Professor Mowery has suggested, while the funding for their creation is indeed national in the sense elaborated by Professor Skolnikoff. Creating national allegiance to international public good and creating the governance structures are difficult tasks, as recent experience with not only science policy but with the United Nations suggests.

Yet it is exactly this path that we are led to by economists’ justification for investment in science as a public good. And the public good argument does continue to be relevant in explaining why science cannot be privatized. The logic of the public good, however, is subject to the same criteria that we apply to any other public good investment such as highways or the arts. For those who keep the faith with economics, what we need is a proper cost-benefit analysis to justify our public expenditures in science.

As someone who has investigated this issue in a variety of contexts, I must report a skeptical view. The size of the scientific community created by the Cold War as well as many major initiatives falling under the heading of Big Science are unlikely to find the returns to justify the investment they require. Without a restructuring of the rationale for the support of science, downsizing is only just beginning. At the heart of this problem is the tyranny of how we economists account for investment.

The returns from science are long delayed, and we are now reaping the bequest of past generations who cannot revoke their gift to us regardless of what we choose to do. Nor can future generations, who we continue to believe will be far more wealthy than we are – they can't protest our failure to provide a larger stock of scientific knowledge, as they are not yet born. Even if we were to somehow to remedy this problem with our accounting, I am skeptical of the instrumental justification of the science enterprise.

The best hope for constructing an economic justification lies in the role of science in education. In the pursuit of scientific knowledge, we have one of the best instruments for the acquisition of skills and competence in society. And that is what leads us away from the traditional preoccupation of economists with measuring scientific knowledge as an investment good and attempting to trace its returns.

Instead, we are led to consider the impact of scientific research in creating skills and developing networks of knowledge exchange. It leads us to the difficult task of tracing individual careers, and the synergistic affect of social networks in which knowledgeable individuals participate. And it leads us to longer term considerations of labor force evolution in which we have so little capacity to offer young people advice about their future careers.

I suspect that in such investigations are answers to important questions in the field of economics, such as the premium that college-educated labor has been able to earn in the labor force, and in the true cost of labor force frictions in Europe.

Why is a fundamental reconstruction of the rationale for public investment in science necessary? Professor Mowery has suggested that a major issue is getting the balance right between footloose science and less footloose embodiment of skills in the capacity to exploit knowledge. To achieve this re-balancing, we will have to have a much clearer view of what is "public" about science.

Here, I think it is worthwhile to consider one of Vannevar Bush's less profound ideas. He suggested that in the relationship between science and applied pursuits, that practical technical pursuits would tend to displace curiosity-driven investigation. Bush's intuition was based on the logic of expediency. This logic is under contest. European scholars such as Michael Gibbons are contesting the view that science is a public good by arguing that the tools and methods of scientific investigation are spreading throughout society. The widespread diffusion of the methods of science is destroying the privileged position of the university as the predominant source of scientific knowledge. And in Colon's case, the argument is posed even more sharply by his contention that scientific knowledge cannot exist outside of networks of individuals engaged in scientific investigation, wherever that might be.

Colon and others are taking aim at the public-good character of scientific knowledge, and if we accept these claims, we can also explain Professor Skolnikoff's paradox that nations cannot seem to see beyond their immediate political agendas to a more internationalist strategy of cost-reducing investment in scientific cooperation. If science is a private rather than a public good, the process of private sector internationalization is a continuation and an enlargement of the role of multinationals in bypassing national governments in order to create coherent international networks of wealth and knowledge creation.

Traditionally, what has distinguished public from private funding of research is the requirement of public disclosure. Paul David and others have suggested that there is a fundamental contradiction between the requirements of public disclosure accompanying public scientific funding and the growing pursuit of science in the private domain. Clearly if we accept Colon's view, there is no public knowledge. If we follow David’s view that what is important about publicly funded science is public disclosure and the use of this knowledge as a public good, then we need to know why private sector researchers publish and what is different about the publicly funded research programs.

What is the prospect for national governments to shift gears from the Cold War world of science as a military, strategic asset to science as a tradable commodity in which collective gains are possible? Recent U.S. experience with export controls on software as well as other examples cited by Professor Mowery are not encouraging. And I can't report that Europe is prepared to lead on this issue either. In Europe, we have just had a strategic view of advanced telecommunication developments that produced a short list of recommendations. The first was the need, as we now have throughout the world, for a coherent information infrastructure or as we would refer to it here, a global data highway. The second of these was the recommendation that the process of liberalization in telecommunications and broadcasting infrastructures and services should be speeded up.

The third was, and I quote, "only unique European standards will protect investments of industry and consumers." Clearly, the meaning of liberalization is confined to the national and, in this case, regional aims and agendas noted by Professor Skolnikoff, and the idea of technology as a strategic good noted by David Mowery is alive and well. I doubt that the current enthusiasm for strategic planning will easily give way to a reconstruction of the rationale of the scientific enterprise to rival that of Vannevar Bush. In this sense, Bush may be a man for all seasons in arguing for the fragility of scientific investigation in the face of practical interests.

This leads me back to my key message that the rationale for public funding of the scientific community largely hinges on the vision of the social purposes of technology and science. If science is to be viewed again as an endless frontier whose exploration should be among the highest aspirations of new generations, we need to understand how this enterprise can do more than contribute to international competitiveness or the generation of wealth for innovators.

Tracing the role of scientific research in education and the consequences of scientific education for economic progress are first priority in these times. Such an investigation may or may not bring good news for some portions of the scientific community such as Big Science, but it must be done if we are to have any hope of defending scientific investigation in these instrumental times.

We must also re-examine the value of public disclosure of scientific investigation and improve our capacity to distinguish what is private and what is public in the generation of scientific knowledge, so we are able to distinguish what the appropriate role of public funding is. This will involve a reassertion of other standards of accountability related to disclosure, rather than those of economics and accounting where we have been attempting to provide the incentives in the form of publication counts and other mechanisms to link academic and financial accountability.

Finally, and this is particularly the view of an American living in Europe, we must examine more deeply the values that we hold for the future of society and individual aspiration. Such a re-examination might just lead to a re-discovery of Bush's enthusiasm for choosing the life of the pioneer at the edge of the frontier. Thank you.

[top]

NELSON: Thank you very much, Ed, for an interesting and provocative set of remarks. Our second panelist is John Zysman. John is a Professor of Political Science at the University of California at Berkeley, and for many years has been interested in the connections among politics, economics, science, and technology. It's a pleasure to have you contributing to this discussion, John.

ZYSMAN: Thank you very much. In part, as a transition to audience discussion, partly to keep my own remarks limited since we are running a bit behind, and partly because in response to the very interesting comments of those who preceded me, I've scribbled a range of notes that I won't be able to read if I stand up, I'm going to speak sitting down.

I think there really is a double set of questions put on the table. First, given our belief that science and technology are essential to the long-run well-being of our communities, to the stability and power of our countries, and to the long-run growth of our economies, how do we maintain that commitment? That's the first question, and I think it's a very basic one.

The second is, assuming we conclude that we do want to maintain that commitment, how do we organize it? How do the new challenges and problems differ from those around which we organized science and technology in the past?

In a funny way, the sense of crisis of the last few years – that science and technology would be de-funded – is an opportunity to confront the fact that the demands on science and technology have radically changed and that consequently we need re-thinking and restructuring as to the appropriate ways of proceeding.

The crucial question is, what in fact do we want science and technology to do? The purposes of science and technology and the role they’ve played have certainly evolved. But there's a double change. The tightening of the links between science and industry, between science and practical application, has captured our mind, but also the issues that we faced have shifted the way in which we think about science and technology and the kinds of demands we make on it.

In my mind, there really have been four different stages. The first, of course, was the original era in which there was a sense of linear progress from basic research to application – the end of World War II and the years after it, of large projects in which large scientific breakthroughs could support broad national purposes. The second phase, sort of the post-war reality, was one in which investment in science and technology was often driven by military concerns, which lifted the technological plateaus. The commercial market demand drove the application of that science to technology as it moved from plateau to plateau. Here, in a funny way, it was the insurance industry that drove the emergence of the IBM mainframe and of broad-scale computing in the end, not the military.

And then, of course, there was the third stage, forced on us in a way by Japanese competition, which had a reality of two parts. One was that productivity rested not just on broad scientific application but also on the simpler reality of work organization and changes in how we structured the behavior of companies and the shop floor.

Second, the leading edge applications were increasingly, as David and others have suggested, driven from the commercial sector – not just from the commercial sector as in the case of the IBM mainframe but driven from the consumer durable sector. The mundane things of everyday life that we produced in large volumes – when we opened them up and looked inside, suddenly we saw components and subsystems that were in fact cutting edge, where scientific knowledge was often being applied. And precisely because it was being applied in volume, the consumer durables industry was able to support research or draw on the research in a new kind of way. The logic and funding of technology, not necessarily of science, was shifted. One only has to look inside a Sony Camcorder or at the fluid dynamics in an inkjet printer to reach this kind of conclusion.

Of course, some of this took on the tone of national rivalries, as we became fearful that other people’s great success at organizing production and using consumer durable sectors would give them enduring advantage not only in the technologies but in the supply base. That is, the machines, the know-how, that were required to produce a good today and support its production and the technological innovation and scientific investigation required to maintain it tomorrow.

Now, we move to a fourth era, which is really a derivative of the third, characterized in the 1990s by two things. One, which I loosely call Intelism, is the formal realization that the competition is no longer just about the assembly of products as it was in the era of Henry Ford. It’s about what goes into those boxes, that the real value added in this laptop computer is in the microprocessor and the screen and the operating system, and Microsoft and Intel and the Toshiba/IBM venture are likely to be the only people making money out of the sale of this particular product. Therefore, Intel Inside in a sense represents that. Many of the components have the possibility of application of scientific and technical knowledge in a wide range of countries and in a wide range of sectors in this era of cross-national production networks.

The other aspect of this is the emergence of software and digital innovation because it, in a funny way, breaks some of the links between scientific technological growth and productivity. What in fact is the scientific investment required to develop Netscape? It's not so obvious, apart from the development of broad-scale mathematical training, what one really needs to do. And if one looks at the innovators in many of the digital areas, it's often a generational set of jumps in which those who are over 30 are often not the drivers – in which the relationship between innovation and scientific and technical training is oftentimes reversed, with investment driven by innovation.

I don't have many answers or policy proposals, I'm afraid, but I do have five questions. The first is, who invests in science? In an era of corporate downsizing – in which we can't depend on the IBM labs or Bell Labs in the role they played before, sort of an oligopoly or a regulated industry playing a para-public kind of role – the choices that national governments or state governments make about spending and science become crucial. But the spending is being cut at the same time. Therefore, it becomes critical who pays for science and what kind of science we want. I think that begins to be the kind of questions that Ed Steinmuller was suggesting. How do we organize the scientific enterprise at its core? I don't think, without opening up another conversation, that the answers of the past are terribly persuasive to me as answers to the future.

The second question is, do we really invest in this scientific base or do we invest in applications, be they the fusion of science and technology or the kind of mission-oriented work that the United States has been good at over the years? And if we emphasize mission-oriented work, is it our military missions or the broader social policy kinds of missions?

Third, if we emphasize these applications, it seems to me that we can characterize the choices we have as two different kinds of games that we have to play: one is chess and one is poker.

In the established oligopolies, there's a complicated chess game about investments in which people investing in technology and science try to position themselves not to lose in a market. On the other hand, in a whole range of new technologies, you're simply playing poker. In fact, the organizations that are set up to do one often don’t do the other very well. And that's particularly a problem in sectors such as the electronics industry, where today half comes from businesses that existed ten years ago and half from businesses or products that didn't exist ten years ago. How do we play both games?

Fourth, do we invest in science or training? Fifth, are the investment issues the critical ones at all? In the whole telecommunications and digital area, the American decision to de-regulate the telecommunications industry – which I was very skeptical of, at the time – is ultimately what has given us real leadership in network computing and what I would call the new consumer electronics.

These choices that we make at home are part of this more complex world of rival national innovation systems. Now, I would say that these are differently structured national economies with quite distinct national market dynamics, but we’re talking about the same thing.

The world is supposedly more global. I don’t want to start the conversation about whether the world is really more global, but the numbers in 1914 and 1996 don't look so different. FDI, Foreign Direct Investment, looks different. It may be the entrance of Japan and China into the world market that gives this flavor of globalism. The world is very different, but exactly what this globalism consists of isn’t so clear. We often use a code word to explain what we don't understand, to point at things rather than to really analyze them.

In any case, the co-existence of these different kinds of national systems raises two possible relationships. One is that in this world of Intel-ism – with Thailand, Taiwan, and ultimately parts of eastern Europe becoming players and investors in different components and subsystems and the emergence of regionally based cross-national production systems – we’re going to see a much finer division of labor.

It's sort of Adam Smith applied to science and technology, in which case one sees the success of the Danish model, where I have been spending the fall – the clear ability to monitor and apply technology, the clear success of the IBM/Toshiba deals to produce the active matrix screen, the cross-national production networks themselves, which exist in Asia and have been a large part frankly of the American comeback in electronics.

Now, that is a world in which we all co-exist, in which the effort to build national systems of science and technology is a race everyone can win. It's sort of the decathlon. Everybody gets points, and the winner is the one who gets the most points, but you know it's a game everyone can play and everyone can win. An alternative is chess or perhaps lacrosse in which you play moves and you take your opponent off the playing field. And the metaphor we choose I think is quite significant because the other side of the story of these confrontations is one we've all told. I've spent time telling it about Japan, one could tell it about Korea, the French Air Bus story is certainly one that one would highlight.

Now, the reality is that these two stories are going to co-exist in very intimate ways over the next years, and it's going to be very difficult to keep the game open while not allowing others who are playing chess at a national level to gain advantage. To say we're going to eliminate these efforts to create national advantage isn’t the question. The question is how to moderate them and how to keep them in bounds so that the underlying finer division of labor can in fact proceed.

The optimistic part is that many of these rivalries will start to become cross-national coalitions. The efforts to create digital copyrights, for example, create the same splits in Europe that they do in the United States. Interestingly, the lobbying over precisely those issues is now consisting of European/American coalitions that lobby on both sides of these issues in Europe and the United States. So I think the critical question here and in the international policy arena is to keep our balance. That is, to recognize there are great gains from this finer division of labor but there is no set of world trade organization rules or any set of intergovernmental agreements that's going to ultimately eliminate these temptations toward offensive technology policy.

And finally, I would say that in this supposedly global world, what the evidence from the economists has suggested is that we see an increasing specialization in the kinds of product, in the kinds of technology. That put us back to the choices that we have to make at the national level in the first place – how do we do it right so that our particular specialization assures that we capture our share of the high value added, high wage kinds of industries that everyone wants to be a participant in? Thank you.

[top]

NELSON: Thank you very much, John.

ADAMS: I am Dorothy Adams from Columbia University. Since we have been speaking about integration, about various global considerations in a geo-political theater, which has become a diffuse conflict, what I would like to know, looking back at 1945, is where is the George C. Marshall, Marshall Plan creator of our era for science?

ZYSMAN: I think we’re in a fundamentally different period. Vannevar Bush had the currency and the visibility that stemmed primarily from World War II. There would have been no such response to his interests and his recommendations if it hadn't been for the role he played as a centerpiece of science and technology during World War II. Since then, the communities have grown, and the only time traditionally that you get a focus on one person or one place is in a time of crisis. After the Russian Sputnik, we once again for a period of time had a crisis and a response with a focus of government attention to the field that made a huge difference.

If you're looking for a new General Marshall, I guess we need another crisis first, which I would just as soon not have as a way of stimulating that. I think the community is too large, the interactions between technology and science and society and the economy and the international scene are too great to imagine that any one individual or one person is going to create that kind of following and that kind of vision.

HAUBEN: I'm Ronda Hauben, I'm a student at Columbia, and I've done an online book on the history and development of the global computer network. Do you see any broader perspective? I've been listening today, and I've only heard a little bit. We have tremendous developments that the scientific and technological communities in the U.S. have pioneered for the rest of the world to make people’s lives better. And isn't there some way of one studying and building on all of this, not in terms of chasing short-term kinds of things, which I think is going to be disastrous for the scientific community, but instead somehow really looking into the significance of these broader developments. So is there any perspective in this direction?

NELSON: Yours is an important and profound question. It's a question, however, that relates to the broad subject matter of this overall conference rather than to this particular session, so why don't we file that as an important question and ask it again a little bit later in the conference. I think that we’re observing self-organization in terms of people who want to comment.

LAIRD: My name is Burgess Laird, and I'm from Los Alamos National Laboratory. I have a brief question for David Mowery. You argued that one of the central challenges facing the science and technology policy-making establishment is trying to prevent growing demands resulting in a profusion of ill-advised barriers to foreign participation, I think you said in our economy or at least in the S&T infrastructure. I wanted to ask if you've seen any evidence of this, because I've seen quite a bit of evidence to the contrary, including that in the past few years, the rate of growth of foreign-based R&D facilities in the United States has actually increased. Just taking that as one indicator, those foreign R&D facilities don't seem to much care about pseudo-techno-nationalist foreign policy programs. Any comments?

MOWERY: What I meant specifically was restrictions on foreign participation in federally funded and perhaps in some cases state funded S&T programs. I think that there are a number of examples of this. There has been some relaxation over time, but there is continuing pressure – some of it from Congress, some of it from within the Executive branch – for restrictions on foreign participation in Sematech as originally designed, restrictions on foreign participation in the high-temperature superconductivity conference back under the Reagan Administration, for a range of restrictions applying to various elements of the advanced technical program, and depending on the specific agency, the Cooperative Research and Development Agreement programs administered by different federal agencies.

Now, there's I believe a report from the Office of Technology Assessment, the late Office of Technology Assessment, issued probably in '94, that documents some of the array of these restrictions. It makes the fairly compelling point that there is really not much consistency among them – as one might expect, since these originated in different agencies, in some cases at the behest of different individuals – and indeed in some cases even the underlying economic rationale is particularly difficult to discern.

So we have quite a contradictory portfolio of these restrictions; in some cases, they have been relaxed, in other cases, new ones are being proposed. I think in many cases they are difficult to justify. Certainly, their internal inconsistency is even more difficult to justify when we look at the role of U.S. firms as beneficiaries of participants in programs in the U.S. and elsewhere, perhaps the underlying rationale is equally open to question.

WESSNER: My name is Charles Wessner, and I'm with the National Research Council. We're pleased to be able to tell you that we have a report coming out on the 17th of October that addresses many of the issues that have been so articulately raised here today. I'm sorry to tell you we don’t solve them all, but I think you may find some of the points we raise interesting.

I wanted to raise two questions – actually several questions. The first is, I used to work for the federal government as a Director of International Technology Policy, and I’d like to direct a question to both David and John.

The question to David is, there seems to be much ado about nothing with respect to the restrictions on American programs. There is a simple case that restrictions occur around the world on all national programs. There are some that are open to U.S. participation, particularly in areas where we have substantial technological advantage.

We once asked a coalition of foreign companies whether they really felt that these programs with our restrictions were an obstacle and if they had the chance of opening the programs completely or getting rid of them, which they would choose. The answers were twofold: first, they're not really an obstacle. They can get in if they want to. Second, they would prefer that we got rid of them. I think that's instructive, but I would ask David if he might wish to address that.

On the question of globalization, in the preparatory material, we note that differences in national technology policies have become increasingly costly, in recognition of the global nature of science and technology. Much of the work we found in the government is that these were not costly – the companies adapt, as you would expect, quite successfully – and that the differences in national technology programs, which are increasing very rapidly, notably in Japan, and on an exclusionary basis, suggest that the chess model that John Zysman was talking about is becoming more predominant. I would like to ask John if he thinks in fact we’re moving towards a more chess-oriented nature of competition.

NELSON: In order to keep the discussion coming from the floor, let me bypass you this time, David, and ask for a quick response from John.

ZYSMAN: As I suggested, I think both are going on. A generation ago, we were all concerned about Japan, and the issues are not just about participation in science and technology programs. A crucial issue in the Korean case is whether the markets are open for foreign direct investment into Korea. Many of the issues that concern us about participation and about the Korean strategies would evaporate with the proper liberalization of those markets. That's why I personally believe that we should pursue rules in broad ways of trying to address these questions.

DAVID: I'm Paul David from Stanford University and from All Souls College in Oxford.

I share the view that the prospects for increasing national commitments to programs of international collaboration of a formal character, especially involving incremental appropriations, are quite gloomy.

There is a set of possible avenues for less formal cooperation involving either cross-subsidies, which run across national fines, and resource transfers, which you explicitly said you were weren’t going to focus on. But I wondered whether you could be drawn out, Gene, to talk briefly about the range of issues involving international access to existing large facilities, an issue which is currently before OECD Megascience Forum and more generally about the efforts of organizations that have been cobbled together, like Megascience Forum, to increase, or at least protect, existing levels of cooperation of an informal character, allowing teams from various countries to visit and share facilities which have been financed by other governments.

Another area – and this might touch on a question that was asked earlier – is the longer term prospect for expansion of the facilities in high-speed data networks, which would allow remote access of scientists in differing countries to facilities which have been substantially financed abroad out of national resources.

These kinds of possibilities can create problems, in that they will require tolerant or supportive national policies in allowing such access to develop. They will be replicated, likely, within the national level in the policy decisions that will face many institutions, like universities, whose faculties and researchers will be in active collaboration with other institutions, and will raise questions about who's paying for this. So would you perhaps address this range of informal areas of cooperation? Thank you.

STEINMULLER: Thank you very much, Paul. I had considered originally when thinking about the remarks here whether to focus entirely on the informal dimension that you raised rather than the formal nature of cooperation. In fact, I believe that not only is there more informal collaboration going on today than ever before, but that that's where the large future is.

And it's not simply in cooperation in science and technology. It’s general, if you look at international agreements in environment, for example, and their implementation, that much of what happens, happens through what is sometimes called soft law – that is, not formal agreements but informal agreements that nations are quite willing to carry out without the same kind of onerous ratification and formal process of agreement.

But in any case, in cooperation in science and technology, I think as far as access of facilities is concerned, Paul, you said everything there was to be said. It does raise important questions about not only who pays but who benefits. If there is going to be fallout of knowledge that has economic significance, commercial significance, then questions will be raised about why are we letting others participate in a project that has been paid for by one country.

I would recall half a dozen years ago, when the United States saw our competition with Japan as being a high-technology competition, that it was not only serious but that the United States was losing drastically. And during that period, the universities, particularly the one I'm at, were attacked vehemently from the Congress and elsewhere, that we were letting too many Japanese come to our university. Never mind supporting research and cooperative work, but also just visiting, that there was a huge leakage of knowledge to Japan, and that the cooperation was the source of that. And we took a very protectionist attitude.

Right now, that's not a serious issue. If it’s a serious issue, it's not high on anybody's agenda. If we find ourselves once again under stress because of competition, I think that issue will return. And similarly, the question of access to facilities will become a more serious question on those grounds.

Last, let me just mention that there's a very interesting American technology, in the sense that we've exploited or developed it first, which is almost out of our control. And that's GPS, the global positioning system. Military-related development, which has now been thrown open, in effect, to commercial exploitation in the market. And the United States government has been forced – because of the enormous growth of the civilian applications of this technology all over the world, all informal – to make a commitment that we will make that technology available to the rest of the world, presumably forever, free of charge.

What may change some day is that there will be competing systems. But for the moment and for the foreseeable future, here’s a new technology, first developed and exploited by the United States, which is informal in terms of its – and do you call it cooperation? I think it is. And it's a fascinating example of what would at first blush seem to be something in one nation's control, but is, in fact, out of control in terms of any ability to cut it off at some future time. We have to continue it now.

NELSON: We have time for one more question.

LICHTENBERG: I'm Frank Lichtenberg, Columbia University and National Bureau of Economic Research. I thought that John raised the important question of who will fund science, and I thought he suggested that there may be a crisis in both the private and the public sectors, citing the examples of IBM and Bell Labs.

But I think when we look at the data, it's a little bit hard to see that there is, in fact, a crisis or even a serious problem in the private sector. If we look, for example, at R&D intensity or R&D per dollar of sales of manufacturing companies, that has risen steadily over the last 35 years. It's about twice as high now as it was in 1958, when the NSF started collecting the data.

Now manufacturing is a shrinking portion of the economy, so that if we look at private R&D intensity in the economy as a whole, that's been relatively flat. But there has not been a decline in private R&D spending in relative terms, even during this period of apparent downsizing. Moreover, the econometric evidence that I'm familiar with suggests that, if anything, the productivity impact or the kind of social rate of return of private R&D is higher now than it was in the 1960s and 1970s. So I would ask him perhaps to respond to this issue: Is there a problem with privately funded R&D?

NELSON: I think it was a very useful factual statement, Frank, and it's good to have that in our thoughts. I don't think that it requires a particular response, in view of the tight time.

MALE VOICE: I don't agree with that.

MALE VOICE: There’s one thing that I would add, which is that actually the R&D spending in the non-manufacturing sector also has been rising rapidly in the last five plus, ten years, I guess, some of which may be the result of a change in the sample selection used by the National Science Foundation. But there is R&D spending going up rapidly outside of manufacturing within industry as well.

NELSON: John does think it warrants a response. (laughter)

ZYSMAN: I do. I think it warrants a response in two ways. Not a challenge to the facts, but an interpretation of what I was focused on. Which is that the character of what industry is spending money on is changing, and therefore, Bell Labs and Xerox Park and places like that as sources of basic science are changing functions.

We're increasingly spending money on more downstream work. And therefore, the question becomes, if that role is not being played– and it was being played by Bell Labs in part because it was a public monopoly – who substitutes for those kinds of roles?

So the issue isn't just the absolute amount of money. It's the way in which it's organized, on the one hand. And on the other hand, the increasing tendency of many companies to involve themselves in university research, which raises the question that Steinmuller pointed out, which is, what constitutes public and private research. Where are the fines, and what are the appropriate rules? So I actually appreciate it, because it clarifies the point I was trying to make, which is not about the absolute levels of spending as such.

NELSON: This topic won't go away. It’s going to come back when we talk about the future of university research, and it's going to come back when we have a session concerned with civilian technology policy. Let’s take a break.

[top]