Hi, so today we're going to talk about innovation policy. When we talk about or think about what the government has to do with innovation, we tend to think about funding, right? And that's often the primary way. So you think about institutions like the National Science Foundation or the National Institutes of Health in the United States. They are primarily research funding organizations. Now, of course, in each country there are different agencies that are primarily devoted to giving out research dollars. Much of it goes to academics, so scholars, professors, other university staff, but also sometimes they provide grants, contracts, loans to other kinds of innovators, sometimes small businesses, for example. So that is a huge part of what the government does when it comes to innovation policy. They fund basic research, they fund applied research and they also fund technological development. But they aren't the only ones involved in innovation policy and that's so important to keep in mind. There's also patent offices. And those patent offices issue patents and the idea behind patents and I'll talk a little bit more about this in a second. The idea behind patents is that they incentivize innovation. Basically, the idea is that if the government gives somebody a reward for inventing something, that reward being an exclusive right to commercialize their invention for a limited period of time. Then that will incentivize people to innovate, it will lead to more innovation. So that's an important part two of a government's innovation policy. And so, the idea generally is that the government is funding research but then also emphasizing or encouraging that research turning into technologies that then go out into the marketplace and they're sold and then social benefits will arise. So that's the basic idea. We're going to complicate that quite a bit today. I want to start first with the patent system. As I said, it's often ignored when we think about innovation policy, but it's incredibly important and it has been around long before the government was involved in research funding. In fact, patent systems date back to the 16th century but really the modern patent system originated in the United States. And many lawyers will tell you, patent lawyers in particular, will tell you that patents were so important to this new country in the late 18th century that it was written into the constitution. So the clause in the constitution that talks about the idea that we want to protect intellectual property for inventor. The US not only put it in the constitution, but there were a number of parts of this US system that made it modern and in fact it then went on to become influential around the world. Today, every country has a patent system and they are basically the kind of patent system that I'm talking about today, their rights based. So, when you receive a patent you have a right to commercialize your invention for a limited period of time as I said before. It's a bureaucratic and technical system. So most countries have patent offices or in the case of the European Patent Office, for example, the European Patent Office covers a number of countries in Europe. There may also be country level patent offices, but when the European Patent Office issues a patent, right now, it's actually country based, but soon it's going to become a European Patent, so there's an actual bureaucracy. And inside that bureaucracy, you have a bunch of patent examiners. And those patent examiners are technically trained and they evaluate a patent application according to how technically feasible it is, how useful, how novel, whether it involves an inventive step and then a patent is granted. As I said in an intellectual property, was key to the United States that the founding of the country. The idea was that if we really incentivized innovation then more and more people would get involved and that would be beneficial, would produce economic benefits. But it would also produce social benefits through access to new technologies. When we think about this, I talk about how technical the space is, you would imagine that it's purely technical. But in fact, it's actually deeply value based too. In the beginning of the patent system in the United States, there were restrictions on who could get a patent. You had to be a US resident, you also had to be a citizen. That of course excluded a number of people who were residents in the country. Those kinds of things have changed changed over time, but there are still restrictions in terms of what you need to do with it? What kinds of things are patentable? What is not patentable, I talked about novelty and inventiveness for example. There's also a focus on stimulating research and innovation rather than, for example, thinking about the moral or social dimension. So, for example, there's a very famous case in the 1980 that said that, patents could be issued on anything under the sun made by man and that opened the door to patents on what people call life forms. So genetically modified organisms, stem cells, human genes initially for many years and that's actually a value position. It might seem like a technical position but it's actually a set of values, right? It's saying that there may be moral questions about the status of this as nature or technology or as life, but we're not going to think about those things. We really want to focus on stimulating research and innovation and we believe that we can do this by allowing patents on these things. As I said, the modern approach, this basic approach has been replicated around the world with a big caveat. And an important caveat, I think especially when we're talking about equity. And that is that other systems often see places where patents might pose problems. So remember I said that the modern patent system really dates back to the 16th century. In fact, the first patent law was the English Statute of Monopolies, it was in 1623. And even that first patent law said that there should be certain exceptions to not allowing patents on things that might cause riots or other kinds of public disorder. Even then, right, the idea was, okay, there might be things, if you patent things like daily commodities, salt and oil, that could create riots, right? It could create real economic deprivation. So there needs to be limits. And for many decades, many European countries did not allow patents, for example, on foods, on pharmaceuticals, on pharmaceutical products. But they would allow them on particular processes to ensure that there were not monopolies, sorry. So that it would actually lead to lower costs, right? So, these kinds of prohibitions have existed all over the world. I mentioned patents on life forms. In Europe, for example, there are some prohibitions on the kinds of life forms that can be patented. A number of low and middle income countries have rules about what's called compulsory licensing. That is, that if you are a producer and you have a patent and you charged too much for something, then the government has the right to say no, we want that to be licensed to ensure broad access, right? So, there are these kinds of tools. However, by and large, the United States is kind of an outlier, historically has been. Because it not only insists that the system is objective and market making, but it also insists that because its objective in market making, it's not really dealing with any of those values issue. But of course that is a value in and of itself. So now I want to kind of speed up a little bit and talk about the origins of research funding policy, right? So we might think now that the idea that the government provides a lot of funding for research and development is self evidence. Of course the government should, right, who else is going to invest, especially at early stages and research. But in fact, that's a relatively recent phenomenon. It's really less than a century old, in fact before the 1940s or so, government funding was really piecemeal, much of it happened through the public health service. But things started to change with the Manhattan project and World War II. So Vannevar Bush is really known as the father of modern research funding policy, and the father in particular of the US National Science Foundation. And he led the Office of Scientific Research and Development, basically coordinating science for the Manhattan project. And that project was so successful that President Roosevelt asked Vannevar Bush to answer four questions about how the government could more systematically use research to benefit society. He asked about how the government could aid scientific education and research, how it should organize science, and how that information should be diffused. And Bush responded with a very famous report called Science, the Endless Frontier in July of 1945. And in that report, he advocated the creation of a national science foundation that would be focused on basic research. And he basically said, if we fund the best science in an unfettered way, we leave scientists alone, we give them a lot of money. We review, we make sure that the science that is funded goes to the best scientists. Then he said, society and the economy will benefit in many ways, right? It's similar to what I just described in the patent system, right? If we give patents, then society and the economy will benefit. This is known. You might have heard of the term, the social contract for science, that's basically the social contract for science. If government provides scientists with funding, scientists will provide the public with these broad benefits. Bush also envisioned the patent system as being crucial, ensuring that the technologies that came eventually from basic science could be widely disseminated. At the time there were concerns about this excessive focus on basic research. The question was, really is this the role of government, isn't that just mere curiosity, shouldn't the focus really be on more applied research that can actually more directly benefit people? There was also another concern that this would ultimately mean the best scientists would give money to their friends that they thought that were the best scientists. And that that might mean that you had a lot of funding in places like Ann Arbor Michigan or Cambridge Massachusetts, and it wouldn't be equitably spread around the world. But by and large, that idea was taken up. The National Science Foundation was established in 1950. The National Institutes of Health really expanded for, from what I was mentioning before, these kind of public health labs that were really focused on infectious disease, to a much broader effort that was focused on basic research. There was an enormous expansion in research universities like the University of Michigan, and in the scientific workforce. Then in 1980, there was an important piece of legislation called the Bayh-Dole Act. And the Bayh-Dole Act is important because basically what the government said was it was sort of doubling down on the Bush approach to the social contract and social change. Basically with the Bayh-Dole Act said was, any university that gets federal funding for research, the intellectual property resides not with the government but with the university. So the idea was that that would clarify the question of who invented what. So it would be clear for the private sector who they needed to develop contracts with. But it also meant especially in later years and more recently, as there have been declining budgets for universities. It meant that there was a sharp increase in university patents, because universities wanted to be able to commercialize what they could and make money from that part of their work. This has of course produced really important new technologies and economic growth, for example, Yale developed the triple cocktail for managing AIDs and HIV which has had an enormous impact on the epidemic around the world. But the problem with the system, I'm going to talk about a few of those, but one of those big problems is that the priorities have been guided mostly by politically appointed decision makers, and then funding decisions by peer reviewers. Now, if we're talking about what's best in terms of the scientific priorities and politicians priorities, that makes sense, but it doesn't necessarily maximize equity. At the same time though, the Bush approach has generally speaking gone global with a few exceptions. So that exception is if Bush's approach is really basic research focused, then the contrary approach you might call mission-oriented innovation policy. And this is true in a number of countries, especially in Asia, they use what is called National Innovation Systems. So they're much more involved. We sometimes in the United States we might say the government's role is not to pick winners or losers, but in many Asian countries they say no, the government's role is to pick winners and losers. Both in the sense of the sector that is we want to invest in diagnostic testing for infectious disease, as opposed to for example, gene editing. But also they might actually get involved in terms of assessing which are the best innovators that they want to invest in. More generally the government in those countries plays a much more active role in shaping industrial development. We do see a little bit of that in the United States, in terms of the Department of Defense. The Department of Defense as you'll see, I have a slide that gives you a better sense of that, is actually quite involved in these kinds of mission oriented technological projects, and that kind of makes sense, right? There involved in national security, they have very clear guidelines on what they need made, and so they will work directly with the private sector in order to get that done, as well as in some cases universities. The clearest case that many of you might be familiar with, more recently in terms of the national Innovation systems approach in Asia, is south Korea's success in terms of rolling out COVID testing very quickly. And the reason that they were able to do that, was because in fact for quite a while for about a decade before the COVID pandemic. They had been working with diagnostic testing companies to ensure that they were really at the state of the art in terms of infectious disease. And they had a relationship so that as soon as there was the COVID pandemic, they were able to work with them to very quickly get testing produced, and then distributed across the country. I've sort of told you about kind of the nuts and bolts and the governance structure, but I want to zoom out a little bit and put it in some context, and give you a sense of the funding trends, let's say. So, the first graph I want to focus on here gives you a sense of about the last 30 years of research and development funding across countries. The most notable changes here are China. China is in gray here, and you can see that there has been a rapid increase in the amount of government investment in research and development. And, of course, the European Union, which has really developed over the last 30 years. The European Union is now doing a lot more research funding. And actually, European Union funding is often across European Union countries as a means of building solidarity. And the United States has also continued to increase, again, this is all as a function of purchasing power parity. While a lot of the other countries that we might consider to be in this category of leading countries involved in research and development has remained relatively flat over the last 30 years. Focusing on the United States, this gives you a sense of general US government outlays when it comes to research and development. I think perhaps two main takeaways here. One is that, there are probably agencies on this list that you didn't necessarily think of as being research and development agencies. Perhaps you didn't think about education or the interior department. The interior department is involved, for example, in the National Park System or Veterans' Affairs, really the research and development funding in the US government occurs across the government. The second, I think, really important thing to keep in mind is that the main research and development funding comes from the Defense Department and Health and Human Services. And they're pretty huge pieces of the pie, as you can see. And it's sort of interesting, because the National Science Foundation, which was of course Vannevar Bush's baby, it's really tiny as a slice of American research and development funding. But the approach has had, as I said, really global implications. And then finally I think it's useful, so we split out the different agencies involved. This is a useful chart, I think, to give you a sense of how very different the Department of Defense, which I said is much more close to the National Innovation Systems approach and the Asian countries is in comparison to all of the other agencies, right? So in the NIH, which is part of HHS, that is Health and Human Services, and then the National Aeronautics and Space Administration, you have a kind of balanced funding between basic and applied research. But DOD, the Department of Defense, right, the vast majority of its work is focused on major systems development. So that's also going to be rather than grants, it's more likely to be, for example, contracts. So I've kind of talked a little bit about some of the different kind of problems with the Vannevar Bush approach. But perhaps the biggest challenge, especially when it comes to equity, is that Vannevar Bush really subscribed to what the science and technology policy scholar Daniel Sarewitz calls the myth of infinite benefit, right? So he basically said, in order to solve all of these social problems, whether it's disease, whether it's agriculture, whether it's employment and labor, whether it's just efficiency, we need more scientific knowledge. And that, of course, is kind of limited. But his idea, right, coming to kind of be a little bit cheeky about it, the way to think about it is, money goes into this mysterious innovation pipeline and then poof, great things happen. But there are a few problems with that approach. So it might mean that great things happen, but who can afford those great things? That is, much technology is inaccessible, and often inaccessible to people who really need it most. The second problem with this model is that it doesn't necessarily align with social need. That is that the research that's done is often aligning with scientific priorities and not necessarily citizens' priorities. That it tends to focus third on commodifiable interventions, rather than changes to public policy or the built environment, right? It's easier to get an inhaler for asthma than to bulldoze a school and rebuild one with better ventilation systems. Publics are often providing really important labor and assistance, right? They're often increasingly data of various kinds. Some tech is actually harmful. So it has embedded racial biases, for example, or other kinds of social biases, and in fact funding decisions often represent those biases as well. So I mentioned before that those who tend to do peer review are those who are recognized as the best scientists. But the best scientists, that categorization is made by other best scientists. It sort of reproduces itself, and it tends to be pretty demographically homogeneous. Which means then that it's not necessarily representative even of scientists, who represent a more diverse set of categories.
