 In the current New Yorker James Surowiecki (author of Wisdom of Crowds) describes a novel approach
to funding research to develop vaccines and treatments for third world
diseases like malaria, tuberculosis and AIDS. The traditional funding
approach is what Surowiecki calls the 'push' approach: Government
agencies and philanthropic organizations 'push' money to research
organizations in the hope that they will come up with the answer. But
the UK government is funding third-world malaria research using an
alternative 'pull' approach: They have agreed to buy 300 million doses
of a successful vaccine at an attractive pre-set price, if, and only
if, a vaccine is found that meets their specifications.
This 'pull' approach has two advantages over the 'push' approach: It
encourages entrepreneurial and innovative companies to focus and
collaborate to fast-track the solution to the problem (since if they
don't find the answer, they won't get paid), and it costs the
government or philanthropist nothing if a successful solution is not
found (so the money can instead be spent elsewhere).
It has a host of disadvantages as well, most of which are due to the
anti-innovative and anti-entrepreneurial nature of most large
corporations and the politicians they own. Big corporations are risk
averse, and would rather go for the next Viagra or other copycat drug
that the rich and powerful will buy no matter what the price. And they
don't want to tell their shareholders that millions were spent on an
unsuccessful research project, because investors are short-term focused
and don't appreciate that innovation and quantum-leap successes require
risk and patience.
All the more reason why we as citizens should be pressing our
politicians to switch most or all research funding of private
enterprise to 'pull'-approach funding. Just consider the $150 billion
per year that North American and European governments each throw away
in agricultural subsidies, or the even greater amounts that the US
government is squandering on so-called 'defense' spending for foreign
military adventures and absurd unworkable missile defense and Star Wars
programs. If these billions were instead invested in 'pull'-approach,
successful-efforts research funding, imagine what could be
accomplished!
This is how governments and foundations could encourage development of a true
'market' economy, instead of subsidizing the closed, innovation-averse
global oligopolies that currently dominate our economy. Rather than
being doled out as corporate welfare, with no performance requirement
from corporate recipients, our tax money should go to guaranteeing prices and markets for products for which there is a pressing human need, on a successful efforts basis, and setting truly entrepreneurial, innovative and collaborative enterprises loose to chase after these rewards.
With governments in the back pockets of the oligopolies,
we should not expect them to take any initiative to do this. But the UK
government should be praised for this one brave example of
'pull'-approach funding, and we as taxpayers and supporters of
charities should be pressing our elected officials and the charitable
and humanitarian institutions we support to follow this model more
often.
The chart I've developed above shows how the process might work. Here's an example of its application:
- Suppose the problem is the need for a solar or wind-based
technology that will electrolyze water to create the hydrogen needed to
power home and automobile fuel cells, and a fuel-cell technology that
will efficiently and economically store the energy until it is needed.
First we'd set minimum specifications for technologies that will
address these needs.
- Based on forecast cost increases as we near the End of Oil,
and the costs of remedying global warming and other problems
hydrocarbon energy produces, compute a Real Value to humanity of a
hydrogen-based solution.
- Divide this Real Value by the Minimum Volume for the fuel
cells and other components of the solution sufficient to meet
humanity's needs and to eliminate the need for non-renewable energy, to
compute the Fair Price.
- Have the UN, or some other international body, commit
governments to guarantee the Fair Price and Minimum Volume to the first
consortium of entrepreneurs that meets the minimum specifications.
- Once the solution has been found, award the guarantees to
the successful consortium. This will ensure they will be able to raise
the necessary financing to produce the Minimum Volume of each solution
component.
- Determine an Affordable Price for each customer, ideally
based on some percentage of the customer's income and accumulated
wealth. Distribute the solution to all customers, and use the federal
taxation system or some other ability-to-pay mechanism to charge the
Affordable Price to each customer.
- The difference between the Minimum Price and the Affordable
Price would be paid for from a Global Solutions Fund, which would be
paid for by world governments apportioned on the basis of their ability to pay.
Yes, I know, it's a dream, and probably a wildly idealistic one at
that. The last two steps, as reasonable as they are in a mixed economy,
fly in the face of a fundamental hard-line capitalist principle: The
rich get whatever they want, and the poor do without what they need.
But every new idea starts with a dream.
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