How do we place a value on science?

On April 3, the New Zealand Association of Scientists is holding its annual conference to ask “What is the value of science in NZ?” (you can register here). As the conference chair, Dr Nicola Gaston, puts it:


Nicola will have to grit her teeth, because I am going to make excessive use of economic jargon in this post. How do you put a value on science?

This is actually a very difficult question. If I asked you to place a value on a car, you might well go to Trade Me and see what cars of that particular make, model and year were selling for. This will give you an estimate of the market value of the car, and for many goods, this is a very good way of determining their value.

Unfortunately, it turns out that scientific knowledge cannot can be valued this way. Unlike a car, many people can possess the same piece of knowledge and once this knowledge exists, it is hard to stop it spreading. Because it is difficult to have exclusive ownership of an idea, the market will pay less for that idea than it is worth to society as a whole. In fact, because the market undervalues knowledge in this way, a free market economy produces less scientific knowledge than society would like.

In other words, the social value of scientific knowledge is typically greater than its market value.

This is true even for scientific knowledge that has direct economic value. Economists have found that scientific knowledge produced by firms often spills over into others. Firms that develop valuable new technologies or products will soon find that others begin to copy them, forcing them to share the benefits of their discovery with others. As the market value of new knowledge represents its worth to an individual firm rather than to the economy as a whole, the economic value of scientific knowledge will often be greater than its market value.

Should governments do science?
This is not good news because markets are amongst the best tools we have for allocating resources in society. If we markets are poor at valuing knowledge, how should we go about allocating resources to scientific research?

Most of us look first to our government to redress the market’s undervaluation of science. Indeed, governments have developed all sorts of tricks to deal with this. Patents, tax credits  and R&D grants are all mechanisms that governments use to stimulate scientific research over and above that which the market will deliver.

Yet many of these tools rely on the government being able to determine the economic or social benefits of scientific knowledge, often in advance of the research itself. What then are Kiwis to make of their government, which funds far less science than the governments of most other advanced countries (see below) and often tries its best to rely on the market for estimates of the value of science?

image(Source: OECD, 2006)

A culture of knowledge
Well, you get the government you vote for. Our government’s reluctance to spend on research and development mirrors that of our private sector. Frankly, I think that New Zealanders place less value on scientific knowledge than the citizens of other countries. Attempts at getting Kiwis to place a value on science through initiatives like the National Science Challenges have met with a lukewarm response. Sadly, our politicians are well aware that the New Zealand public is ambivalent about science. Why campaign on increasing spending on science if no one cares?

I suspect that it is the countries that place a higher cultural value on scientific knowledge that vote in governments that are prepared to fund science generously. That these countries are also richer is perhaps not surprising – their cultural values compensate for the market’s underestimation of the value of knowledge.

So how could we create a country that places a higher value on knowledge? And would such a society be  healthier, wealthier, and happier? Join us on April 3 in Wellington to discuss this further.

This post originally appeared on Sciblogs
