Government and Industry

A government that controls industry is necessarily a government that is controlled by industry. Just thought of this as I was reading this review of the movie Food Inc.

I admit my expectations were somewhat low. I was anticipating something more along the lines of a Michael Moore’s emotional yet analytically vapid productions, such as Sicko and Capitalism: A Love Story. This film had quite a few negative things to say. However, it is a bit more sober and interesting, even for a laissez-faire capitalist like me.

To see why, consider a few of its themes:

  1. A negative view of the large size of food industry businesses.
  2. A positive view of government power when it’s used to mandate food industry practice.
  3. A negative view of the control of government by the food industry.
  4. A positive view of small/organic/non-factory farming.

Holding both views 2. and 3. involves a contradiction.

Book Review: NEXT

NEXT is a novel by Michael Crichton. Or atleast it claims to be. It has a disorganized plot, too many characters with too little characterization and gratuitous sex. Just about two weeks after reading it, I can hardly remember the characters or their roles in the plot. The main plot describes the efforts of a biological research company engaged in creating genetic drugs to recover some cells that could be used to fight cancer. The cells have been obtained during a routine treatment and the patient is unaware that his cells are special. The doctor who treats him discovers that the cells are special and continues his research without informing the patient. When he decides to commercialize the cells, the patient sues his company but loses the case. He then gets an offer from a competitor for his cells and goes into hiding. Meanwhile the cell samples are stolen and the company attempts to obtain cells from the patient’s daughter and grandson, providing enough material for all the action. There are also some sub-plots. There is a researcher who discovers a “maturity” gene, accidentally gives it to his drug addicted brother who comes out of his addiction, then tries out the gene on some other people, only to discover that the gene actually causes premature ageing and death. There is another researcher who inseminates a female chimpanzee with his own sperm with some genetic process (I don’t recall the details) and lands up with a humanzee kid, resembling a chimpanzee in appearance but capable of human speech. He takes the kid home and sends him to school disguised as a child with some rare medical condition. Overall, the plot is somewhat incoherant and one has to make an effort to remember the characters when they reappear after a few pages. As a novel Airframe was much more engaging and Prey was a lot more exciting even though the plot in Prey was much worse. (Airframe and Prey are the only other novels by Crichton that I have read). If NEXT were just a novel, it would be a waste of time. But NEXT is more than a novel. It raises serious questions about patent laws in the domain of genetics, intellectual property rights, what it means to own ones body, commercialization of genetic research, role of universities and government in research etc. In fact, Crichton has a 7 page note at the end of the novel, explaining his views on these issues. Since one of the purposes of this novel (perhaps the primary purpose) is clearly to raise these issues, let me present a summary of some of the issues from the novel and Crichton’s views.

Crichton presents a world that is almost out of control, a world in which the state of the art in genetics has far surpassed the state of the relevant laws. Here are some examples:

The lawyer representing the doctor and his research company tells the patient’s daughter after winning the case, that it would be futile for the patient to appeal the ruling. “UCLA is a state university. The Board of Regents is prepared, on behalf of the state of California, to take your father’s cells by right of eminent domain.”

The CEO of the research company wants a divorce and custody over his children but his wife doesn’t. His wife’s grandfather died from a fatal genetic disease and there is a chance that she might have it too. The CEO’s lawyer demands that the wife be genetically tested and gets a court order. The wife is unwilling to be tested since a discovery that she carries the disease would ruin her life.

An insurance company cancels a person’s coverage based on some genetic information about his father who died in circumstances that caused a legal enquiry. Someone at the company that performed the genetic tests says “Anyway the son is saying he did not authorize the release of genetic information about himself, which is true. But if we release the father’s information, as we’re required by state law to do, we also release the son’s, which we’re required by state law not to do. Because his children share half the same genes as the father. One way or another, we break the law.”

“The COX-2 inhibitor patent fight was famous. In 2000 the university of Rochester was granted a patent for a gene called COX-2, which produced an anzyme that caused pain. The university propmptly sued the pharmaceutical giant Searle, which marketed a successful arthritis drug, Celebrex, that blocked the COX-2 enzyme. Rochester said Celebrex had infringed on its gene patent, even though their patent only claimed general uses of the gene to fight pain. The university had not claimed a patent on any specific drug.”

Op-Ed commentary: “Columbia University researchers now claim to have found a sociability gene. What’s next?… In truth researchers are taking advantage of the public’s lack of knowledge… Geneticists will not speak out. They all sit on the boards of private companies, and are in a race to identify genes they can patent for their own profit…”

At the end of the novel, Crichton presents his views in the form of a 5 point course of action

1. Stop patenting genes: Crichton writes that genes are a fact of nature and such cannot be owned or patented.

2. Establish clear guidelines for the use of human tissues: Crichton writes that there should be legislation to ensure that patients can control the purpose for which their tissues are used.

3. Pass laws to ensure that data about gene testing is made public: Crichton suggests (not very clearly or convincingly) that there should be some genuinely independent verification of findings and full disclosure of research data.

4. Avoid bans on research: Crichton essentially argues that “To the best of my knowledge there has never been a successful global ban on anything. Genetic research is unlikely to be the first.”

5. Rescind the Bayh-Dole act (an act permitting university researchers to sell their discoveries for their own profit, even when that research had been funded by taxpayer money): Crichton laments that thirty years ago, universities provided a scholarly haven, a place where disinterested scientists were available to discuss any subject affecting the public. Now universities are commercialized, the haven is gone and scientists have personal interests that influence their judgement. Also “Taxpayers finance research, but when it bears fruit, the researchers sell it for their own institutional and personal gain, after which the drug is sold back to the taxpayers.”

I agree with points 1, 2 and 4 and strongly disagree with points 3 and 5. In fact I believe he has got the issue backwards.

In his support for point 3, Crichton writes “Government should take action. In the long run there is no constituency for bad information. In the short run, all sorts of groups want to bend the facts their way. And they do not hesitate to call their senators, Democratic or Republican. This will continue until the public demands a change.” This is true but his conclusion doesn’t follow. An “independent agency” in charge of verifying findings has to be under the control of politicians who will be all too willing to oblige the groups who who want to bend facts in exchange for backing. This phenomenon is not new at all. It is called lobbying. Requirements for disclosure are even more ridiculous than bans. You can force a person from doing something with limited success. How do you force a person to disclose what no one else knows? And most importantly, government has no moral right to <i>require</i> someone to do anything. Men are not slaves.

About the Bayh-Dole act, again Crichton has the facts right and the conclusion wrong. Universities are certainly commercialized today. And researchers who are funded by public money and allowed to make private profits certainly act in unscrupulous ways. The incentives are definitely wrong. But the solution is not to de-commercialize research. That is neither possible nor desirable. It ignores the context of why the act was passed in the first place. It was passed because non-commercial research does not work.

Describing a character who is a director of NIH (National Institutes of Health), another character says: “Rob’s a major player at NIH, He’s got huge research facilities and he dispenses millions in grants. He holds breakfasts with congressmen. He’s a scientist who believes in God. They love him on the Hill. He’d never be charged with misconduct. Even if we caught him buggering a lab assistant, he wouldn’t be charged.” and again “It was classic Rob Bellarmino. Talking like a preacher, subtly invoking God, and somehow getting everyone to push the envelope, no matter who got hurt, no matter what happened. Rob can justify anything. He’s brilliant at it.” The solution to unscrupulous researchers (in as much as the problem can be “solved”) is not to have more such men like Rob. It is to make them impossible, or more precisely to make it impossible for them to enjoy political clout and arbitrary powers to grant millions in grants. It is to divorce research from government.

Government Funding of Science

As part of a comment on a post on India’s Chandrayan mission on desicritics.org, I wrote

The government has no business pursuing scientific research.

Here are some responses

kerty: Unfortunately, many sectors can not rely on private commercial transactions. So tax payers have to pool their resources and create capital markets that can allow large scale projects to be undertaken. Unfortunately, capital markets run on profit motive. Lack of instant profit gratification can not help corpocracy or private sector to tackle fields of r&d and infra-structure that are key for economic development. So tax-payers have to pool money and assign such roles to government – roles that neither individual, private sector is capable of undertaking. Removing poverty is a function of economy – and that role is ideal for private sector – government need not dabble in it when empowerment of private sector can tackle it. R&D and economic infra-structure is a proper role of government and good use of tax money.

Morris: …a lot of other government activities are unjust to some people. I think the real question is; is this a proper activity for a government to engage into? If the answer is yes and I think it is then why not. The fact that India is poorer than the US is not relavent.

Chandra: It is increasingly debatable as to what the Govt should be or should not be in. The bottomline clearly is efficiency. Anybody who is able to use resources efficiently is good.

There are three aspects of this issue that I wish to comment on

1) The proper role of government

A government is an involuntary organization. Its involuntary nature makes it fundamentally different from other organizations such as companies, political parties, social groups etc. A voluntary organization is one which works on mutual consent. The individuals who are a part of such an organization, participate in it of their own choice. They (in whatever manner, democratic or otherwise) decide the rules by which the organization functions and the goals which the organization pursues. Any individual can leave a voluntary organization (subject to the rules to which he has already agreed) if he judges the rules or goals to be inappropriate. The only power a voluntary organization has over its members is the power of persuasion. It may not initiate physical force on its members and it may not violate its contracts with its members (the rules subject to which its members join the organization and stay in it). A voluntary organization cannot force a man to act against his judgement. A voluntary organization recognizes the principles that the individual is the unit of thought, choice and action; that the goals and interests of a group are merely the sum of the goals and interests of its members as determined by voluntary consensus; that the proper way to deal with men is persuasion and not force. A voluntary organization enables its members to work together in pursuit of their shared goals. No society can function without voluntary organizations.

But a voluntary organization cannot work without an arbiter. It cannot work if there is no authority to resolve and settle disputes. A voluntary organization cannot work in an anarchy. The role of government is to maintain a framework of individual rights within which individuals and voluntary organizations can work and interact with each other. The creation and maintenance of such a framework is the only proper role of government. This involves creating a system of laws and procedures in accordance with individual rights to adjudicate the resoluion and settlement of disputes (the law courts). It involves granting authority to certain individuals to implement laws (the police). It involves protecting its territory from outside interference (the army).

As a necessarily involuntary organization, a government can have no shared goals or purposes. Thought, choice, action, purpose, goal are all concepts which apply to individuals. Action, purpose and goal are concepts which can apply to groups if there is a consensus among its members and an agreement on the mechanism of estalishing a consensus. Shared goals can range from running a business to spreading a religion to landing on the moon to running a charity to achieving spiritual awakening. All such goals are legitimate. Individuals and voluntary groups have every right to spend their resources on pursuing these goals in any manner they see fit. No individual or group (and therefore the government) has any right to use the resources of some individuals to pursue the goals of others. For example a government may not subsidise a pilgrimage, may not sponser research, may not subsidise certain industries, may not provide social welfare etc. All such activities may properly be carried out by voluntary groups.

It is meaningless to talk of efficiency of resource allocation when one is talking of government activities. Is an efficient pilgrimage an efficient allocation of resources? Is a successful trip to the moon an efficient allocation of resources? Is a welfare scheme run without corruption an efficient allocation of resources? Is a subsidy or bailout granted to failing banks an efficient allocation of resources? Is the creation of a wildlife preserve an efficient allocation of resources? The concept of efficiency does not make sense without a purpose. And a government does not have a purpose beyond that of protecting individual rights.

2) The effects of government sponsored science

Since government funds come from taxation, government funding of research (whether by research institutes as in India, or grants to professors as in the U.S.) reduces the capacity of industry to conduct their own research. When industry conducts research and the research fails to yield any practical results, the industy’s profitability declines. When the research succeeds the industry makes greater profits and its capacity for research increases. Good research is rewarded and bad research is punished. That is not the case with government sponsored research. When research fails, the researcher(s) has nothing to lose. When it succeeds, he (they) receive a patent, commercialize the results and reap the rewards (out of taxpayer money). Profits are private and losses are public. This is true of any commercial activity by the government. Those favored individuals (or groups) who get government support are able to take higher risks since the upside is unlimited and there is no downside. (Just consider the current mortgage crisis for example.) In the American model of research grants to university professors, the university is turned into a research lab. The professors who are able to get the most grants and write the most papers succeed at the cost of the professors who are genuinely interested in teaching. In the Indian model of research institutes, there are labs all over the country engaged in carrying out meaningless research, little of which is ever commercialized.

More importantly, the quality of research suffers. Since the government has no specific goals for research and no ability to judge matters of science or the calibre of researchers or the potential of their proposals, the task of approving grants is taken over by favored panels of “scientists” whose primary skills are political rather than scientific. Obtaining research grants becomes a game of winning favors. Politically motivated projects often get funding. Consider the enormous amounts being spent on researching “climate change” as an example.

3) Private industry and large scale projects

Consider some numbers. The estimated cost of the Chandrayan mission is around $120 million. The annual profits of Exxon Mobil are $40 billion, of General Electric $21 billion, Reliance $2 billion, TCS $338 million. Private industry certainly has the sort of money required for large projects. The reason they do not engage in certain large scale projects is either that the projects are too risky or because under current laws (such as anti-trust), the projects are not profitable. Would a company spend billions on cancer or AIDS research when it knows that its intellectual property rights would immediately be confiscated? Would a company launch a satellite when it knows that government would demand control over its commercial uses? Would a company build a highway when it knows that toll-fares would be fixed by politicians eager to win the next election? Would a company setup a university when it knows that admissions and fees would be subject to vote-bank politics? Why do laws that prevent large scale projects from being profitable exist? Apparantly to “protect” “consumers” from the “greedy” private sector. These laws deliver the “consumer” to unprincipled politicians who do not care to look beyond the next election. If the road in front of my (am I a “consumer”?) house (which gets washed away every monsoon) had been laid by a private corporation, I (or some housing society) would have a contract and the corporation would be legally bound to implement it. The corporation would lay a concrete road that would last for 20 years. Instead the muncipal officers give the contract (for laying a 2-inch thick tar road which survives for about 8 months) to favored corporations, who in turn ensure that the muncipal officers will have adequate funds for political canvassing in the coming election. And if the muncipal officers decide that “public interest” will be better served by some other project, that is just too bad. I should learn to sacrifice my narrow selfish interests for a “larger purpose”. Or I can try going to court and proving that a road in front of my house is crucial to the “public interest”.

Note: This post is also available on desicritics.org with a separate comment thread.

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