Rodent Regatta

My friend and fellow critical thinker, Craig Cantoni, does a thorough and thoroughly entertaining analysis of the way journalists in some cities are promoting the biotech frenzy. He’s guarding our dollars again, and I appreciate it!

Journalism and the Biotech Feeding Frenzy
By Craig J. Cantoni
March 24, 2005

The Arizona Republic has been advocating huge public investments in biotech research, due to a belief that such investments are a way for Arizona to gain economically from the coming biotech revolution. Other big-city dailies across the nation have advocated the same thing for their hometowns.

This raises two questions: First, are the investments a smart and proper use of public money? Second, is it the proper role of journalism to be an advocate for such investments instead of being neutral and presenting both the pros and cons of this use of public money?

Let’s start with the proper role of journalism.

Last Sunday’s edition of The Arizona Republic devoted six pages to a new biotech research center that was built with public money in Phoenix. Three of the pages were in the news section, and three were in the opinions section.

In a blurring of news and opinion, there was no difference between the coverage in the news section and the editorials in the opinions section. Both sections quoted people and organizations that have a vested interest in the public investments, and both sections steered clear of people, studies and statistics that question the wisdom of the investments.

Such one-sided coverage plays into the hands of critics on the right who say that the mainstream press is losing market share because it has a big-government agenda and can’t be trusted to report the news objectively. My view is that newspapers should be a watchdog over the public purse and should have a healthy skepticism about government proposals to take money from the purse, especially for the purposes of industrial planning and economic development.

Let’s turn to the question of whether public investment in biotech is a smart and proper use of public money. I’ll skip the “proper” part of the question, because that comes down to a philosophical, ideological, constitutional and moral issue of whether the government should have the power to forcibly take money from citizens for what is essentially a modern form of mercantilism.

To determine if it is a smart investment to spend public money on biotech research, we first need to know the following:

1. The expected rate of return on the invested money.
2. The historical return on investment of both public and private capital invested in biotech research.
3. The success of such investments in other cities and states.
4. The economic opportunities that were lost by taking capital out of the private sector.
5. The competition faced by cities and states in biotech, and whether, instead of investing in biotech, they would be better off playing to their natural competitive advantages, coupled with removing tax and regulatory barriers to economic growth.

Amazingly, to the best of my knowledge, neither the local government nor the press has provided the foregoing information. Worse, with respect to No. 1, the local press did not challenge a specious claim by the head of Phoenix’s new research center that there has already been a sizable return on investment. How did he calculate the ROI? He included federal research grants in the center’s revenue. In other words, if money is taken from taxpayers twice – once to build and operate the research center, and once to fund research grants – the center is generating a profit. In reality, taxpayers have experienced a loss.

It’s not as if the information listed above is difficult to find. I found it in one hour by doing two things: one, typing various city names into an Internet search engine, along with the words “biotech research;” and two, sending an e-mail to contacts familiar with public policy issues, asking them if they knew of any authoritative studies on the subject of publicly-funded biotech research.

Here’s what I discovered from my city-by-city search:

• That scores of cities are pinning their hopes on publicly-funded biotech research but have not provided the information listed in Nos. 1-5 above.
• That scores of big-city newspaper are advocating biotech research as an economic elixir but have not provided the information listed in Nos. 1-5 above.

Here’s what I discovered from authoritative studies by the Cato Institute, the Federal Reserve Bank of Minneapolis and others:

• That there is now more biotech research capacity in the nation than the number of scientists needed to fill the capacity, a situation that is similar to the excess convention center capacity in the nation, due to cities exaggerating the economic benefits of the centers and racing each other to see who can build the biggest and fanciest facilities.
• That advocates of publicly-funded research centers have exaggerated the returns on investment.
• That privately-funded research centers have higher returns on investment than publicly-funded research centers.
• That the research centers are based on the idea of cluster-based economic development, an idea that has dubious merit.
• That politicians are in a bidding war of financial subsidies for a small number of biotech companies, thus driving up the value of the companies beyond their true economic value.
• That a smart strategy for a city or state is to reap the benefits of biotech research while letting other cities and states incur the cost of the research, by instituting tax and regulatory policies that attract biotech companies (and other companies).

For more information, see the following sources:

http://www.cato.org/pubs/journal/cj14n1-6.html

http://minneapolisfed.org/pubs/fedgaz/03-09/biotech.cfm

San Francisco Chronicle

http://minneapolisfed.org/pubs/fedgaz/03-09/clusters.cfm

In closing, it would seem that before hundreds of millions of dollars of public money are spent, the government and the press should at least do an hour of research and report the results.

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Mr. Cantoni is an author, columnist and founder of Honest Americans Against Legal Theft (www.haalt.org). His new book will be published in a couple of months (Breaking from the Herd: Political Essays for Independent Thinkers by a Maverick Columnist). He can be reached at either ccan2@aol.com or haalt1@aol.com.