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April 1998
Volume 16, Number 4


Lab-Coat Welfare
by Timothy Terrell


Medical researchers are often so convinced of the overriding social importance of their work that they won't let something as petty as market valuations get in the way of their agenda. That's why they haven't missed many opportunities at securing tax-funded grants and subsidies, and they're about to score again.

Over the past ten years, the budget of the National Institutes of Health has doubled, and the government medical research outfit is demanding even more dramatic increases in the future. Scientists on the government dole gush about the possibilities for new discoveries--and last year's budget of $13.6 billion wasn't enough to bring them about.

Researchers have teamed up with doctors, medical schools, and patient advocacy groups to lobby for another doubling of the NIH budget, this time over a five-year period. It seems they're going to get exactly what they want. Last year the Senate voted 98 to 0 in support of that goal, and President Clinton's new budget will contain a substantially larger allotment for medical research.

What will that buy for the American people? Not as much as most people think. Medical research as it is conducted today is not the only means to better health, and it is not even close to being the major influence on longevity and quality of life. Some researchers have pointed out that improvements in basic living conditions, i.e., refrigeration, availability of clean food and water, and sanitation have been responsible for most increases in health in this century.

Medical research certainly has produced amazing technological successes (at incredible cost), but gee-whiz implants and transplants may not produce as many added years of life as less-well-noticed advances in living standards. A vast gulf in vital statistics between people on welfare and the rest of the population reveals just how close the connection between health and productivity truly is.

Tax money is a danger even to the science it supports. Government subsidization of medical research, besides diverting funds from other health-producing endeavors, can make science less effective and more irrelevant. By politicizing particular diseases, government involvement sidetracks research into areas that may be relatively unfruitful. As diseases fall in and out of favor with the political elite, researchers devote more of their efforts toward attracting official attention, and less toward productive research.

The New York Times recently reported that scientists and other supporters of increases in the NIH budget have contracted with a Washington lobbying firm to promote their interests. "We plan a grass-roots campaign inside and outside the Beltway. It will be run the same way Northrop Grumman lobbies for the B-2 bomber," said Terry Lierman, president of Capitol Associates. Research subsidies can cause creative and unconventional scientific explorations, like Bryan Ellison's studies of HIV and AIDS, to get shelved or denounced outright in favor of government-approved research. Young scientists learn quickly not to stray from the safety of political approval, and research is channeled in the direction that Washington politicians and bureaucrats have determined it should go.

For many medical researchers, this is a profitable way of life. However, the steady flow of government money (punctuated by windfalls such as the one to be included in the next budget) attracts students into the medical profession who would otherwise have chosen another, perhaps more fertile, field of study. Certainly society is better off if bright young minds are directed into the more productive professions. But the artificial incentive to enter medical research pulls brain power away from engineering, business, mathematics, economics, and other disciplines. As with every attempt at government planning, resources are misallocated and society as a whole suffers.

Many will argue that private funding for medical research is inadequate, and that government support is necessary for continued increases in life expectancy and well-being. It is absurd, however, to claim that any individual or committee has the ability to determine what should be the proper level of medical research in a dynamic economy.

No one can collect comprehensive, detailed information on every potential use of funds in an economy. But that is what would be required before anyone could show unambiguously that such-and-such an amount of money should be devoted to medical research. As Ludwig von Mises pointed out decades ago, that sort of knowledge must always evade government planners. Only in a market system of voluntary production and exchange is the most beneficial amount of medical research likely to emerge.

Large amounts of private funding for medical research do exist, and the uses that are being made of that money are astounding. Since 1953, the Maryland-based Howard Hughes Medical Institute has stood for excellence in medical research. The largest private philanthropy in the United States, the HHMI supports an outstanding research program as well as the largest private science education program in U.S. history.

The new Van Andel Institute in Grand Rapids, Michigan, backed by an immense private fortune made in business, is about to embark on path-breaking research in alternatives to mainstream medicine; that is, research the government does not back. The opportunity to conduct well-funded, long-term research attracted four Nobel Prize-winning scientists to its board of scientific advisers. Donors large and small have contributed to university research programs, medical schools, and research institutes.

Because one's level of income has the greatest influence on private donations, the best way the government can increase private funding is to let the economy grow. Protecting private property, reducing taxes, and deregulating the economy will do far more for human health (and other measures of well-being) than the system of lab-coat welfare we have today.

It is reasonable to expect that total funding for medical research would decline if subsidies were eliminated and tax money returned to private citizens. However, it is senseless to think that because private funding increases may not match public funding decreases dollar for dollar, the health of Americans will be in jeopardy. That would be to make the mistake of equating research success and research dollars.

Private funds can be used to much greater effect than funds in the hands of government bureaucracy. Rather than wasting resources on futile but politically correct research, private donors and for-profit organizations would ensure that their money is used in the most productive manner possible. Researchers subject to market forces will have the incentive to produce more life-saving and life-enhancing developments more efficiently, saving resources for other valuable uses.

If the government really wants to support effective medical research, it will back off and let the free market do its job. Historically, free markets have satisfied material human needs in the most efficient manner through voluntary production and exchange. Medical research, if freed from subsidies, will respond by promoting human health and well-being instead of political agendas.


Timothy Terrell teaches economics at Liberty University 


FURTHER READING: Ludwig von Mises, Socialism (Indianapolis: Liberty Classics, 1981), pp. 97-105, 165-69; Murray N. Rothbard "Government Medical Insurance'" in Making Economic Sense (Auburn, Ala.: Mises Institute, 1995), pp. 78-81.


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