(2023-07-13) Clancy How To Impede Technological Progress

Matt Clancy: How to Impede Technological Progress. Most of the time, we think of innovation policy as a problem of how to accelerate desirable forms of technological progress. Broadly speaking, economists tend to lump innovation policy options into two categories: push and pull policies. Push policies try to reduce the cost of conducting research, often by funding or subsidizing research. Pull policies try to increase the rewards of doing research, for example by offering patent protection or placing advance orders.

But* there are other times when we may wish to actively slow technological progress. The AI pause letter is a recent example, but less controversial examples abound. A lot of energy policy acts as a brake on the rate of technological advance in conventional fossil fuel innovation.***

Today I want to look at policy levers that actively slow technological advance, sometimes (but not always) as an explicit goal.

Reverse push (drag?): Policies that raise the costs of conducting research. Examples we’ll look at include restrictions on federal R&D funding for stem cell research, and increased requirements for making sure chemical research is conducted safely.

Reverse pull (barrier?): Policies that reduce the profits of certain kinds of innovation. We’ll look (briefly) at carbon taxes, competition policy, liability, and bans on commercializing research.

Reverse Push Policies Sort of Working

Let’s start with US restrictions on public funding for research involving human embryonic stem cells

A few years later, George W. Bush (who was sympathetic to this view) won a closely fought US presidential election and in August 2001, a new policy was announced that prohibited federal research funding for research on new cell lines

Beginning in 2001 though (when the policy was announced), US citations to these papers dropped by a pretty noticeable amount - from roughly 80% of baseline to 40%.

Note though; just three years later, in 2004 things may have been back to their pre-2001 levels. But the restrictions on federal research weren’t relaxed in 2004. So what’s going on?

For now, let’s turn to another study that shows reverse push policies (of a sort) can exert a detectable influence on basic research. This time, we’ll look at a policy whose goal was not to reduce the amount of research, but instead to simply make sure it was done in a safer manner.

In 2008 Sheharbano (Sheri) Sangji died in a tragic UCLA chemistry lab accident involving flammable compounds.

Their main finding is that the impact of the increased safety requirements were pretty small.

The effects were not totally zero though. When they zero in on labs using the most dangerous compounds, they find that after safety standards are ratcheted up, the most high-risk labs begin to publish about 1.2 fewer articles per year mentioning dangerous substances as compared to less dangerous wet labs (labs publish an average of 7.7 articles per year in the sample).

Reverse Pull Policies

Carbon taxes raise the price of carbon-emitting technologies, making them less desirable in the market relative to clean alternatives. Besides leading consumers and firms to purchase disproportionately more clean energy, relative to carbon-emitting energy, carbon taxes also disincentivize R&D related to fossil fuels.

A pretty robust finding is that all these things induce car companies to develop more fuel efficient cars. A fact that I didn’t emphasize in the post, but which also emerges from some of these papers, is that higher fuel prices are associated with less patenting of combustion engine technologies. That’s consistent with carbon taxes impeding fossil fuel innovation.

When a particular health category has more generic sales, relative to the sales of branded drugs, (and hence, it is probably a less profitable category to enter) Branstetter and coauthors document a pretty strong and robust decline in the number of preclinical and phase 1 clinical trials that use new drug compounds in that category.

Simple as that?

there are a few other nuances that I think are worth highlighting.

First, in many cases, the impact of these policies was actually to boost innovation in areas not impacted by the policy.

This is also a major theme in my post Pulling More Fuel Efficient Cars Into Existence: higher fuel prices appear to induce more innovation among electric and hybrid cars, even as it depresses R&D reliant on fossil fuels. it shifts the research focus

A second important nuance is that the effects of these policies is pretty uneven across R&D performers. A pretty common finding across these papers is that these kinds of reverse push and pull policies have their strongest impact on marginal R&D performers and their weakest impact on leaders. That is, they mostly reduce total R&D by driving out the research laggards, not by slowing up the research leaders.

Well, researchers are not passive receivers of policy; they have their own agency and will use available resources to pursue their interests if feasible. US scientists interested in continuing research on human embryonic stem cells had several options open to them. For example, they could turn to private and state support for stem cell research, or partner with foreign scientists who could receive public support from their governments. They could also restructure their labs to continue receiving US public funding for permissible research. And this basically seems to be what happened.

One closing thought. Why is it so much more common to study conventional push and pull policies, rather than reverse push and reverse pull policies? I wonder if it’s partly due to political economy reasons about what kinds of policies get implemented in the first place. The beneficiaries of traditional push and pull policies tend to be a relatively small group of R&D performers, who benefit from cheaper research or more profits, while the costs are broadly distributed across consumers (maybe they have to pay a bit more in taxes, for example). A small group with the potential to benefit substantially from a new policy has a strong incentive to make the case for the policy

But for reverse push and pull policies, these dynamics work in, well, reverse. Now the costs of policy are concentrated on a small group of R&D performers, but the benefits are (perhaps) broadly shared by society.

So it may well be that reverse push and pull policies don’t work better, because if they did work better, opposition to them would become increasingly sharp.