From: mrh@centerline.com (Mike Huben)
Newsgroups: alt.politics.libertarian
Subject: Real world example of society profiting from startup subsidies.
Date: 9 Oct 1992 15:47:43 GMT
Organization: CenterLine Software, Inc.
NNTP-Posting-Host: 140.239.2.36

(Was Re: Open letter to the libertarian right)

I'd like to thank Atit Desai and Douglas Parvin for responding to some of
the challenges to my post brought by Thant Tessman and some others.

There was one challenge from Thant which has gone unanswered so far.

In article <qq1ssh0@zola.esd.sgi.com> thant@void.esd.sgi.com (Thant Tessman)
writes:

>Again I challenge you to present a *single* real-world example of any
>of these claims of yours.

There's a clear-cut example in one of our major industries: state-subsidized
agricultural research at the land-grant colleges (which in turn were created
by a federal grant).  There are almost 50 states supporting one or more
programs each, all COMPETING.  (Many states have several land grant colleges.)

Let me illustrate with a small example: hybrid seed variety development.
This is an endeaver with high startup costs.  The developer has a monopoly
in that variety because he does not sell the parents, only the progeny.
The monopoly would be broken by developing a different variety with equal
or superior characteristics: this is a costly endeavor.

This cost is born by the states, and the resulting varieties are sold by
any seed companies that want to distribute them.  This changes the situation
from what would be monopolies on varieties to each variety being a commodity,
with consequent reduction in the price of seed.

This has several effects.  Consider if there is a monopoly on a variety
that outproduces the rest.  The price of seed should rise towards the point
where the farmer earns no more from raising that variety than when he
raises the other varieties.  Thus, there is less incentive to increase
production than if the seed has a commodity-based cost.

Increased production brought about by commodity (non-monopoly) pricing of
seed results in reduced cost of the product.  Presuming that all taxpayers
eat, all benefit from the reduced costs.  (Atit: accounting here to determine
whether there is indeed a net benefit as in your example might be a difficult
proposition, but my primary intention is to answer Thant's taunt.)

The same goes for almost every other sort of agricultural innovation, from
machinery to genetic manipulation.

US investment in startup technology in agriculture far exceeds that of
anywhere else in the world.  We outproduce all comparable lands throughout
the world, we feed a large portion of the world with our surplus, and we
are looked to as a role model throughout the third world where ever
agricultural production needs to be improved.  The "green revolution" of
the 70's in rice producing regions of the world was a product of adopting
exactly this model (look up IRI, the International Rice Institute.)
Why is it that private companies didn't exploit this opportunity?  Why is
it that private companies are not exploiting this same opportunity right
now throughout the rest of the third world where comparable organizations
for the local crops don't exist?

(Can you tell I was an Agriculture major for a while?)

Mike Huben

"Education is what survives when what has been learnt has been forgotten."
						B. F. Skinner
Xref: sparky alt.politics.libertarian:670 talk.politics.theory:4460