EDITORIAL OBSERVER TERESA TRITCH __THENEW YORK TIMES EDITORIALS/LETTERS MONDAY, MARCH 24,2014 _ America’s Underappreciated Entrepreneur: The Federal Government Imagine'a world in which the United States government — not the private sector ~ is the econamy’s indispens able entrepreneur, innovating. atthe frontiers of science and technology, able an willing to take risks and to perse Vere through uncertainty That 1s the world depicted iy “The Entrepreneurial State,” 2 recent book by Mariana Mazzueato, an economist at the University of Sussex who special {aes in innovation, And itis in fact, the Way the United States has operated since World War IL, Through the Na- tional Institutes of Health, the Defense Advanced Research Projects Agency and other agencies. and departments, the government has for decades gone beyond financing research and creating the conditions for innovation to oceur; It has also envisioned the future, engaged in the risklest experimentation and overseen the commerclalization pro- Professor Mazzucato documents the leading role of the government in, for fexainple, “all the technologies which ‘make the iPhone smart, including the Internet, wireless systems, globat posi- tioning, ‘voice activation and teuch- soreen displays. The is not to detracy from Apple's role, but to put i ato con text. Without government, the techno logieal revaution that has ‘llowed iPro- ducts to exist would not have happened, Ditto the leading role of government fn aviation and space technologies, pharmaceuticals and biotechnology, And more recently, in nanotechnology, ‘whieh could be the next “general pur pose” breakthrough, akin £0 electricity ‘or computers ‘The private sector never has been and never will be up to tasks lke that. Even in the bygone heyelay of Bell Labs, corporate investment was alongside, not in place of, government investment. ‘Today, the scope, duration and cost of breakthrough research is ether beyond the private sector's corporate and pil- anthrople resources ot outside its profit model. salient point in “The Entrepre- neural State," ampiiied in a review by “Martin Wott, the chief economies com- mentator of The Financial Times, is that corporations today often spend surpius cash on share buybacks rather than on fundamental inovation, 1m bret then, it is an essential role of the federal government — in the ine terest of tomorrow's prosperity — to in- vest and engage in scientific and tech nologieal discovery. And iti a role the government has played wel, until now. ‘After rising steadily for decades, federal financing for research and development peaked in 2008, at $1655 billion, bol- Steed by that year's stimulus spending, thas since sunk to levels last seen a: Imost a decade ago, falling to $1332 bil lion this ial year That roughly $32 billion érop is even greater when adjusted for inflation, and It encompasses both defense- and non Gefense fields, including health, energy, the environment, climate, technology and electronics. One key area, basi sc- fence, received about $40 billion in the peak year 2009. Since then, it has fallen, {0 $30 ilion last year, one ofthe sharp fest declines ever. The future does not Jook much brighter, Constrained by aus rerity-nduced. budget caps, the re search and development budget recent ly proposed by President Obama for fs- cal year 2016 was only $1354 billion, the lowest request’ of his presidency. Chances for more money on top of the budget caps, as Mt. Obama ls called for, are virtually ni. And given that Con- gress invaricbly enacts less than the president asks for, the trend is all down- bal, Worse, the direction is untikely to re- Washington must invest more in science and get a better return. verse as long as prevalling rhetoric re- Inforoes the notion of an inefficient gov: ernment sector versus a dynamic pri- vate sector. To win hudget battles going forward, Democratic paiey makers and administration officials must also win the debate in favor of entrepreneurial government. The fact that they have not successfully made that case in recent years is a result of both implacable Re- publican opposition and their own tend- fences toexalt the privatesector whileig ‘oriagits many rootsin publiespending, Correcting that misimpression is eru- cial to building and sustaining support for public involvement in science and technology. Equally important is devel- oping ways to ensure that taxpayers share in private-sector profits that e- sue from government efforts. Fair and adequate corporate taxation is the obvi fous way, but that is currently a politica! Don-starter, Non-tax models also need {tobe considered — far instance, requlr ing Fecpients of federal grants to pay & porcion oF subsequent profits to the gov: ernment or establishing a federally backed innovation fund that lets the government retain an equity stake in ‘companies that use the fund. ‘The goal, as expressed by Professor ‘Mazzucato, s not for taxpayer-provided research (0 spare the private sector from risks, but for government and the private sector to take risks together and tnjoy the rewards as one,