The Folly of Stem Cell Subsidies

President Obama’s decision earlier this month to overturn restrictions on federal funding of embryonic stem cell research was widely praised by supporters. Yet even setting aside the moral controversy involved, there are good reasons to challenge the wisdom of devoting public dollars to the cause. Despite the President’s stated desire to spur innovation and dislodge the “ideology” and “false choice” that he believes drove George W. Bush to restrict funding in the first place, publicly funded research inevitably suffers from the perverse consequences of political wrangling.

Cash-strapped California’s $6 billion foray into publicly funded stem-cell research illustrates the pitfalls of government-sponsored science. Its still uncertain just what impact increased federal funding will have on California’s four-year-old initiative. In November 2004, California voters approved Proposition 71, establishing the California Institute for Regenerative Medicine (CIRM), and funding it with a 10-year, $3 billion bond measure that will ultimately cost taxpayers an additional $3 billion in interest payments. The public campaign for Prop 71 was an intense multi-million-dollar undertaking. Right-to-life advocates mobilized in opposition to the measure, while supporters created their own emotionally-charged campaign ads featuring the likes of Parkinson’s sufferer Michael J. Fox.

So what has CIRM actually accomplished since Prop 71’s passage? Not much. In a September 2008 report for the Competitive Enterprise Institute, Sigrid Fry-Revere and Molly Elgin find that only 15% of the money CIRM has distributed has been devoted to actual research. The remaining 85% has been devoted to building infrastructure and training scientists in California’s enormously expensive higher education system. Fry-Revere and Elgin also cite the repeated legal challenges to Prop 71’s constitutionality, which have reduced CIRM’s effectiveness. Not surprisingly, California’s deepening deficits have also impaired CIRM’s traditional investment and fundraising efforts.

Since early 2005, David Jensen has followed Prop 71 at his blog California Stem Cell Report. Jensen forecasts a steadily evolving and increasingly politically autonomous role for CIRM, citing the agency’s recent lobbying activity in favor of a $10 billion federal biotech stimulus package. Jensen believes that it’s far too early to judge the CIRM’s success, but he warns that it may become “the handmaiden of industry, as is sometimes the case with government agencies that are closely tied to a particular business.”

The political consequences of California’s efforts to promote stem cell research are typical of the challenges facing federally funded ventures. As we’ve seen in California, when federal policymakers invest public dollars in scientific research, ideological opponents mount costly and time-consuming legal challenges that impede scientific progress. In response to President Obama’s reversal of federal policy, the state legislatures in Texas and Oklahoma have begun to develop expansive new limitations on stem cell research.

While disagreements over public research dollars have dominated headlines, there is evidence that public funding may not serve the essential role that many presume. Dr. Terence Kealey, Vice Chancellor at the University of Buckingham in the United Kingdom, believes that public investment actually impairs innovation by crowding out private funds and directing resources to less productive areas of inquiry. In his books, The Economic Laws of Scientific Research (2003) and Sex, Science and Profits (2008) Kealey argues that private funding sources are more than adequate to meet the demands of the most promising scientific research.

The human genome project bears out Kealey’s assertions. While the $3 billion public research efforts began in 1990 and proceeded at a leisurely pace for nearly a decade, J. Craig Venter’s privately funded venture, Celera Genomics, introduced a sequencing technique that delivered faster results at a fraction of the cost. Venter’s efforts galvanized the public program, which diverted enormous sums of money from other purposes to beat him to the finish line. Eventually both camps shared credit for sequencing the genome, but not before the publicly funded efforts had adopted many of Celera’s innovative techniques.

In California, the legislators who passed Prop 71 sought explicitly to “maximize the use of research funds by giving priority to stem cell research that has the greatest potential for therapies and cures.” But as even stem cells’ most ardent supporters would be forced to concede, many of the state-funded research efforts remain in legal limbo, while the important work is being done with private dollars.

-Kmele Foster is the Vice President of TelcoIQ, a telecommunications consultancy in Lanham, Maryland. He presently serves as the Director of Marketing for America’s Future.