R&D and Money

Ok, so assuming we have the talent that is required to pursue the research and development of new technology, how do we provide institutions with both the finances and the incentives to do so?

This to me is a much more difficult question that I do not have a fully developed solution to, yet I have a few ideas mostly dealing with private companies. First, I would create a system of tax write-offs for corporations where they can write-off the money that they spend on research so that they can reduce and amount of tax that they pay, this would drive companies to commit more of their profits to research instead of corporate bonuses. This system in the long run would create more profit for the company as they would develop more products, which intern would create increased governmental revenues through sales and income tax.

The second idea that I have is a little more interventionalist so the conservative in me is kind of frightened by it, but I think that it could help companies a lot in areas which some politicians want to nationalize. I actually came up with this idea when having a discussion about healthcare and pharmaceuticals but I think it could be extended to other industries. One of the major problems with healthcare is that drugs are real expensive within the United States because patent law does not allow for the manufacturing of generics for several years. Because drugs cost billons of dollars to develop the company needs to charge high prices in order to reclaim much of the cost before the generics come on the market. In contrast, many countries do not have as strict a patent system as the US so companies can manufacture generics right away, thus while costs are lower there is no incentives for new drugs to be developed so most of the innovation comes from foreign companies, namely US companies. Thus the question becomes how do we reduce drug costs and still strive to innovate? I think that this may be a time that government can act because unlike other products people have to have medications. Thus I would start by giving out small grants to companies to pursue research in a drug so that they can get their feet wet. But after they actually develop the drug I would have the government reimburse them for around 75% of the cost. This will drastically reduce the cost toward the consume and save Americans billions in healthcare costs which then will create more productivity and better lives. This increase in productivity again would grow America’s economy and thus the government’s income. Secondly I would tax international sales which would recuperate much of the cost to the prime investor in the business, the government.

I do not know if this is a cost effective maneuver that would keep our budget balanced on the long term, but I have to think that it would greatly benefit the world and is much better than the existing system.