Terence Kealey on the cost of copying R&D;

By Penny Hawthorne | 27 July 2005

This Financial Times article by Dr Terence Kealey is very interesting:

The OECD complains that "the negative results for public R&D; are surprising". They are only surprising, though, if you subscribe to the myth that science is a public good - that, in other words, once a paper is published everyone else can read it freely, so no one else has an incentive to do the original research. But have you cloned an organism recently? Or etched a silicon chip? Nor have I. Even though the relevant papers are freely available, only a handful of specialists have the knowledge required to understand them.

It was Edwin Mansfield, the late professor of economics at the University of Pennsylvania, who showed that science, and especially technology, are the most private of goods, because they are, in essence, tacit. They are contained within our individual brains and they are hard to transfer, even to fellow specialists.

That is why the cost of copying other people's technology is, contrary to the received wisdom, so high. Copying an invention costs, on average, 70 per cent of the cost of making the original invention. When the sunk costs of first employing the scientists who will do the copying are added to the bill, we find that the total costs of copying an invention are the same as those of inventing it.