• The latest calls for state-funding of R&D are not visionary, but simply a repeat of a failed history

• State spending on research and development, in both the United States and

• Britain, does not contribute to innovation or economic growth

• £800m allocated to create British Advanced Research Projects Agency is a wasteful use of taxpayers’ money 

• The UK should look to the economies of Japan, South Korea, and Taiwan’s economic miracles and encourage private sector Research & Development

• The UK Government is making a mistake by creating British ARPA.

New research by the Adam Smith Institute argues that this pursuit of a state-funded research body is a waste of taxpayer funds that will not stimulate innovation or substantial technological progress. 

Often reported as a personal preoccupation of senior government advisor Dominic Cummings, the creation of a British version of the USA’s Advanced Research Projects Agency (ARPA) has been government policy since the Queen’s speech in 2019, in which she said the British government would:

“… significantly boost public R&D … modelled on the US Advanced Research Projects Agency …”

This followed a blog post a year earlier, on March 11, 2019, when Cummings said:

“We KNOW how effective the very unusual funding for computer science was in the 1960s/1970s—ARPA-PARC created the internet and personal computing …”

Terence Kealey, author of the report and emeritus professor of clinical biochemistry at the University of Buckingham in the United Kingdom, says that ARPA’s proponents misdiagnose the incentives that drive innovation and the history of the project in the United States. 

ARPA, along with other state-funded research spending, is justified by proponents through claims of a “market failure” in science funding: that private companies under produce “public good” basic science research. Yet the history of technological progress since the Industrial Revolution is one of private businesses investing in beneficial innovations without state assistance. 

Research from the OECD shows that public sector funding of R&D crowds out private funding and does not contribute to economic growth. While in the USA, the large scale public funding of research projects led to no long-term increase in per capita growth, and that US productivity actually declined.

Looking at the history of the American ARPA, and scientific progress in the USA before, during and after its foundation, the report argues that the original ARPA was a mistake and that the British government’s attempt to repeat it is ‘folly.’

Instead of copying a failed US model, the free market think tank argues that the UK should be looking to the far east for inspiration. South Korea, Taiwan and Japan’s embrace of a laissez-faire approach to R&D, funded by industry for its own interests, has meant high-tech companies growing quickly to challenge those in the industrialised west in recent decades. 

Business sector R&D spending in Japan and Taiwan stands at nearly two and half times that of the UK’s and South Korea’s is nearly three times as high as our own. 

Meanwhile nearly all of these countries’ research comes from private sources. 

Kealey argues that the eastern miracle economics enjoyed their status because their governments did not direct or fund research and that the latest calls for state-funding of R&D are not visionary, but simply a repeat of a failed history.

Terence Kealey, an adjunct scholar at the Cato Institute in Washington DC, former lecturer in clinical biochemistry at Cambridge University and author of the report, said:

“In the hope of stimulating technological and economic growth, Parliament has committed £800 million to funding a British ARPA (Advanced Research Projects Agency). Yet the original American ARPA of 1958 failed to stimulate either technological or economic growth. Moreover it was, like our imitative ARPA, based on a discredited, Marxist, model of science. Every penny of our £800 million will be wasted.”

Matthew Lesh, Head of Research at the Adam Smith Institute, said:

“The evidence is clear: innovation is a bottom-up, spontaneous market-driven process. The so-called 'British ARPA' is throwing £800 million of taxpayer money down the drain. If we want our entrepreneurs and innovators to succeed we need to focus on reducing taxes and cutting red tape not on boondoggle vanity projects."

Notes to editors:  

For further comments or to arrange an interview, contact Matt Kilcoyne: matt@adamsmith.org | 07904 099599

The Adam Smith Institute is a free market, neoliberal think tank based in London. It advocates classically liberal public policies to create a richer, freer world.