cant externalities for the economy. This would likely provide a greater channeling of federal funds to potentially useful projects than the types of tax policy incentives discussed above, for example. If successful, the CTC would provide for higher levels of R&D investment in pre-commercial areas in the United States and, over time, for a larger number of successful technology commercialization projects in the private sector. The government can affect technology commercialization rates to the benefit not only of a single firm or industry but also of the economy and welfare of the nation.

What types of investment might comprise the initial portfolio for the CTC? We believe that details on specific investment examples for the CTC should be determined by those directly responsible for the organization in consultation with specialists in science, technology, and economics. Investments made by the CTC would be in pre-commercial areas where the social rate of return on investments would be significantly higher than the initial, expected rate of return in the private sector. As noted in previous chapters, these areas would be identified by the existence of great initial externalities in projected benefits of successful R&D efforts to other sectors of the economy and might include, for example, energy R&D projects with the potential for enhancing productivity and long-term economic growth. In addition, CTC investments should be in projects initiated by industry. The frequent failure of previous government technology efforts suggests that industry commitment in the initial stages of project design and through all subsequent phases is a critical factor in promoting success.

The panel has considered several possible areas for initial investment by the CTC. These include advanced materials such as ceramics; environmental and energy-related technologies outside DOE's investments; microelectronics (to the extent that DARPA does not assume the leading role in this area); applied biotechnology such as protein separation and fermentation; information-processing technologies such as massive parallel processing, flat panel displays, and artificial intelligence (to the extent that DARPA does not assume this role); machine tools, such as computer-numerically controlled machine tools; nanostructures and nanomachines; technologies related to the construction of an Intelligent Vehicle Highway System; and technologies associated with the establishment of the National Research and Education Network (NREN) and High Performance Computer network, of which NREN is a part (to the extent they are not already being pursued by mission agencies of the federal government). Evaluation of CTC's success in promoting pre-commercial R&D in U.S. firms, in areas such as those outlined above, is an important element of this type of experiment. The CTC would have the flexibility to invest in either consortia, private firms with promising research agendas, or university-based R&D projects. As such, there should be no expectation that a diverse project portfolio, spread

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