Panel I: History and Current Legislative Perspective on the ATP Program

Introduction

Clark McFadden

Dewey Ballantine

Mr. McFadden welcomed the first panel by noting that the Advanced Technology Program (ATP) is one of the most visible government-industry partnership programs and therefore fits squarely into the charge of the Board on Science, Technology, and Economic Policy's (STEP) project on Government-Industry Partnerships for the Development of New Technologies. The ATP is a prominent government-industry partnership that was founded as part of an explicit "national effort to help accelerate the commercialization of high-risk broad benefit enabling technologies with significant commercial implications." That is an ambitious goal, Mr. McFadden observed, and moreover, the program was born in an atmosphere of great controversy and attention. Today, this panel examines the program from the perspective of its history, purpose, and objectives. Dr. Christopher Hill of George Mason University begins the discussion; like the panelists to follow him in discussing the program, Dr. Hill brings exceptional expertise to the discussion of the program's history.



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--> Panel I: History and Current Legislative Perspective on the ATP Program Introduction Clark McFadden Dewey Ballantine Mr. McFadden welcomed the first panel by noting that the Advanced Technology Program (ATP) is one of the most visible government-industry partnership programs and therefore fits squarely into the charge of the Board on Science, Technology, and Economic Policy's (STEP) project on Government-Industry Partnerships for the Development of New Technologies. The ATP is a prominent government-industry partnership that was founded as part of an explicit "national effort to help accelerate the commercialization of high-risk broad benefit enabling technologies with significant commercial implications." That is an ambitious goal, Mr. McFadden observed, and moreover, the program was born in an atmosphere of great controversy and attention. Today, this panel examines the program from the perspective of its history, purpose, and objectives. Dr. Christopher Hill of George Mason University begins the discussion; like the panelists to follow him in discussing the program, Dr. Hill brings exceptional expertise to the discussion of the program's history.

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--> An Overview of the ATP's History and Objectives Christopher Hill George Mason University Dr. Hill opened his remarks by expressing his hope that the symposium would bring new information and insights to bear on the ATP. His task was to provide, as a basis for further discussion, some background on where the ATP came from and why it exists. Dr. Hill noted that he was involved with the program in its formative stages and that his views would represent "one man's perspective" on the ATP's origin. Economic Context of the ATP's Origins The ATP arose out of a confluence of several forces at a particular point in time in the late 1980s, but whose initial causes date prior to that time. Beginning in the 1970s with the Arab oil embargo and extending into the 1980s, Dr. Hill recalled the growing sense of crisis in the United States, a sense that perhaps America's best days were behind it. There was a widespread perception that "we must do something" to restore prior levels of income and productivity growth. One defining event of that period, Dr. Hill said, was the Federal Reserve's decision in 1979 to focus on money supply growth as a means to control inflation. Although this policy successfully addressed inflation, it also caused a severe recession that saw unemployment rise to 11 percent. This triggered the great debate on industrial policy in the mid-1980s. An additional consequence of the Federal Reserve's tight monetary policy, Dr. Hill said, was a rise in interest rates, which in turn strengthened the dollar and created a very high trade deficit. The trade deficit extended beyond traditional manufacturing goods to high-technology goods. A trade deficit in the high-technology sector had not existed since the Commerce Department began compiling figures for this sector in the 1960s. Research-intensive industries in the United States, such as electronics and semiconductors, began to see their world market shares decline. The Japanese Challenge There were some highly visible instances in which promising U.S. start-up firms were unable to procure financing domestically, and therefore turned to Japanese firms for capital to grow. This suggested that there was something fundamentally unworkable about the American system of risk capital for high-technology start-ups, and that this country had to do something about it. There was the manifest failure of U.S. firms to commercialize the videocassette recorder

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--> (VCR); Japanese firms successfully commercialized this market and during this period no VCRs in U.S. homes were made by U.S. firms. In the mid-1980s, Dr. Hill continued, Japanese economic success was attributed in part to government-supported cooperative research and development (R&D) programs in Japan. Revisionists now claim that too much credit was given to Japanese cooperative R&D programs for Japan's overall economic success, but certainly conventional wisdom at that time placed great emphasis on Japanese government-funded cooperative R&D programs. This created great enthusiasm in the United States for R&D partnerships involving companies, universities, and federal laboratories. By 1987, it became clear that a trade bill would have to be passed because the Export Administration Act was expiring, as was the President's fast-track trade negotiating authority. The need to have a bill invited a large number of amendments and miscellaneous titles, which in the end became the Omnibus Trade and Competitiveness Act, an enormous bill in excess of 4,000 pages. Technology Policy Context In this context, the Advanced Technology Program was born, but the context was no guarantee that a program such as the ATP would be created. Why did this specific program come into being? In Dr. Hill's opinion, the program was created because, in the eyes of its advocates, it codified an idea whose time had come. The seeds of the ATP were sown at least 25 years earlier during the Kennedy administration, which advocated the creation of a civilian industrial technology program whereby the government would fund a series of cooperative R&D programs to be operated by nonprofit institutions to strengthen the technology base of lagging sectors. Because that was a period of robust economic growth, problems in sectors such as electronics, autos, and steel were not foreseen. The Kennedy initiative sought to address sectors such as building materials, construction, textiles, and shoes. However, this initiative was defeated, in part because the industries that were the intended beneficiaries opposed the program. Although the initiative failed, it did renew a dialogue about the proper government role in civilian technology development. This dialogue meandered throughout the late 1960s and through the Nixon and Ford administrations. The energy crisis of the early 1970s resulted in a number of government research programs to either conserve energy or expand supply. In this context, the notion of government support for industrial R&D to address specific nonmilitary economic problems was not alien. The Carter administration's domestic policy review of industrial innovation during 1978–1979 was the next manifestation of the idea of government support for civilian industrial research. The objective was to search for ways to resuscitate U.S. industry, given the era's high unemployment, high inflation, and slow

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--> economic growth. There were a wide range of diagnoses and proposed solutions to the economic slowdown, and one widely explored area was America's apparently declining capacity for industrial innovation. The administration produced a series of recommendations in 1980 to address these issues, but most were ignored when Reagan took office. Growth of Cooperation During the 1980s Nonetheless, some action resulted from this debate, namely the Stevenson-Wydler Technology Innovation Act of 1980. This embodied some of the recommendations of the Carter dialogue, including authorization of the establishment of centers of industrial technology with government funding to aid industry. The Reagan administration, however, did not fund these centers, but the authority still remains in the law. In the mid-1980s, the idea of government support for cooperative R&D emerged on an ad hoc sector-by-sector basis. Examples include SEMATECH, the National Center for Manufacturing Sciences, and other efforts to help the steel and aluminum industries. This idea emerged in the private sector as well, with the creation of the Microelectronics and Computer Technology Corporation, which was advocated by Bill Norris of Control Data Corporation. Norris's advocacy of cooperation was very strong, and he pushed the idea whenever he could. The belief in the need for government support for precompetitive or generic research was fairly well developed when the trade bill came along in 1987. Every committee in Congress wanted to have a piece of the trade bill, and the House Committee on Science was no exception. The ATP was the Science Committee's main contribution to the trade bill. Politics of the ATP Dr. Hill then turned to some of the politics accompanying the ATP. First, the business groups that were likely beneficiaries of the program initially were, in Dr. Hill's view, somewhere between "oblivious, lukewarm, and indifferent" to the ATP initiative. Dr. Hill was working on Capitol Hill at the time, and he recalled that it was difficult to find witnesses from industry to testify on what an ATP might do. It was not something for which the National Association of Manufacturers or the Chamber of Commerce was prepared to mount a large lobbying campaign. The ATP was not seen as an initiative of a particular trade association. Rather, congressional staff drove the initiative. Second, Dr. Hill believed that the ATP would never have been enacted had it stood alone, apart from the larger trade bill. Had it had the chance, the Reagan administration would have vetoed the program. When President Bush took office, his administration implemented the ATP at the level of $10 million in its first year. This laid the groundwork for future

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--> debates about the program's growth path. Ten million dollars was not even experimental, but more of a ''baby step'' in program development, and little more than an opportunity to develop rules and regulations. The Bush administration was deeply divided on the program: Some officials in the Commerce Department vigorously advocated the initiative, but powerful officials in the White House, such as Chief of Staff John Sununu and Chairman of the Council of Economic Advisors Michael Boskin opposed the program. This result was that the program's funding rose slowly in the Bush Administration, to over $60 million annually by the end of the administration. When President Clinton came into office, many people thought this ushered in an era new initiatives in technology policy. By and large, of course, this did not happen. In the campaign, the Clinton-Gore team embraced ideas such as the ATP and, in March 1993, in a $16 billion stimulus package, the ATP played a prominent role. However, the stimulus package was defeated by a Congress controlled by Democrats. The most focused opposition, however, came from Republicans, which perhaps should not be a surprise. Dr. Hill noted that the intense Republican opposition to anything that President Clinton personally endorsed was remarkable, even by Washington standards. And the ATP suffered from that. The anticipated growth path for the ATP, to as high as $1 billion per year, further fueled opposition to the program. After the 1994 elections, which brought a Republican majority to Congress skeptical of many federal programs, the ATP went into what might be described as survival mode. The issue was no longer how to expand the program or whether to search for new things to do, but rather how to protect the program from extinction. As part of that effort, NIST implemented the very extensive analytical program that Mr. Kammer described and which will be the subject of much discussion today. For the size of the program, Dr. Hill observed that, with the possible exception of Head Start, ATP is the most rigorously studied, open, and closely scrutinized program of any era, in any country. If there is a program that has been more extensively evaluated, Dr. Hill said he hoped that someone would bring that up in the day's discussions. Current Outlook In the politics of the program, things have settled down considerably since the departure of Representative Robert Walker (R-Pennsylvania), the former Chairman of the House Committee on Science. He was one of the program's most vocal critics, and certainly the one in the best position to act on his views. Dr. Hill also observed that the drive to "do something to help industry" has also largely subsided. After all, we are in a remarkable period of industrial renaissance, with corporate profits very healthy and productivity growing at more than 2 percent per year. Although the trade deficit remains high, it seems to have almost disappeared from public concern. We have budget surpluses "as far as the

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--> eye can see" and 4.3 percent unemployment. The need for action appears to have gone away. What has happened is what always happened when the economy is strong; technology policy has disappeared from the national agenda. Dr. Hill recalled a chart developed by Chuck Larson, president of the Industrial Research Institute, which shows technology policy initiatives over the past three decades. The chart is blank after 1992; there have been no legislative initiatives since then. Of course, one might attribute that to the election of a small-government, anti-interventionist, anti-industrial policy Democratic administration, but that does not seem to be the right explanation. Rather, the remarkable performance of U.S. industry is the more likely answer. This performance has almost nothing to do with the ATP, and to the extent that government programs have contributed to this growth, the Defense Advanced Research Projects Agency (DARPA) has played the main role. Coincidental with the seven years of strong economic growth, the nation, then, has had few technology policy initiatives or legislation. Dr. Hill concluded by observing that we probably will have to wait until the next recession to again have a serious discussion of technology policy. Perspectives on the Program Loren Yager General Accounting Office Dr. Yager began by thanking the Academy for holding the symposium and particularly for highlighting the evaluation that the ATP conducts. He commended the program for the extent of its self-evaluation, that being one of its most positive aspects. He added that the ATP certainly qualifies as a valuable case study in federal technology policy. The ATP in Hindsight Dr. Yager suggested to the audience that it would be useful to think back 10 years, to a time when the ATP had been authorized, but funding levels had not yet been set. We could imagine being in a meeting whose purpose was to decide ATP funding levels, and much of the discussion would have revolved around the incredible performance of the Japanese economy. Some characteristics of the Japanese economy would have been discussed, including how the Japanese government could influence or subsidize R&D investment and how the unique relationship between government and industry had enabled Japan to invest in long-term high-risk R&D at a greater rate than the United States could invest. There also would have been a lot of talk about the poor performance of the U.S. economy, particularly the high-technology sector.

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--> However, imagine sitting in that room 10 years ago and having some information that others did not have. Instead of seeing a Japanese juggernaut going forward into the future, you could see that Japan would become an economic laggard. Japanese economic growth, which averaged 3.4 percent per year during the 1990s, would fall to an average 2.1 percent growth rate from 1990 to 1998. Japanese unemployment would more than double, and the Japanese stock market, as measured by the Nikkei Index, would fall during the late 1990s to less than half its mid-1980s' level. Let us suppose that you also knew that U.S. economic performance would undergo some turbulence during the early 1990s, but would turn around dramatically thereafter. U.S. GDP growth would average 3 percent in the seven years after 1991; unemployment would fall to levels once thought unattainable, and reach a milestone in early 1999 when U.S. and Japanese unemployment rates were both 4.3 percent. Finally, you also would know that, by 1998, the major U.S. stock indexes would be three times their late 1980s' levels, and that an entirely new industry would have been established around the Internet. If such an imaginary meeting were taking place in New York, Dr. Yager observed, and this information were available, everyone would leave the room to call their investment advisors. If the meeting were in Washington, D.C., perhaps few people would leave the room but, Dr. Yager argued, few of those remaining would make the decision to fund the ATP on the basis that the program would emulate the Japanese system. Few people with that information would make the decision to fund ATP because they believed U.S. capital markets were broken and in desperate need of repair. Rationale for the ATP Armed with this information, Dr. Yager said that most people would make the ATP funding decision on the basis of the recognition that market imperfections result in underinvestment in certain types of R&D, a weighing of whether the ATP could resolve that problem. Dr. Yager argued that even many of the most civic-minded people in that room would have left at that point. Even with all the information about the U.S. and Japanese economies, as well as market imperfections in R&D, there would not have been enough information available to make the decision to fund the ATP. The few people who might have stayed in the room probably would have wished for a few years of data on the operations of the program. That would have put them in a position to make an informed decision to assess whether the ATP addressed the R&D underinvestment problem. Given that ATP has been funded and that it has generated data on its opera-

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--> tions, one might argue that the remaining people in the meeting have had their wish fulfilled in the past 10 years. Although ATP has built up a track record on its operations over time, Dr. Yager said that it has come at the expense of a lot of people being "locked in a room talking about the ATP." A great deal of evaluation has been done on the ATP, much of it by the ATP and the General Accounting Office (GAO) and the National Bureau of Economic Research, and some from the American Enterprise Institute. Numerous congressional hearings have been held as well. From an analyst's standpoint, this wealth of information is good news. Moreover, the performance of the U.S. and Japanese economies is no longer the focus when discussing the ATP. Therefore, we now can focus on whether the program addresses the underinvestment in certain types of R&D. Overall, this makes it a much better time to be a room talking about the program's potential. Richard Russell House Committee on Science Mr. Russell began by observing that the level of controversy surrounding the ATP has subsided markedly in the past few years. The program has become a known quantity, and there are likely to be far fewer disagreements about the program than in the past. The House Committee on Science, of which Mr. Russell is the deputy chief of staff, has not yet begun work on the National Institute of Standards and Technology (NIST) authorization; therefore, it is difficult to discuss specifics for 1999. Mr. Russell recommended that interested audience members look at H.R. 1274, the NIST authorization bill passed by the previous Congress, for a sense of the Science Committee's direction for this year. The two main components of H.R. 1274 that address NIST are a change in the matching requirements for ATP—a 60 percent match for all ATP grants except those for small businesses is part of the bill—and language to ensure that ATP funds do not displace private capital. This is a reaction to numerous GAO reports finding that many ATP applicants were not searching for private capital before turning to ATP. Both provisions were critical components of H.R. 1274. The Science Committee's "Views and Estimates" document for this year, which is supplied to the Budget Committee as part of the budget process, states that, without the reforms embodied in H.R. 1274, the Science Committee could not support funding for new ATP grants in the upcoming budget cycle.

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--> David Goldston Office of Representative Sherwood Boehlert Congressional Role in the ATP Debate Mr. Goldston said that, like others on the panel, he was involved with the ATP from the beginning and that he would focus his remarks on the role of ATP evaluation. He recalled Ray Kammer's opening remarks in which Mr. Kammer said that one hope for today's symposium was that the deliberations might yield insight into the proper size for the ATP. Mr. Goldston said that, in his opinion, Congress would not provide much guidance on that question. The prevailing sentiment in Congress is to answer that question in one of two ways: Either the ATP should be funded as much as possible or not at all. Neither answer is helpful in terms of analyzing the economics of the program and the role it should play in the economy. This is an area in which Congress needs outside advice, which then should be filtered through the political process to settle on the program's funding level. Congress itself is not likely to engage in a substantive debate on the optimal size of the program. Mr. Goldston observed that arguments about the ATP have become familiar over the years, and can be placed into one of two categories: People who do not like the ATP because they distrust government, and People who do not like the ATP because they distrust industry. In the early years of the program, these categories broke out largely along party lines, with Republican in the former, saying that government should not "pick winners and losers" and Democrats in the latter, saying that government should not subsidize big business. These alignments have shifted a bit, in that libertarians, who align themselves with Republicans, argue that neither industry nor government can be trusted. In time, primarily because concern over Japan has subsided, the argument in Congress has become quieter and calmer. Debate on the ATP has centered on budget necessities and a certain amount of "grudge match" dynamics between Congress and the administration. In the current budget environment, in which budget caps are still operative, the Clinton administration would like to increase funding for defense and education. This leaves less money for programs such as the ATP and this moves the debate on the ATP to how much money it should receive, not to whether government's role in funding the ATP is appropriate. An important question also becomes the priority that Congress and the administration place on the ATP across NIST's other functions and other government functions.

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--> Importance of the ATP Evaluation In this context, the numerous evaluations of the ATP become more important, and it is worth asking how useful the evaluations are to decision-makers. Mr. Goldston noted that it is a mixed blessing for the ATP to be one of the most measured programs in history. Although it is hard to argue that evaluation is undesirable, one must ask whether too much has been done too early. Too much evaluation may result in "pulling flowers out of the ground to see how their roots are growing." Had DARPA been subject to such scrutiny in its formative years, Mr. Goldston wondered whether the agency would have produced the excellent results that it has. For the ATP, the evaluations generally do not address the real question that Congress would like answered, which is the net economic benefit of the program. Rather, the ATP evaluations explore whether a particular project would have been undertaken without government funding and, if the project had been undertaken, whether the capital invested would have been put to better use in the private sector. Both questions are extremely difficult to answer and tend to draw the discussion into "religious debates among people of different articles of faith." That is why, concluded Mr. Goldston, that the ATP debate will continue in spite of all the evaluations. Claude Barfield American Enterprise Institute Dr. Barfield said that he would focus his remarks on the ATP's evaluation, and specifically on what evaluation of the ATP should accomplish. The ATP was created after a decade in which there was bipartisan agreement that more had to be done in this country to commercialize R&D and put R&D more squarely in the innovation process. The ATP was an outgrowth of the Stevenson-Wydler mindset that encouraged the use of existing technology in the marketplace, but with the difference that the ATP was designed to create new technologies for commercial purposes. The ideas were essentially the same. Rationale Underlying the ATP Evaluation However, the ideas underpinning the ATP, Stevenson-Wydler, and the Bayh-Dole Act presented problems that still have not been addressed fully. The various rationales that have been put forward for program such as the ATP deserve close scrutiny. Dr. Barfield said that he did not dispute the notion that some of the projects undertaken by the ATP have what economists call "public good" characteristics, that is, the projects are nonexcludable and nonrivalrous in nature. This is the strongest rationale for government funding of R&D for projects that extend even beyond basic research.

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--> From a program design and evaluation perspective, this rationale would suggest that the program should encourage collaboration among industry, or other activities that would widely diffuse technologies funded by the ATP. This, in turn, leads to questions about intellectual property provisions in ATP and legislation such as the Bayh-Dole Act. From society's point of view, when industry comes to government for R&D assistance, industry cannot have it both ways. Industry cannot turn to government for an R&D subsidy by arguing that the social costs exceed the private ones, and at the same time want full intellectual property protection for government-funded R&D projects. Dr. Barfield suggested that intellectual property rights be weakened for government-funded R&D or, more drastically, the government should have "march-in" rights for the technology that taxpayers fund. Otherwise, the case for government R&D support is diminished. ATP and Commercialization A second set of issues with the ATP has to do with the program's emphasis on commercialization. ATP awardees are asked to provide commercialization plans, and much of the ATP evaluation discusses the commercial benefits of the program. However, the more clearly one can identify the commercial benefits of the program, Dr. Barfield said, the more the question of why the government is supporting such activity in the first place comes into play. Dr. Barfield observed that there is a great deal of attention in ATP documents devoted to speeding up the "cycle time" of R&D and commercialization. That sort of rationale assumes that the ATP is purely a commercialization program, which Dr. Barfield believes is a much weaker rationale for the program than the public-good argument. Addressing the examples raised by Mr. Kammer, Dr. Barfield argued that these are cases in which the private sector should bear the R&D costs entirely on its own. The projects involved efforts with clear ending points and clear market-demand meaning; if he fully understood the example, Dr. Barfield said, the private sector should have funded the projects. In concluding, Dr. Barfield reiterated that he believed that ATP should encourage collaboration among companies so as to foster R&D dissemination and rarely, if ever, fund a single company. Moreover, the intellectual property protection afforded the private sector in the ATP projects should be rethought. James Turner House Committee on Science Mr. Turner opened by observing that the differences among panelists on the ATP are not that great, and added that he agreed with Claude Barfield on several aspects of the program. Mr. Turner said that, in his comments, he wanted to convey a sense of how congressional staff and elected officials thought about the

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--> program when it was created a decade ago. Many of the same themes emerge in debates today. Mr. Turner identified six issues that were debated "long and hard" in authorizing the program. Context and Values Congress looked at three models, in the aviation, agriculture, and pharmaceutical sectors, in which government played a large funding role. It was thought that relying on the Department of Defense budget for new civilian technologies was no longer sustainable; the ATP was consequently an experiment designed to address new technology development head-on. In terms of values, Congress realized that there was not an infinite amount of money, and for that reason every effort was made to make the grant process as nonpolitical as possible. Senator Ernest Hollings deserves the greatest credit for insulating the ATP from politics; even the first $10 million in ATP appropriations faced pressure from members of Congress for funding for home-district universities or companies. Three administrations have successfully shielded the ATP grant-making process from political pressure. Limited Targets The term precompetitive generic technologies was used to describe the types of technologies to be funded. It was apparent to congressional staff and others in the policy community that the Vannevar Bush notion of innovation, that is, the linear model in which innovation moves from basic science in the lab, to development, to the marketplace, was no longer appropriate. In searching for a program that would respond to quicker innovation cycles, drafters of the ATP decided to concentrate on generic technologies that affect entire industries. That is why the original statute contained a preference for joint ventures. Maximizing Benefits to U.S. Companies The clear intent of the statute was to aid U.S. companies, which required addressing the difficult question of defining what that meant. It was decided that focusing on where the jobs are, especially the research jobs, was more important than where the chief executive officer of a company is located. Industry-Led Mr. Turner recalled living through the Synfuels program of the late 1970s, in which government took the lead in shaping technology development. This proved unsuccessful, and Congress wanted to avoid that mistake with this program. Projects that had "honest" cost-sharing, in which a company really put in 50

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--> percent of funds, would attract the attention of company executives and increase the chances of success. Evaluation At the outset, drafters of ATP legislation thought that ongoing evaluation had to be an integral part of the program. As today's symposium illustrates, evaluation has remained a prominent theme in the ATP. In concluding, Mr. Turner recommended that we look 10 years into the future as we evaluate the ATP. Although the U.S. economy is strong now, Mr. Turner was unwilling to rule out future industrial challenges from the Japanese or the Europeans. The rapid pace of economic change creates great uncertainty; in Mr. Turner's opinion, we do not have enough information to determine whether the current U.S. economic boom is a bubble that might burst or the sign of fundamental long-term strength. Given these uncertainties, Mr. Turner recommended that we make sure that the ATP and other programs are flexible enough to respond to future challenges. Questions from the Audience Dr. Wessner noted that world economic conditions had changed dramatically in the past 10 years; few would have guessed 10 years ago that the Japanese economy would suffer a severe and extended recession, and few might have guessed that the U.S. economy would see such a resurgence. Given the possibility of unforeseeable changes in the next 10 years, how, if at all, should the ATP be changed? Dr. Barfield responded that whatever surprising changes the economy undergoes in the next 10 years, the ATP is unlikely to be part of the solution. The ATP is not large enough to have been relevant to the U.S. resurgence in the past 10 years, and is not likely to become large enough to address new challenges at the macroeconomic level. Mr. Goldston agreed with Dr. Barfield, and added that the program really has to stand or fall on whether it provides social benefits. Concerns about foreign economic threats were a key part of the context of the ATP's development, but Mr. Goldston thought it would be better if that sort of discourse faded from the ATP debate. In addressing Dr. Barfield's earlier comments, Mr. Goldston acknowledged that there were inherent contradictions in the ATP, and to address this, Congress used the term "precompetitive generic research" in drafting the legislation. Mr. Goldston said he believed that no one had a good definition of the term, and that it is one of those "we'll know it when we see it" kinds of phrases. Another contradiction in the program is that the ATP was driven by the perception that companies had insufficient resources to commercialize products; yet the ATP does not deal with commercialization. The ATP really harkens back to the civil-

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--> ian DARPA idea. However, when we evaluate the ATP, we still look at commercialization; this is not a bad thing, although it does reflect some of the program's initial contradictions. Dr. Richard Nelson of Columbia University asked panelists, especially congressional staffers, how the ATP has changed over its 10-year life. Mr. Turner responded that the program today is 20 times bigger than when it started and 3 to 4 times bigger than at the end of the Bush administration. With a $10 million or $60 million program, it is almost impossible to focus on specific technology areas; the program simply funded the best ideas that came forward. As the program grew, some structure was imposed in terms of technology areas to be funded, and this was simply not thought of in the ATP's early years. A questioner asked about the tension between the desire to have ATP generate externalities and the fact that ATP recipients have intellectual property rights to ATP-funded projects. The questioner observed that patent rights are not perfect and, even in the presence of strong intellectual property rights, it seems that economists agree that the social return to R&D is high. Moreover, many innovations could not be commercialized in the absence of patent protection. In response, Dr. Barfield agreed that there was a balance to be struck, that is, some intellectual protection was necessary for ATP awardees even though perfect protection might undermine the goal of technology diffusion. Dr. Barfield added that it seemed contradictory for a company to seek an ATP grant because the private return was not fully appropriable, but at the same time ask to "fence off" that return through intellectual property protection.