The world has spent $9,000,000,000,000 on alternatives to energy and has very little to show for it. The share of conventional energy has dropped by 0.2% while 2,000,000,000 people still use dung and wood as cooking fuel in homes - because the World Bank won't give loans for energy plants in poor nations unless it is alternative energy rather than what they can afford, like coal.
Meanwhile, China, also wrapped in the flag of "developing" nation, produces more pollution that the rest of the top 10 polluters. Combined. They build two coal plants a month to power solar panel factories to create products to sell to clueless westerners who have shut down their nuclear plants.
Canada looks absolutely intelligent for embracing a communist dictator as the New World Order; because the evidence shows that the US and Europe are run by morons.
A new analysis shows our model is wrong, but 'wrong' has become so systemic in polluting our thinking that the public think the Trump administration ending science funding for programs that aren't science is harming science.
The reality is that governments only fund a fraction of basic research, about 33% of it, and no applied research. Which means the private sector funds nearly all basic research and all applied. The most important basic and applied breakthrough of this century, the mRNA technology that led to the COVID-19 vaccine that happened fast once the Trump administration forced career bureaucrats to get out of the way, was not funded by the federal government. They not only refused to fund it, the University of Pennsylvania, where the scientist behind it, Dr. Katalin Karikó, was working, denied her tenure and demoted her - because the NIH thought her work was a waste of time, She eventually quit academia in disgust.(1)
Solar panels and electric cars are two more examples where governments not only don't fund innovation, they prevent it. When President Obama decided to throw the full force of federal funding behind solar panels, the private sector was mystified; 'What is much larger checks going to accomplish when we haven't been able to change the physics in decades?' A lot of political allies, like Robert F. Kennedy, Jr., still lined up at the federal trough.(2)
What would have worked better was what we have endorsed in the past - prizes. This is applied research, not fruitflies or roundworms, the science is known, so a prize motivates companies to come up with proof-of-concept.
With solar and then electric cars, subsidies failed. They will both collapse without mandates and subsidies. No private sector company wanted to build charging stations for electric cars when everyone else was paid to build and buy the car; they knew no one wanted them. So now every charging station has to be subsidized. While people who buy electric cars replace fewer miles, they drive their normal cars more. All while both California and Germany, where government controls utilities, have increased costs on the poor 100 percent to pay for solar and wind they mandated.
For a fraction of the money squandered, governments could have offered a prize to anyone who comes up with a viable battery that is better than the 35-year-old batteries still common.(3) And a tax-break for existing companies is also superior to subsidies. Anti-energy activists like to claim oil companies are subsidized just like solar, but a tax break is not a subsidy, since it only relies on being profitable. The reason so many companies are fleeing California is a hostile regulatory climate but also a tax break. Using the velvet glove instead of writing blank checks is better for taxpayers and science.
In their analysis, Lee, Ng, and Venkat examined tax incentives of $50 million or more and the 115 they found between 1990 and 2014 improved the scientific-technological outcomes better than subsidies but also led to sprouting innovation around the companies getting the tax breaks as well. Startups increased, high-paying, clean jobs moved to the area, and local patents increased by three or four per year. That is not happening when government regressively pays a company with an old patent to produce a product.
When Tesla needed a new battery company, California was on its way to giving Elon Musk $3 billion in taxpayer money for subsidies. He still build his plant in Nevada. Because he is in the real world, not government. California Governor Jerry Brown said he would force environmental groups to get out of the way to fast-track it and give him $500 million. Musk knew that Brown had no control of it and Nevada offered a $1.3 billion tax break. Musk went to Nevada, the plant was built by 2016, and Reno has boomed thanks to it.(4)
But another interesting thing happened; businesses without subsidies sprouted up to handle things like recovering lithium from old batteries. That pattern is repeated elsewhere. Companies don't want to move people in, they want to hire locally whenever possible, so they invest in colleges and education. Even though they know those getting the benefit may never work for the company.
The authors caution that not every Megadeal will be a win. These are still politicians and will hand out deals to their political allies that go nowhere, like President Obama did with too many ethanol and solar companies to count and Governor Gavin Newsom of California, Jerry Brown's successor, can't even resist when he wants to give diapers to the poor. Like all epidemiology and your BMI number, take population studies for the limited value they are.
But Indiana isn't wrong for giving the Chicago Bears a tax break to move to their state. Especially when Chicago was going to increase costs for the team, in true Los Angeles political fashion. They're going to benefit a lot, and that is just sports. With science, tax breaks clobber subsidies even more.
Citation: Lee, Y., Ng, S. and Venkat, A. (2026), “Megadeal” Subsidies, Local Spillovers, and Corporate Innovation. Journal of Accounting Research. DOI:10.1111/1475-679x.70079
NOTES:
(1) Both the federal government and Penn tried to take credit for it, though. Before she quit, another academic at the school who was federally-funded believed in her, so he gave her a spot in the lab making less than a bench tech. Once she had a results, top corporate peer-reviewed journals had no interest in publishing the paper. They settled for being in Immunity.
Karikó K, Buckstein M, Ni H, Suppression of RNA Recognition by Toll-like Receptors: The Impact of Nucleoside Modification and the Evolutionary Origin of RNA, Immunity, 23, 165-175
Penn now pays her to be an "adjunct" professor so they can claim her presence.
(2) President Obama was told Kennedy would not get confirmed to run EPA in 2009 so he instead gave Kennedy's $17 million solar company a $1.4 billion check. It still exists but only does $28 million in revenue per year. In, as you might suspect, AI to trade renewable energy futures. The government cost per job cost $8,000,000 per employee.
(3) For the money squandered, governments could have gotten 2 billion people in poor countries onto centralized energy. Climate emissions would have been stopped cold. Even using coal, which the Godfather Of Global Warming, Dr. James Hansen, said would be fine if old coal was replaced with Clean Coal technology that had been created - by the private sector. That didn't want their profits going up in smoke.
(4) Though they are not in California, where government regulations make building homes difficult, housing values in Reno have more than doubled since he opened there.
