Efficiency matters: Research funds divided by three

Research improves our lives: There’s even a Nobel prize demonstrating that it is good for governments to sponsor research, so long as it has no immediate commercial pay off.

I just looked at a grant for a Post-doctoral fellow – the people responsible for most of the hard laboratory work, paper writing, and many if not all the bright ideas in science. Salary: £28,000… OK but hardly a wonderful reward as a first job for over 8 years of education. Not much security either – this is a one year contract.

But how much does the university want to host this person for one year? Perhaps nothing – anticipating the research credit. Think again: the “full economic cost” – the Bill to the tax payer for paying the Post-doc their 28k salary over the year… £104,500.
Yes: 300% overheads. Some of it is fair: about 5k in software licenses, heating, superannuation. The other £71,000… Well, all we know is it is not going to this post-doc to do their research.

Viewed positively, this means that the country could triple its research output at no cost.Realistically…. well, you tell me.

Why not 100% income tax?

Tax, at base, is simply handing decisions  over how income is spent to a government. With no tax, all purchasing decisions would be made like the decisions you currently make about whether and where to holiday, by the holder of the income (ignoring taxes on Holidays, of course). With 100% tax, the decision is made by whomever controls the taxed money – a more centralized body.

The question of what tax-rate would you like is essentially one about how many things you think you would rather were not decided by yourself, or, by symmetry, that you would rather deprive other’s of the ability to make.

How much of the economy falls into the realm of things we should have done communally. Zero?; 100?; More or less than present?

Tax is a coercive arrangement, enforced on buyers. Because of this it is common to argue for a minimal set of “common” goods, so as to provide what must be provided for the common good, while minimising the volume of coercion.

Such a minimal set might include activities that create the circumstances in which we are able to make our own decisions, free from depredation by others. In this way, tax provides more freedom than it removes, and, in this way, is logically justifiable even to people who value freedom.

This typically includes protection from other nations (armed forces, Un representatives). And freedom  from other citizen’s: a police force, with laws surrounding these protections establishing a framework for preserving property and a judicial arm of government.

Many would also add that the government should enable free movement using its powers of eminent domain: Providing either roads and airport rules, but not actual transportation (rail networks, for instance, but no carriages, which must be paid for privately).

The next expansion arises as to whether the state should protect you from uneducated citizens by providing compulsory education. Most countries have agreed to this requirement also, with debate at the edges: over when free provision should stop.

All of these together typically account for a minor fraction of modern government budgets. Much of government costs lie in welfare initiatives: unemployment, sickness and pension benefits for those not working are around £200,000,000,000 in the UK. Health care is around 10% of GNP, provided from tax.

Restricted to Armed forces, police, judiciary, and education, tax would lie around where it did in Victoria’s time: perhaps 5-10% of income, perhaps paid only by people who own property.