Recently the Canadian National Research Council has, unfortunately, drastically changed course and abandoned pure science research unless it has clear economic benefits.
Many people have written eloquent criticisms of this move by the Canadian government. Phil Plait (at the above link) does a good job of explaining the why the move away from pure science funding is a bad idea from a scientific perspective (we don’t know ahead of time what research will yield economic benefits), but I find that Andrew Coyne (a right leaning commentator writing in a right leaning newspaper) does an excellent job of demonstrating why this is a bad idea from an economic perspective:
The redirection of public funds from basic to applied research may be bad science, but it is even worse economics. Whatever the distortion of the NRC’s raison d’etre is implied, it is nothing compared to the distortion of the economy. Far from a pragmatic matching of public research dollars to the real-word needs of industry, it reveals a basic confusion about the appropriate public and private roles in funding research.
Let’s start from the beginning. To understand what governments should or should not do in the economy, you have first to understand what markets can and cannot do. Governments, that is, should do what markets cannot. They should not try to do what markets can. This is a matter of scarce resources, if nothing else: the more government spends in areas where it is not needed, the less it will have left to spend in areas where it is essential. As a maxim, government should only do what only government can do.
Basic science, the kind of blue-sky research with no immediate commercial application, is an example of something the market cannot do, or not at a level that is optimal for society. Not only is there little obvious incentive for a private firm to spend money on research that does not pay off in new products or better processes, but so far as such research can be adapted to commercial uses it could as well benefit its competitors as itself: so the sharing of research that is a critical part of scientific progress is discouraged.
Hence it is well-established economic principle that basic research is the sort of thing governments should fund. By the same token, however, government should not be in the business of funding applied research, that is research directed to commercial uses. Not only is this unnecessary — business can perfectly well fund this sort of thing on its own — but it inevitably tilts the pitch in favour of certain activities over others: some technologies, innovations, products, firms and industries will be funded, at the expense of the rest.
Or in other words, “picking winners,” with all of the misallocation of resources that term implies. (If a product, firm or industry is really a “winner,” it shouldn’t need a subsidy. If it isn’t, all the more reason it shouldn’t get it.) What the government’s supporters might think is hard-headed realism is in fact simply central planning by another name — an illustration, once gain, of the difference between being “pro-business” and “pro-market.”