When R&D is Not a Public Good, Why Subsidize it?

Patent, copyright, trade secret, and other exclusionary laws regarding intellectual property convert new-product research and development from a public/common good into a private good. To the extent that R&D is a private good, the argument that it, as a public good, needs to be subsidized vanishes. Yet the prima facie case for public subsidies of R&D continues to be the basis for enormous governmental transfers of resources. The explanation of unwarranted subsidies is straightforward and well known. Following a brief review, adapting this standard explanation to the case of R&D in particular, this paper offers an entirely new argument against R&D subsidies. Specifically, unwarranted R&D subsidies destabilize new-product R&D, turning a sustainable process into an unsustainable one