This post was written by Andrew Kaluza, South Central Regional Director and Executive Board Member of Students For Liberty

In Atlas Shrugged, Ayn Rand forewarned that the ever-growing mindset placing society over the individual is destructive to economic creativity.  Hank Rearden, one of Rand’s central characters, is a self-made entrepreneur.  He invents Rearden Metal which is an alloy stronger, lighter, and cheaper than steel.  Turns out, Rand’s fiction was quite similar to reality. Gary Cola, a real-life Hank Rearden, is an amateur metallurgist and entrepreneur.  Cola has developed a new form of steel called Bainite Steel.  Like Rearden Metal, Bainite Steel has the potential to revolutionize the world; although this time, it’s not fiction.

What’s so Rearden about Bainite Steel?

Bainite Steel is purportedly 7% stronger than regular steel.  In fact, its strength to weight ratio is higher than titanium (of the 6Al-4V variety).  Bainite requires only 56% the volume of this form of titanium to maintain the same strength.  Also, the process to create Bainite Steel is much cheaper and faster.  Typically, regular steel sheets are heat-treated at around 900 degrees Celsius–a process that can take anywhere from a few hours to a few days.  Cola’s entire process, On the other hand, uses rollers that carry the sheets through flames as hot as 1100 degrees Celsius and then sends the sheets through a cooling liquid bath.  The entire process takes less than 10 seconds and gives Bainite Steel its characteristic strength and ductile qualities.  Given Bainite’s strength-by-volume is much higher–and its production costs much lower–the metal is useful for a large array of applications.

Applications:

Many speculators are already pondering the applications and uses of the metal.  Cheaper car, truck, train, and ship production could revolutionize the transportation and shipping industries and lower gas usage.  Consumer shipping costs could lower and factory equipment costs could decline (which, in turn, creates cheaper factory direct prices).  Metal frames in buildings would be lighter and cheaper which could allow for cheaper if not taller buildings.  As a result, cities unhindered by height regulations could see higher population concentrations, because Bainite Steel may provide an ease in engineering taller buildings.  Also, less commute time means less gas usage and more money in our pockets.

Some hobbyists have already started to look at Bainite Steel as well.  Competition cyclists are excited about the possibilities, because the metal may provide one of the lightest and strongest bicycle frames on the market.   For example, one blogger writes: “[I] wonder how it will hold up in practical applications like mountain bikes vs ti, aluminum, and carbon.”

Like Dagny Taggart (Atlas Shrugged’s main character and protagonist) and Hank Rearden’s conversing about the uses of Rearden Metal, I could exhaust myself before exhausting the possible applications of Bainite Steel.  This metal could truly revolutionize the world!

Freedom allows for innovation:

One important thing to point out is that Gary Cola was not a scientist working at a government funded research facility.  He was a man who, with the initial study of the metallurgical processes, saw a need and a means to cut down the heating time of the metal.  Eschewing 70 years of traditional metallurgy—something that all other subsidized research groups failed to so much as question—Cola devised industry ways to cut the cost of steel production and create a faster more immediate heating method.  Government lacks the creativity and intuition about any industry to knowledgeably make research funding decisions.  It can’t know which research laboratories are appropriate to provide funding, because it does not have the specific insight for any industry?  Richard Feynman, Nobel Prize winning physicist who worked on the Manhattan Project (Reminder: government run project), said:

“No government has the right to decide on the truth of scientific principles, nor to prescribe in any way the character of the questions investigated. Neither may a government determine the aesthetic value of artistic creations, nor limit the forms of literacy or artistic expression. Nor should it pronounce on the validity of economic, historic, religious, or philosophical doctrines. Instead it has a duty to its citizens to maintain the freedom, to let those citizens contribute to the further adventure and the development of the human race.”

The inherent nature of sight to private industry and government

The French economist Frederic Bastiat

Fredric Bastiat once said that the difference between the unwise and the wise is that the wise see what is not seen.  Government cannot see it’s own creative inability.  Gary Cola was able to see an unseen need and strive to figure out how to capitalize on filling the need.  Government didn’t have this vision, as it has a hard time knowing how to see innovative opportunities (as opposed to the private industry or an individual).  Politicians are blind or, at least, have cloudy vision to market forces unlike individuals in private industry.  They can not properly see what is necessary for an industry, because they speculate what they think is necessary rather than what the market will actually show as necessary.

Government can no more centrally plan innovation than it can centrally plan how to deal with Iraq and Afghanistan or the New Orleans victims in the aftermath of Hurricane Katrina.  In a private industry however, individuals can get together and discuss ideas and put them together to formulate better ideas.

Market incentive vs governmental opinion

As alluded to, innovation must be motivated by the market incentive and not by decisions based on government speculation.  Government prevents the ability to be on the cutting edge of technology, because it takes away a market incentive from those it funds to think outside of the box.  However, this effect goes unseen.  Rather than look to governmental agencies like the National Science Foundation to decide research funding, we should look to empower individuals and private industry and give them the freedom to innovate.  Freedom engenders creativity and innovation.  Let the individual have the ability to strive and improve what she values, and value will be created.

Any rational gambler will tell you to place your bets wisely, so that you’ll have a high chance at profiting.  Science research is a betting game to find what is useful, and the government places bets on everything (regardless of costs and risks).  Risk taking is acceptable when the risk-taker funds the cost—as he should bear the responsibility of the venture—but the funds are taken from tax-paying individuals.  In the end, the government bears none of the responsibility to the risk.

Research subsidies license conflicts of interest and corruption

By nature, government and the subsidies it spews have a high propensity to cause corruption.  Though unseen, subsidies hinder innovation and creativity, because the government uses them as a control over the research thereby monopolizing on technology.  The subsidies empower government over how to implement the technology found.  Often times, government’s research funding decisions are made for political reasons as instead of being based on science or market demand.  The political reasons can include anything from covering-up shoddy oversight to attempting to sway public opinion to making backroom deals with special interest groups.

I’ll use the Challenger shuttle explosion as one example of political dishonesty.   Months before the disaster, NASA administration disregarded warnings and concerns from the engineers over the safety concerns.  They pointed to O-rings on the fuel tanks which became the culprit of the explosion.  Richard Feyman said:

“Official management… claims to believe the probability of failure is a thousand times less. One reason for this may be an attempt to assure the government of NASA perfection and success in order to ensure the supply of funds. The other may be that they sincerely believed it to be true, demonstrating an almost incredible lack of communication between themselves and their working engineers.”

The level of secrecy in the case research dealing with the explosion, became the topic of much criticism.  Within an hour after the disaster, NASA impounded cameras recording the take off.  No private entity could do this, so why was government allowed?  The New York Times responded with threats of a lawsuit, and after quite some time, NASA gave in.  Many criticized the handling of the whole situation.  Skeptical of the honesty behind the government research, Feyman said: “For a successful technology, reality must take precedence over public relations, for Nature cannot be fooled.”  Like in the Challenger case, government is prone to basing research interests around political pretenses which prevents honest research practices.

Though unseen, many of the funding decisions (e.g. where and how much) are backed by special interest groups that benefit from the research.  For instance, the National Corn Growers Association, Monsanto, POET LLC, and other organizations with ethanol interest, spend millions each year lobbying for ethanol research subsidies solely to increase corn sales.  The National Science Foundation joined the orgy and labeled ethanol as a green energy.  In reality, ethanol production is more destructive to the environment than fossil fuels have ever been.  The amount of land and fertilizer necessary to produce a sufficient amount of ethanol is astronomical.  The increased amounts of fertilizer causes horrendous runoff to streams, lakes, and rivers.  This is why at the mouth of the Mississippi River, there are enormous oxygen deficient “dead zones” where no aquatic life can survive.  Despite the negative effects, the government still subsidizes ethanol.  Giving tax-payer funds to private interest research is the reverse Robin Hood story: Take from the many (and the many are poor) and give to the few and wealthy.  Every political demographic should be against this practice, but I suppose it is difficult to see the unseen.

I’m glad there are real-life Hank Reardens out there to counter the anti-incentives engendered by research subsidies.  Gary Cola–and men like him–empower others to be the innovators in society.  In turn, this enshrines the ability of individual creativity, and fosters an appreciation of market incentives that provides motivation to the individual entrepreneur.

(P.S. Check out this excellent video from Atlas Society and Atlas Shrugged the movie.  This excerpt points out the politically corrupt capabilities of government research organizations and their proclivity to inhibit economic innovation.)