As a technology comes onto the horizon and looks like it will become profitable eventually, people will invest in it. They will collectively increase their investments as long as the net future value of the investment’s profits is greater than the amount invested. The result is that people invest “too early” and actually waste the full value of the expected future profits in premature investments.

The same problem arises with homesteading – standard economic analysis emphasizes how homesteading doesn’t work as people acquire and develop land prematurely in order to capture the eventual future value of the land, and end up wasting that whole value.

This phenomenon is called ‘rent seeking’.

Here’s a description from economist Robin Hanson:

“Consider a typical as-yet-untried investment project, becoming more and more attractive with time as technology improves and the world market grows larger. If there wasn’t much point in attempting such a project very long after other teams tried, then a race to be first should make sure the project is attempted near when investors first expect such attempts to produce a competitive rate of return. This should happen even if the project returns would be much greater if everyone waited longer. The extra value the project would have if everyone waited is burned up in the race to do it first.

“Thus most of the return above the market return in our supply and demand figure above should be burned up, leaving the average return at about the market return. Thus in the low demand mode the height of the demand curve is relatively unimportant. If anticipated, a technology which makes a moderate number of investment projects much more productive may have no effect on growth rates or on rates of return.”

http://www.transhumanist.com/volume2/singularity.htm

Glad to see that you’ve posted your talk from Thursday’s event, which I thought was a brilliant tour d’horizon, and a real highlight of the day. You neatly punctured the sense of complacency that seems to have crept into the UK policy discourse around nano in the two years since the Royal Society/RAEng report. And I was interested in the parallels you drew between the UK’s somewhat half-hearted approach to exploring the societal dimensions of nano and its wider failure to support the sector through more effective financial and institutional arrangements.

This goes to the heart of a question that underpins a lot of Demos’ work in this area (and which we tried to unpack in our report ‘The Public Value of Science’): about the extent to which increased economic investment in science and the creation of more open and deliberative cultures of innovation can be mutually reinforcing. On your account, the UK’s track record with nano may not prove any positive relationship between the economic and social/democratic dimensions of innovation, but it certainly shows that it’s possible to do both pretty badly, which is a rather depressing state of affairs.

One of the great myths regarding Microelectronics is about profits. One of the favourite saying of Peter Drucker a famous management guru, is that Hi-tech industries overall has made Zero profits when losing investments are taken into account!

Now, this could mean that as Microelectronics has been around for 30 years, it will make money only in the next 20 years. Whatever, this demostrates how difficult it is for even capitalism to make technology pay!

My opinion regarding Nanotech is that making money will be more self evident as it happening at the moment as a ENABLING TECHNOLOGY.

What I mean by this is that First Stage Nanotech is hybridization of existening technologies like Microelectronics / Medical Biotech / Materials science and energy. Therefore pioneering entire new fields with their enormous startup costs will be avoided.

Regarding Scientific funding of Nanotech. The real problem has been the massive fall of students doing science. This makes it difficult for ANY goverment to justify Science spending. I believe that the present Labour Government has been an improvement over the old Tory regime, but that is no saying much.

A solution maybe an amateur outgrowth of Nanotech might emerge like the personal computer industry in the 1970’s. Depends how cheap Atomic Force Microscopes / experiments with colloids/ printing processes etc .

An amateur mathematician