Some public officials in Arizona have pinned the state's economic future on the hope of a big biotech payoff. Just last month, Governor Napolitano signed a bill creating a tax credit to subsidize investment in certain bioscience companies. But the industry's track record does little to inspire confidence.
In 2004 alone, the 330 publicly traded biotech firms posted a collective loss of $4.3 billion. Cumulative net losses since the first biotech company went public are more than $40 billion.
The Wall Street Journal likens the biotech craze to "a casino that sends capital to otherwise neglected high-risk corners of research-and rewards a very few with huge paydays."
Despite its massive losses, biotechnology may hold great promise. But private investors are best suited to weather these losses and manage the risks, not "visionary" officials using public money to jumpstart their entree into the high-tech economy via industrial planning.
As Nobel Prize-winning economist Gary Becker wrote, "Silicon Valley could never be reproduced through bureaucratic hothouse support." The numerous localities and states-including Phoenix and Arizona-trying to woo this fickle and unprofitable sector should leave the risky business to private investors, not taxpayers.
- Seattle Post-Intelligencer: "Biotech profits still seen as years away"
- Business Week: "Global Silicon Valleys? First, Kill All the Subsidies"
- Fedgazette (Federal Reserve Bank of Minneapolis), "Focus: Biotech"
- Wall Street Journal: "Biotech's Dismal Bottom Line" (paid subscription)
- Arizona Republic: "Arizona's Tech Game Plan" (paid subscription)