[In conjunction with the release this month of my new book, Stem Cell Century: Law and Policy for a Breakthrough Technology" (more info here), I'll be blogging about policy issues related to stem cell research and regenerative medicine occasionally over the next several weeks.]

Election season in the 21st Century seems to inevitably bring a battle over stem cell research, and 2007 is no different. Tomorrow, New Jersey residents will vote on a proposal to issue $450 million dollars in bonds over the next 10 years to fund stem cell research, a plan quite similar in design to California's Proposition 71, the enactment of which in 2004 provided $3 billion in state funding over a decade. (Although frivolous legal challenges delayed the implementation of Prop. 71, appeals were exhausted in May and California's stem cell agency is now providing funding in earnest.) Along with $270 million that New Jersey has already authorized to build five stem cell research facilities, tomorrow's initiative, if passed, would make that state's financial commitment to stem cell science second only to California's in size, putting the Garden State's effort comfortably ahead of New York's and increasing the distance between it and far smaller financial commitments made by handful of other states including Connecticut, Maryland, and Illinois.

The race among states to publicly fund stem cell research is a response, of course, to President Bush's prohibition on the use of federal funds to support research on any human embryonic stem cell lines derived from embryos after August 9, 2001. But even assuming that it is not immoral to destroy 5-day old embryos in the cause of medical research, that embryonic stem cells have particularly valuable therapeutic potential, and that the Bush funding policy is internally illogical (future posts will explain why all three of these claims are correct), it isn't altogether clear whether it makes sense for the citizens of New Jersey to step into the funding void. At the end of the day, if I lived in New Jersey I would vote in favor of tomorrow's bond initiative, but let me explain why even strong supporters of biomedical research generally and stem cell research specifically might rightly hesitate.

If it were possible for private firms to capture all the gains from basic biomedical research, through patents, for example, public funding would not be required in the first place, because private capital would fund all research projects with a positive expected value. It is the belief that basic research has significant positive spillover effects that are difficult to capture that justifies public funding. If public funding is justified by this reasoning, it follows that individual states face a collective action problem. The scientific benefits created by the expenditure of New Jersey tax dollars will benefit all Americans -- indeed, people all over the world. Why should New Jersey foot the bill and let everyone else free ride? For an economy as large as that of the United States, the potential benefits that basic science can create for its citizens alone can justify support of a public good, even if others can free ride. But this seems much less likely to be true for a single, medium-sized state.

By supporting stem cell research, New Jersey can signal its voters' unhappiness with the Bush funding restrictions, but this seems an unconvincing reason to vote yes, because polls can also -- and do -- show that Garden State residents support embryonic stem cell research. A better reason to vote for the initiative is that, in the federal funding vacuum, state funding can entice not only top academic researchers to a state, but also the biotech companies that tend to cluster around top research universities. This means, potentially, thousands of relatively high-paying jobs in a "clean" industry. And by attracting stem cell researchers, New Jersey could potentially serve as a coordination point for related biotechnology and health-care related industries. How much of a return will the investment provide for New Jersey? To say the answer is uncertain would be an understatement. The projections that have been published ($2 billion is bandied about by supporters of the bill) are hardly better than wild guesses. Direct tax revenues and potential revenue-sharing from the developers of blockbuster inventions will return only a small portion of the expenditure to state coffers. The payoff depends primarily on how much private investment the public investment generates.

The potential benefit to the state's biotechnology industry seems substantial enough to justify a relatively modest annual investment of $45 million, and, as a non-resident, I certainly hope the good people of New Jersey agree and vote "yes." But two concerns would still nag at me were I a New Jerseyan. First, given New Jersey's position in the state stem cell race, the marginal value of this particular investment is even less clear than the value of its total investment. With a $270 million investment in infrastructure already made, New Jersey is already a player in stem cell research, and, at the same time, $450 million more will not be enough for it to compete for biotechnology with California on the basis of public expenditures alone. Second, if Rudy Giuliani, John McCain, or any of the Democratic candidates win next year's presidential election, federal funding restrictions will be loosened substantially, causing state support to be less important. It is unclear whether New Jersey's investment will be big enough, or early enough, to capture the benefits envisioned.

I want to invite all VC readers in the Boston area interested in the policy issues surrounding stem cell reserach to a panel discussion of my new book tomorrow, Wednesday, Nov. 28, from 6-7:30 p.m. The event, sponsored by the Harvard Stem Cell Institute and the Harvard Law School's Health Policy Center, will be held at "The Meeting Room," located at 2 Arrow Street in Cambridge, MA, about a block away from Harvard Yard. I'll be speaking about the book, and then commentary will be provided by Professors Kevin Eggan (a well-known Harvard stem cell scientist), Frances Kamm (a philosopher at the Harvard Kennedy School of Government), and Pam Samuelson (an intellectual property expert at Boalt Hall and Harvard Law School). The event is open to the public, so please let any friends or colleagues interested in stem cell research specifically or the interface between law and biotechnology in general know.