OPINION
The Big Stem Sell

California, a state that prides itself on experimentation and rebelliousness, has recently turned its attention to stem cell research issues.

On the November ballot is Proposition 71, which proposes to create a new and expensive government-funded stem-cell research apparatus. While finding cures to disease is a priority, government programs such as this are riddled with problems.

Preying on Hope

First is the sheer size of the measure, which authorizes $3 billion to pay for new research and facilities. Since this loan will have to be paid back, the interest rate doubles the cost of the investment -- not exactly something a state swimming in deficits can do with a clear conscience.

At a time when California households are at record levels of debt and the state itself was forced to borrow $15 billion simply to balance the budget, one would think that the idea of borrowing more money would be off the table. But that would be underestimating the power of hope -- and of those willing to prey on it.

Millions of Americans have ailments such as Parkinson's, Alzheimer's and spinal injuries. Stem-cell research offers some promising avenues for therapy, but it is far from being a silver bullet. When pushed, even its staunchest proponents admit that it's unclear whether stem-cell research will lead to cures.

Allocating Resources

Yet, many involved in the campaign for Prop 71 act as if $3 billion is all that stands between the ability for a young girl to walk again or for a grandmother to be cured of Alzheimer's. The creation of this false dichotomy clouds the issue and can make even the staunchest of Republicans blind to the fact that government is less efficient than the marketplace at allocating scarce resources.

Governments are by nature less effective at properly allocating resources because politics necessarily plays a large role. Imagine that the government-funded stem-cell research gets off track or fails to produce the results the team intended. Because the research is being done with public money, politics will be an issue and the flexibility required to switch gears will likely not exist.

In contrast, a market environment forces companies to adapt or die, ensuring that the resources are allocated to the best possible functions. Such flexibility and efficiency will help Californians overcome troubling diseases.

Space and Health

Some argue that the reason government needs to fund research is that the investment community is not willing to make the expensive, longer-term investments needed. That's what people used to say about space exploration.

It's hard to believe that argument given that private companies just competed in a contest to see who would be the first to go into space twice in a 14-day time frame. Paul Allen put $20 million into creating SpaceShipOne, and British entrepreneur Richard Branson has announced grand plans to start a space tourist business.

Like space exploration, curing disease would not only make big money, but also reputations. So why are many in the biotech industry supporting proposition 71? The answer is a skewed process that hijacks self-interest in distorted ways that harm the average Californian.

Efficiency and Fairness

Something is sorely wrong when the rules of the game tell investors that instead of putting $20 million of their own cash into stem cell research, they can spend hundreds of thousands supporting a bond measure that will hand them billions in other people's money to invest.

It is unfair that these private investors stand to get rich off the profits from public money. Bond measures to fund research are expensive and don't make sense from an efficiency or fairness perspective. Instead, they saddle ordinary Californians with debt, making it harder for them to afford the advances that come from the science in the first place.

The maverick Californian attitude of going where no one has gone before works well in some instances, but not in others. Before Californians vote on this or any other proposition, they should consider the facts very carefully.