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The Biotech BubbleWhy stem-cell research won't make states rich.

By David HamiltonPosted Tuesday, Feb. 6, 2007, at 3:28 PM ET

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William Selatan explores in a five-part series the biological, ethical, and policymaking considerations tied to human embryonic stem cell research. Chris Suellentrop explains why stem cell researchers can patent life forms, just as long as they've invented them. In the ethical realm, Michael Kinsley argues out that classic right-to-life arguments against abortion do not apply to stem cells and questions the conservative human life timeline.

What about the potential of stem-cell research to spur economic development—can a state that sponsors stem-cell research hope to attract cool scientists who will then draw others, plus a coterie of entrepreneurs and venture capitalists? Biotech companies do tend to cluster in places like San Francisco and Boston, but their overall impact on regional economies tends to be limited. While they often pay high salaries, the vast majority of these companies are tiny, unprofitable startups with fewer than 100 employees. They frequently collapse well before they earn a dollar in sales. Even successful biotech ventures are often bought out by distant drug companies, which sometimes shut down the acquired company while transferring its research activities and any products elsewhere. On top of all that, big states like California and New York are going to wind up competing for some of the very same scientists, VCs, and entrepreneurs, further shrinking the rewards.

Why did Baker and Deal see dollar signs? The $200,000 stem-cell supporters paid to Deal's firm, the Analysis Group, for campaign consulting might have something to do with it. In an interview, Baker said he didn't think of the report as advocacy but added that "we knew we were working for people who wanted to pass this thing." And while he still believes the economic benefits of stem-cell research could be "quite large," Baker also describes the report as merely "one possible version of how things might happen."

None of this means that stem-cell research doesn't deserve government funding. Stem-cell science, after all, remains in its infancy. Nearly a decade after the discovery of embryonic stem cells in humans, scientists still don't know exactly how they work, how to assure their purity, or what unexpected side effects they might have when transplanted into the human body.

At this stage of basic research, private funding is in short supply precisely because it's not clear where the payoff lies. This is where the federal government should come in. But a 2001 executive order from President Bush prevents federally funded scientists—that is, the bulk of academic biomedical researchers in the United States—from creating new embryonic stem-cell lines or even studying new lines developed elsewhere. So, the states are right to ante up where the federal government has failed to. They just shouldn't expect to do well while they're doing good.