During the 1940s, a Cornell graduate student became intrigued by the similarity between the wing pigments of butterflies and a chemical compound found in liver, spinach and yeast.
Where are we going? To unintended consequences.
A New Cancer Drug
Continuing at the University of Illinois and then at Princeton since 1954, Edward Taylor saw that altered versions of the compound he had studied at Cornell could halt cell growth. After another 31 years of research, he established a collaborative relationship with Eli Lilly. Then seven years after his retirement as the A. Barton Hepburn Professor of Organic Chemistry, Emeritus, in 2004 Dr. Taylor saw the FDA approve the work he began as a graduate student. Used primarily to treat lung cancers, the drug is called Alimta.
The licensing agreement with Eli Lilly for the compound that led to Alimta brought the university $524 million from 2005-2012. Part of that $524 million was used to fund the construction of a 263,000 square foot chemistry building while $118 million went to faculty salary increases.
And that is the problem.
Tax Exemptions for Non-Profits
According to NJ state law, municipalities must exempt from property taxes buildings used for non-profit purposes that include educational, charitable, and religion related activities. Once Princeton University decided to give that $118 million to the faculty, four local residents sued. No longer, they said, was the research “non-profit.” If the court agrees, then Princeton will owe the municipality millions in tax dollars.
But Princeton is not the only concerned party. Because a tax court judge refused to dismiss the case last week, the entire non-profit world is concerned about losing tax exempt status.
Our Bottom Line: More Butterflies
Dr. Taylor’s research began with butterflies and now we can say it has returned to them.
In his Teaching Company course, “Thinking Like An Economist,” Smith Professor Randall Bartlett places unanticipated consequences from the butterfly effect among the six basic ideas in his economic tool kit.
The butterfly effect was explained by James Gleick in Chaos. Seemingly inconsequential, not having a nail had a gargantuan impact on a kingdom:
- “For want of a nail, the shoe was lost;
- For want of a shoe, the horse was lost;
- For want of a horse, the rider was lost;
- For want of a rider, the battle was lost;
- For want of a battle, the kingdom was lost!”
Similarly, an organic chemist’s butterfly fascination could have an impact on the tax status of non-profit entities.
Where does all of this leave us? Looking at the world through economic lenses, you should always expect to see unintended consequences.