On the public vs. private research:
I asked myself the same questions.
Consider this:
Germanys college/universities are all public sector financed and lag waaaaaay behind in international comparisions.
The university i'm in is considered one of the best in Germany, and it's main politics are: get as much contact to the private sector as possible. Guess why
As far as i know, many big companies throughout history had big research departments for fundamental research. I think, the reason that this is declining, is that private companies can delegate research to the public researchers, thus saving money (exactly this is happening with me right now, working with a project leader, who is in contact with Siemens)
Look at the best colleges in the western world (MIT, Oxford..). Are they public or private? How are they funded? As far as i know, it's private and private.
The professors at my university have no substantial interest in good customer support (the customers being the students). They do not depend on them, paying the bills. Professors here are distant, don't have much time for their students (not all of course), we have lectures with 200-500 people, which is not in favor of discussion, and i consider the learning material as very poor (except if you buy the books the professors sell of course)
There are research projects that are funded by a group of companies, when the burden is too high for one alone to shoulder.
Ever tried to sack a teacher in a public school or college?
As far as i know, most of the fundamental research leading to the outburst of science at the beginning of the 20th century was done by private universities and research groups. Often, fundamental research is done by private people not affiliated with any research department (Einstein for example)
And a big question is: how do you measure, what research should be done, and how much money you should put in it? How much taxes have to be raised? There is only one answer to this question. Let the people with money decide which projects seem the most lucrative. When people pay for a product, this means that it raises their standard of living more than still having the money. Private people often do long term investments, like 20 or more years, if they think it is worth it.
As far as i know, it's always the big industry which pushes the state to fund certain research projects. If they hadn't the state to research for them by taxing them and the people, wouldn't they have more money and more investors to do the research themselves?