Michael Schrage wrote a telling article about Erich Block's management of the National Science Foundation during his recent tenure as its director {Financial, Oct. 26}.

The article quoted Mr. Block's attitude about the search for nonapplied knowledge (basic science) and the application of knowledge (technology) to profit-motivated innovations: ''There's no dividing line between the two. The knowledge flows back and forth. The separation between science and technology is a bad separation -- there's no reality behind it.'' Mr. Block apparently believes that there is no dividing line between scientific activities, which are not profit-motivated, and technological activities, which are profit-motivated.

The next step was simple: convince Congress that industrial competitiveness would improve if university scientific activities were directed to profit-motivated technologies (since there is ''no dividing line''). By authorizing NSF to draw from a bankrupt Treasury, Congress has financed such nonscientific activities as university engineering research centers and technology transfer centers (whatever they are).

The National Institutes of Health has an excellent international reputation for discovering nonapplied knowledge in the health sciences. But that is not the case with the NSF. The foundation's principal federal responsibilities are to advocate science education programs at all educational levels and to fund scientific research in the other scientific disciplines. (If not the NSF, then who?) But Mr. Block had other things in mind.

By Congress' funding of Mr. Block's ''no dividing line'' theory, professors found it more lucrative to operate federally funded engineering research centers and to consult with corporations about profit-motivated technologies rather than perform basic research in university labs and instruct students on the mysterious workings of nature. This is Mr. Block's legacy to the state of scientific education and progress in the United States.

D. G. SOERGEL Gaithersburg