It's enough to make Edwin Schumacher, author of the best-selling book "Small Is Beautiful," grin with delight. But it's a good, solid bet that some of the busiest and most important factories of the future will be small -- microscopic, in fact. They will be bacteria, yeast and other microorganisms, and cultures of animal cells. And they will be producing protein for food, fermenting sugar to make alcohol, synthesizing enzymes of industrial importance, turning out exquisitely pure disease-fighting antibodies and, after some genetic engineering, producing a variety of substances that could revolutionize medicine.

It's not too much to say that an entirely new industry -- bioltechnology -- is being born and that society is about to reap, with interest, the payoffs from two decades of support for basic research in molecular biology and biochemistry.

At the heart of these breakthroughs lie the techniques of recombinant DNA, which allow single genes from higher organisms like humans to be separated and inserted into bacteria, where they are reproduced as though they were bacterial genes. Because of the fundamental biochemical unity of all living things, the bacteria can decode the information contained in the foreign DNA and translate it into a protein indentical to that which would have been made in the higher organism.

The key is this: because bacteria reproduce so fast, vast amounts of the desired protein can be easily obtained. Consider: bacteria can grow and divide every 30 minutes, so that a single cell can produce 100 trillion descendants in 24 hours, each one of which could produce 100 or more molecules of the new protein. Scaled up to industrial dimensions, the result is a theoretically limitless, cheap supply of whatever substance is wanted.

The most exciting application of this technique thus far was announced with appropriate fanfare last week: the production of a substance known as interferon, a protein that protects cells from attack by viruses. Interferon was discovered more than 20 years ago, but it is made in such small amounts in the body that very little had been learned about its clinical potential. Nevertheless, trials on a small number of patients with a variety of diseases -- including hepatitis, respiratory infections, chicken pox and several types of cancer -- have produced dramatic results.

Currently, interferon is extracted from human cells grown in the laboratory, a procedure so difficult and slow that the amount needed to treat a single patient costs well over $10,000. But once the bacterial interferon factories get going and the material is proved to be pure and non-toxic -- and this may take only a year or so -- the cost will plummet and clinical trials can finally begin on a large scale.

What they may show is that interferon is a universal drug against the whole battery of virus-caused diseases, perhaps including some types of cancer. If this turns out to be the case, interferon could cause a revolution in medicine as profound as that which followed the introduction of penicillin.

The promise of the new biological techniques is limitless. Bacteria are already making insulin and human growth hormone as well as inteferon. Research has begun on ways to control foot and mouth virus, a devastating cattle disease, and dozens of other diseases that affect agricultural production. General Electric has constructed a bacterium that eats oil that could be used to dispose of oil slicks. The list goes on and on.

But the emergence of these biotechnologies will not be trouble-free. There will be major new kinds of safety problems to cope with, problems with which society has little experience. There will be severe ethnical and moral issues associated with genetic engineering. And biologists are already worrying about the growing corporate influence over what research gets done in the unversities and how freely the results are shared among scientists: the promise of future profits has turned once-noisy scientific meetings into silent gatherin gs.

The most intriguing of the immediate questions concerns patent protection. Can you patent a living thing? If the answer is yes, does the patent grant ownership of a particular biochemical process or of the entire organism? These questions have been bouncing back and forth among the U.S. Patent Office, the Court of Customs and Patent Appeals and the Supreme Court for the last four years.

The government says the patent law wasn't meant to cover living things. The Appeals Court says it can't think why not: "We do not see any reason . . . for excluding [a bacterium] . . . on the sole ground that it is alive. It is because it is alive that it is useful." In response, the government argues that the decision has such broad implications that it should be made by Congress rather than by the courts. So far the Supreme Court has ducked the issue, but last fall it finally agreed to hear the case of General Electric's oil-eating bacterium.

The toughest question it will face is whether -- in the light of current knowledge -- it is any longer possible to legally define life. Is a single molecule of DNA that can reproduce itself in a test tube, when mixed with the right chemicals, life? Is a virus that cannot reproduce itself, unless it takes over the machinery of a living cell, life? The distinctions are now so blurred that, in the opinion of many experts in the field, the question no longer makes any sense.

Whatever the answer, the applications of modern biology are likely to change dramatically not only the way we live, but also the way we think about the phenomenon of being alive.