Monday, April 28, 2014
Science, Econometrically Speaking
According to a book by the OECD from 2003 entitled, "The Sources of Growth in OECD Countries", privately funded R&D has a powerful and positive effect on economic growth while publicly funded R&D has virtually no impact at all and, if anything, tends to crowd out the private funding......................................................................................And if that isn't bad enough for you, neither does there seem to exist any historical data to support this whole notion that the the government MUST support science (an assertion that even the likes of Milton Friedman have allegedly made). Case in point, England and the United States. From 1800 to 1900, England was the wealthiest country on the planet (with the most in terms of scientific breakthroughs) and they had virtually ZERO government expenditures on science. Ditto the U.S. in the early parts of the 20th Century in that even as late as 1940, over 80% of American R&D was private.....................................................................................So, with all of this evidence that government science is essentially wasteful, even counter-productive, why do we continue to piss away valuable resources on it? I don't know, probably for the same exact reasons that we continue to waste money in other regards; cronyism, the inexorable growth of bureaucracy (where a program's success is gauged by its size, not by its thrift), etc........That and, well, because we can.
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I think (and I'm sure you will correct me if I am wrong) these results depends a lot on what you define as R&D. There are different kinds of research. You have theoretical research, basic research, developmental research, etc. My understanding has been that much of government funded research is in the areas of theoretical and basic research which by their very nature have little or no direct economic value. However, theoretical and basic research form the foundation for more economically oriented developmental research which results in salable products. Plus the government generally is not in the business of developing products for sale to the general public.
Companies, on the other hand, are in the business of making money. It is natural that their investment in research would be directed towards product development. That product development is often based on theoretical and basic research previously funded by government entities.
The government spends money on literally everything (shrimp on treadmills), Jerry, and, so, yeah, there's bound to be some benefit here and there but all that you really need to do is look at England in the 19th Century when they were on the cutting-edge of both the agricultural and industrial revolutions and England today when they can't even seem to get out of their own way and people are dying just waiting to get health care...........And I believe that the OECD book examined all government spending on science and concluded that it had virtually no effect on a country's economic well-being, period.
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