How Much to Spend?

Posted by: Michael Mandel on July 05

In a comment, pgl asks:

In a $12 trillion per year economy, why not just commit $2 trillion a year to R&D or even more? But we are nowhere close to comitting 17% of our income to R&D. Why not if costs are not a relevant criteria?

Here, I’ll make my position even simpler. In 1978, the federal government spent about 0.1% of GDP funding civilian basic research, outside of health. That included energy, general science, environment, space—everything.

Today, the ability of the U.S. to compete on global markets depends on our technological edge. To keep pace with China and India, the U.S. has to be able to innovate, and create new products and even industries. What’s more, one of the biggest problems the global economy faces is the long-term sufficiency of energy, at reasonable prices.

And do you know how much the federal government has available for basic civilian research these days, outside of health care? Yep, roughly about that same 0.1% of GDP, or about $10 billion.

I’m willing to say that isn’t enough.

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Reader Comments

Sergio

July 5, 2005 03:37 PM

There is a point that is missing in all this discussions about R&D and the new emerging countries.
The bulk of the industrial exports by China and India is done by U.S companies taking advantage of the cheap labor and tax advantages offered to those companies in these two countries.
United is not competing yet with countries. Companies are just moving offshore to save money.

Jack Krupansky

July 11, 2005 12:43 AM

There are two routes you can go on research: open-ended and directed.

Much research spending is made simply because people have clearly identified problems that they want solved with alacrity. That's all well and good, but a little too short-sighted.

The problem with open-ended research is that it's too vague to attract general interest. How can you lobby effectively for something you can't point to?

One solution might be to treat the open-ended stuff as a "tax" on the directed stuff. Committing 10% or 15% or 20% or even 25% of the directed research budget to longer-term, open-ended research might be a good rule of thumb.

-- Jack Krupansky

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Michael Mandel, BW's award-winning chief economist, provides his unique perspective on the hot economic issues of the day. From globalization to the future of work to the ups and downs of the financial markets, Mandel-named 2006 economic journalist of the year by the World Leadership Forum-offers cutting edge analysis and commentary.

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