What Are the Benefits of Government-Funded Research?

Congress wants to know.
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Congress wants to know.
Statue of Albert Einstein in front of the National Academy of Sciences Building. (Photo: fischerfotos/Flickr)

Statue of Albert Einstein in front of the National Academy of Sciences Building. (Photo: fischerfotos/Flickr)

In 2014, the U.S. government will spend just over $60 billion on non-defense research. It's a small part of the overall budget (as the saying goes, our government is an insurance company with an army), but when it comes to non-defense "discretionary spending" on things like education, transportation, law enforcement, and the environment, research receives more than 10 percent—not exactly small change. Given the urgent need for money to do things like address our border crisis and fix our decaying infrastructure, Congress wants to know: Are we getting the most out of our research dollars?

Congress asked the National Academy of Sciences to look into ways to assess the economic return on our investment in research, and this summer the Academy came back with its answer. Their report, Furthering America's Research Enterprise, says what you'd expect a committee of researchers to say: If you care about the economic returns of research, don't focus too much on the economic returns of research. Focus instead on cultivating a world-class basic research community, and the economic returns will come.

There is a popular belief that basic science is driven purely by intellectual curiosity, without regard for practical applications, but for the most part, that's wrong. Scientists want to solve important problems.

This isn't as self-serving as it sounds. The report makes a good case for why it's hard to directly measure and manipulate the economic benefits of government-funded research. The authors argue that most of the metrics aimed at capturing the commercial value of federally funded research are misleading, and that attempts to directly boost economic returns—such as urging universities to patent their scientists' discoveries—tend to have unintended consequences that make these policies self-defeating. The best way to get the most out of our research, the report concludes, is to help researchers in government, academia, and industry do what they naturally want to do.

Understanding the way to best reap the economic benefits of science and technology is clearly important. How we work, eat, travel, communicate, and care for our health today is a result of fundamental discoveries in thermodynamics, quantum mechanics, chemistry, genetics, microbiology, and computer science, many of which were made only in the 20th century. The U.S. government recognized that scientific research plays a big role in a society's economic, physical, and social well-being, and so for the past 65 years, our national policy has been to directly fund a substantial amount of research. But how do we know this policy is working well? Should we be spending more money or are we crowding out private investment? Which areas should we fund? Does it help to emphasize research with obvious commercial potential? If we're going to spend our research dollars intelligently, we need metrics and principles that can guide our policy-making.

The problem is that most economic metrics aren’t well suited to measuring government-funded research. "It is tempting to try to transfer the methodology for computing private returns on R&D investment to the assessment of economic returns on federal research investments," the report's authors write. "But this is generally a mistake." Why? One problem is that, unlike the output of a company, the output of federal research isn't priced in any sort of market, making it difficult to estimate its value. More importantly, it is hard to attribute the economic benefits of a commercial product to any particular government-funded basic research project. What's the economic value of the decades of government-funded research that Larry Page cited in his original patent application for Google's page rank algorithm? The report argues that "the relevant output for most federal research is not revenue but a variety of public goods, some but not all of which will be reflected in economy-wide productivity growth but will not be directly traceable to any particular R&D spending."

Our modern research enterprise is complex, and it is difficult to make sense of any one component in isolation. Naive efforts to directly increase its economic returns are like trying to improve a gourmet recipe without knowing how the ingredients function together—you're more likely to make things worse. Congress made big but temporary additions to the budget for the National Institutes of Health; such wide swings in funding left biomedical research in worse shape than it would have been with smaller, but more predictable budget increases. The government encouraged universities to patent more discoveries, but this likely inhibited the flow of knowledge into industry by putting too much emphasis on formal (and more adversarial) channels of technology transfer, while neglecting other key ways that knowledge moves into the commercial sector. And China learned that rewarding researchers with cash bonuses for papers in high-impact journals tends to encourage fraud.

SO HOW SHOULD WE maximize the economic returns on federally sponsored research? Certainly some of the answer has to do with more conventional areas of economic policy like tax incentives, regulatory procedures, and patent law. But when it comes to guiding policy decisions for the major federal research agencies, the report argues that the best way to boost our economic returns is to focus on "three pillars" of our research system: "a talented and interconnected workforce, adequate and dependable resources, and world-class basic research in all major areas of science." In other words, we'll gain the concrete benefits of applied science and technology by fostering a broad portfolio of basic research.

Why? There is a popular belief that basic science is driven purely by intellectual curiosity, without regard for practical applications, but for the most part, that's wrong. Scientists want to solve important problems. In basic research, importance is defined by more than just intellectual appeal; two other factors are also crucial: the potential impact of the result and the realistic possibility of a solution. Science is the art of the soluble, and well-trained, well-connected, and well-supported scientists working on the bleeding edge of our understanding are in a good position to recognize the most promising opportunities for progress. By trying to force our research system to produce a specific practical result, we risk turning scientists' attention away from problems that are ready to be solved toward ones that may not be.

With that in mind, the National Academy's report recommends that we focus on evaluating the overall quality of our basic research institutions. Do we have a capable, well-connected scientific workforce? Are we adequately funding research and training institutions over the long term? And do we have a balanced portfolio that doesn't neglect major areas of science? Right now, we have a hard time answering those questions because the U.S. "lacks an institutionalized capability for systematically evaluating the nation’s research enterprise as a whole, assessing its performance, and developing policy options for federally funded research." If we want to get more practical benefits from our research dollars, we should focus on measuring and supporting our system of basic research.