Borrowed Thoughts on Research Funding

At the end of my previous post, I hinted that I have been thinking lately about funding of research and development activities, particularly government funding of basic research.  This thought was catalyzed by a recent article in Science, What's So Special About Science (And How Much Should We Spend on It?), an address to the 2013 AAAS Annual Meeting by William H. Press.  Although it is a bit long and technical from an economic perspective, I think this is one of the best written and most logical statements for federal support of scientific research that I have ever read. The foundational idea, sustained by the evidence, is that scientific research is supported by the public both because it contributes to “intellectual richness” and has tangible economic benefits.  Is this changing?  Will this support continue?

Because I think it is important for everyone to understand the article’s arguments, I provide below an abridged version.  But I urge you to read the original; it is worth it (and it has figures).

1. United States GDP/capita has increased exponentially for more than 130 years, and this country is among the leaders in R&D spending as a percentage of GDP (~3%).  But does R&D spending lead to wealth or does a nation’s wealth result in more R&D spending simply because it is available? Let’s take a closer look at the economics.
2. Exponential GDP growth is due to a positive feedback mechanism (so say Nobel Prize winning economists).
3. Only capital, including intellectual capital and technology, can produce exponential economic growth.
4. A key concept to understanding the benefits of research is appropriability, which can be defined as how well returns accrue to investors.  That is, do investors in research get a payback for their invested money?  The answer for basic research is not very good.  While the returns can be substantial, because of modern dissemination of ideas these often do not come back to the original investor but are more globally distributed.
5. Hence, incentive for private investment in basic research is diminished.  So, public investment must fulfill this role, and it generally does.
6. Over the last 50 years, however, the US government’s 2/3 share (in the early 1960s) of research funding has decreased to 1/3 with the opposite seen for industry funding.  But this increased industry funding is more applied, and thus more appropriable, for faster return on investment.
7. From 1990-2007, industry’s basic research spending was stagnant and this has been the case for government spending since 2003, in constant dollars.
8. Basic research is not growing with the economy therefore the feedback mechanism (see #2 and #3) is broken; 10 years of neglect need to be reversed.  This will also lead to a global effect with no country willing to invest in basic research – the “tragedy of the commons” – because everyone will believe they can benefit from the work of others.  According to Press:

“The current situation is dangerous. Short-term actions in a time of budget crisis and financial austerity might become the triggers of long-term underinvestment in the ultimate fuel of economic growth, basic research in science.”

So, what is the solution to this problem?

1.  National and state government policies must change to increase appropriability and return on investment in basic research.  One such approach may be university and other infrastructure-based research hubs that are designed to keep commercialization efforts more local and regional.
2. History demonstrates that technical advances due to basic research are not rare events, but occur frequently, and with significant payoff, and this is intuitively understood by the public.  We, the public, need to convince our government, therefore, that patient, sustained, and consistent investment is required. 

It is only through education, outreach, and the democratic process that scientists and engineers, with the help of the public, can cause governments to act.

As Press states so eloquently:

“Through communication with the public, we must continue to provide the evidence that may justify those beliefs…as individuals, we must seize every opportunity to demonstrate that what we do is altruistic and idealistic and that it is also economically vital.  Our message is that science is a single, unified, long-term enterprise in which basic science discoveries, and research accomplishments of applied science and engineering, are things to be admired in their own right that also, often unpredictably, lead to better jobs and better lives, new products and new industries.”

Now who can argue with that?