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Why Science? An Unemotional Argument for Federal Investment in Research

How did we become the world's leading economy and one of its wealthiest nations per capita? One critical reason is that the U.S. has always invested in innovation. We spend more than any other country on R&D. Has this spending made us richer? The clear answer comes from a long run of economists who have studied this subject intensively. Here is what they have learned.
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researcher preparing several...
researcher preparing several...

What is so special about science? And why should the federal government invest in it?

As Congress emerges from years of making spending decisions largely through continuing resolutions and sequestration, last year's budget agreement enables it to actually prioritize discretionary spending. To succeed in this process, advocates for scientific research must answer two important questions: Does science justify spending taxpayers' hard-earned dollars? And is it "better" spending than other federal outlays?

We believe the case for science spending is solid and clear, because science is an investment that pays enormous dividends. Right now our nation faces an innovation deficit because federal spending on research has been lagging, while our international competitors have been pouring resources into this vital investment. For the U.S. to remain the world's innovation leader, it needs to address this widening deficit. But science advocates need to marshal their arguments. This means that those who care about manufacturing, health care, and America's national security must speak loudly and often about the extraordinary technological advances that have depended on scientific discoveries from federally funded research, and about the role they have played in creating new manufacturing opportunities, medical treatments, and the technology that supports our nation's men and women in uniform.

From World War II until recent times, there was a bipartisan consensus that basic scientific research was well worth funding in increasing amounts. In fact, this belief goes back even farther. In his first annual address to Congress, George Washington wrote that "there is nothing which can better deserve your patronage than the promotion of Science and Literature. Knowledge is in every country the surest basis of public happiness."

One of us is a classics professor, and both of us believe in federal support for the humanities, but here we focus on George Washington's belief in government support for science. The consensus that he describes has become frayed in recent years. We think our first president would agree that now is the time to make the rational, clear-cut, evidence-based case.

On average, the nation's per-capita income has risen about 2 percent a year, adjusted for inflation, for many decades. It may not feel like it for many American families, but we remain one of the world's wealthiest nations -- far wealthier, per capita, than China, for example. China will soon have a larger economy, but it will not overtake this country's per-capita income anytime soon.

How did we become the world's leading economy and one of its wealthiest nations per capita? One critical reason is that the U.S. has always invested in innovation. We spend more than any other country on R&D (though a few nations now outspend us as a percentage of GDP, which is not a good development). Has this spending made us richer?

The clear answer comes from a long run of economists who have studied this subject intensively. It began with Robert Solow, who won a Nobel Prize for his work during the 1950s, and has continued through the work of many others. Here is what they have learned.

Exponential economic growth such as we have experienced comes from positive feedback, where the production of something enables you to produce even more. Economists note that only capital -- including human, intellectual, and environmental capital -- can fuel exponential growth. Solow and subsequent researchers found that at most half of historical growth could be attributed to known factors. The unexplained part, sometimes estimated to be as large as 85 percent of growth, was termed the "Solow residual." Subsequent work showed that the bulk of that residual could be explained by positing a new factor in production: technological progress.

Technology produces wealth, and it produces more technological progress, which produces even more growth, thus enabling a virtuous cycle of exponential growth. Technological progress depends on basic research; this is why economists have found that investments in basic research can produce returns between 20 percent and 60 percent per year.

The problem is that those extraordinary returns frequently go not to the investor in basic research but to the entire world. The applied research that follows on basic research does not necessarily take place in the same company or university. Basic research leading to scientific discovery is, therefore, a public good. The purpose of companies is to provide a return on investment, not to provide for the public good per se. However, the public good is the purpose of government, so this national investment must come from the federal government -- as it has, in a major way, since 1947.

Disturbingly, federal spending on basic research has stagnated since 2003. A virtual freeze on discretionary spending (and the threat that additional deep cuts due to budget sequestration will resume in FY 2016), makes it extremely unlikely that Congress will make up for this decade of flat funding, let alone take the investment where it ought to be.

Research investments have what statisticians call a very "heavy-tailed" distribution. This means that given the modest investments, extraordinary results occur far more often than one would predict in a normal distribution. Think about the number of results of research that have not just been important but have literally transformed society. A typical medical advance might save many thousands of lives. The discovery of penicillin (and its publicly supported development into further antibiotics) has saved hundreds of millions of lives. In a single century a confluence of fundamental discoveries in quantum mechanics and atomic structure led to all of modern electronics, the computer, and the Internet. This stemmed from what, in the 1920s and 1930s, were arcane areas of very basic science.

Science's heavy tail allows us to expect even greater future discoveries, even if we cannot predict when or in what fields they will occur.

But will we make these investments? To answer this question, we can look inward. How patient we can be as investors is a matter of social and national character. Does our planning horizon extend beyond two years, or two decades, or even two generations?

We are competing against nations that understand long time horizons. Europeans look every day at 500-year-old cathedrals, and Europe has developed mechanisms for obligating its member nations to make stable science investments over long periods. Chinese culture sees itself as having continuity over millennia. China's investment in R&D is on a trajectory of amazingly rapid and sustained increase.

Most Americans highly value science and scientists and seem to have an intuitive grasp of the returns for research. Advocates for science must continue to provide the evidence that justifies those beliefs. We must seize every opportunity to demonstrate that the U.S. scientific enterprise is not only altruistic but economically vital, leading, often unpredictably, to better jobs and better lives, new products, and new industries. If we don't, future generations will regret our shortsightedness.

This blog post is based in part on an article by Dr. Press in Science.

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