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Should the Stimulus Be Spent on R&D Instead?

test tubes; adobemac via Flickr

Question: What is the approximate rate of return on investment in the National Institutes of Health, National Science Foundation, and other agencies that sponsor research in this country? At one time, I read that it was something like 1:17 (investment:return).

Even if the return was something on the order of 1:2, shouldn’t this be a no-brainer in terms of where the stimulus should go? This would enhance medicine, energy, defense, etc.

Paul Solman: Estimates of the return on investment on government R&D seem to be at least that high, though of course it’s a matter of debate. That said, the stimulus objective is quickly getting money into the hands of those who will in turn spend it quickly. The term for such spending on infrastructure is “shovel-ready.” For science R&D, maybe it should be “lab-ready.”

A lot of the scientific R&D stimulus money will go to university professors. The schools themselves take maybe half the money for overhead. Since the professors’ salaries are already paid for, the money tends to support post-doctoral fellows and other young researchers, people none too high up on the income spectrum who are therefore likely to spend pretty much all of what they get. Moreover, without the money, they might well be unemployed, since universities are under such pressure to cut at the moment. That’s especially true of state schools, backed by state governments. But with endowments down substantially at both universities and the private foundations that fund R&D, government money could be the difference between life and death for many projects.

My first draft of this answer was far more skeptical, by the way. It was also off the top of my head. But then, realizing I didn’t know what I was talking about, I did some research of my own and here’s the development: I guess you’re right. R&D spending as stimulus IS a no-brainer. High payoff, both in the long run and the short.

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