Are we spending enough on R&D?

OfflerCrocGod · 21-09-2008 7:31pm #1

SoCal90046 wrote: »

The US government has run a deficit for a long time. In fact, the period right after the largest debt ever, World War II, turned out to be one of the greatest periods of growth. Productivity is the issue: I'd be more concerned that, in the US, there isn't sufficient investment into R&D, particularly the "R"; for the long run, I'd be more worried on that point.

Worry not then

The terms of the bailout do not sound too onerous on the tax payer they may even profit in the long run. US goverment debt will always have a market; if it ceases to have a market its probably only because we end up going back to fighting wars with sticks and stones.

SoCal90046 · 21-09-2008 7:46pm

OfflerCrocGod wrote: »

Worry not then

The terms of the bailout do not sound too onerous on the tax payer they may even profit in the long run. US goverment debt will always have a market; if it ceases to have a market its probably only because we end up going back to fighting wars with sticks and stones.

That chart doesn't tell the story. The focus is on third level institutions.

It's not the level of the spend, it's the trend in spending: it's down. It's down in government and it's down in industry too.

For many years, the US has imported a large fraction of scientists and engineers from other countries. As long as that supply continues, it may not be an issue, but there's no guarantee that the US will continue to increase its stock of scientists and engineers by depending on others.

Flamed Diving · 21-09-2008 9:17pm

OfflerCrocGod wrote: »

Worry not then

The terms of the bailout do not sound too onerous on the tax payer they may even profit in the long run. US goverment debt will always have a market; if it ceases to have a market its probably only because we end up going back to fighting wars with sticks and stones.

That chart is meaningless without a year or time interval.

Time Magazine · 21-09-2008 11:05pm

Spliting these off from the other thread because a) it's off-topic, and b) this is an interesting topic. Is R&D a vital component in ensuring growth in Total Factor Productivity, or is it a wasteful black box of over-hyped crap?

Let's throw a spanner in the works:

SoCal90046 · 22-09-2008 2:18am

David McWilliams wrote: »

Spliting these off from the other thread because a) it's off-topic, and b) this is an interesting topic. Is R&D a vital component in ensuring growth in Total Factor Productivity, or is it a wasteful black box of over-hyped crap?

Let's throw a spanner in the works:

Thanks for starting a new thread on this topic; I do think it a really important question to answer: does R&D have a material affect on productivity.

The chart shows some relationship, but it's not that convincing. The type of R&D to which I refer may not be covered in the survey. I am talking about the kind of effort that takes many years, perhaps over a decade, to reach fruition. It's the kind of effort, frankly, implies a role of government. I think of R&D in terms of a common good or perhaps a public good.

One question that may be tougher to answer than it would appear at first blush is "what is research?" In the figure above, it appears that the USA spends more on R&D than some other industrialized nations. However, it is my observation that a lot of what passes as fundamental research today would, a generation ago, be called applied research: third level institutions have turned increasingly to filing patents--a source of potential revenue. Whether this action is appropriate from the perspective of how the R&D is funded is yet another question.

Industry has increasingly pulled out of fundamental research. At least, once venerable institutions such as Bell Labs or the Sarnoff Research Center (now SRI) have cut back.

I think that tax policy pays a role too. For example, in the United States (GAAP), R&D is expensed. IMHO, it really should be accrued an amortized against the products it creates; however, this idea is, frankly, impractical and R&D is, therefore, vulnerable when budgets tighten.

My thesis is that fundamental research, the type of research not immediately connected to any good or service, is where the failing is.

I don't have good ideas as to how to measure the impact of R&D on productivity. Defining research itself could be a tricky enough task. I bet there must be some clever Freakoncomic-esque approach to the issue.

OfflerCrocGod · 22-09-2008 10:02pm

SoCal90046 wrote: »

That chart doesn't tell the story. The focus is on third level institutions.

Which are a very important source of talented young people. They are like incubators for industries and companies. Basic science research is now so expensive that the top end of it needs to be carried out by groups of Universities with goverment funding. The US is well ahead there.

SoCal90046 wrote: »

For many years, the US has imported a large fraction of scientists and engineers from other countries. As long as that supply continues, it may not be an issue, but there's no guarantee that the US will continue to increase its stock of scientists and engineers by depending on others.

It will. Where will the best and brightest have the best chance of reaching their peak? We all know it's the US and I don't see any other place in the world attracting talent like it can. By the way the chart came from this BusinessWeek article.

leninbenjamin · 22-09-2008 11:06pm

SoCal90046 wrote: »

Defining research itself could be a tricky enough task. I bet there must be some clever Freakoncomic-esque approach to the issue.

yup, there is, tis a bit institutional in nature. I had a lecturer kind of shove down our necks his entire philosophy (his work with a few more from NUIG). he never once showed figures to prove it, he just kept talking about backward linkgages and knowledge flows as if R&D was guaranteed to improve the economy. one of these devout followers to the 'knowledge economy' crap the govt keep spouting.

side note: strangely enough I disagreed with his approach in the exam giving some facts and figures i found on finfacts; he gave me the lowest mark i ever got in Uni. that's when i decided a career in economics wasn't for me

SoCal90046 · 23-09-2008 8:25am

OfflerCrocGod wrote: »

Which are a very important source of talented young people. They are like incubators for industries and companies. Basic science research is now so expensive that the top end of it needs to be carried out by groups of Universities with goverment funding. The US is well ahead there.

That's a good point. The US may be in a good position today, but I suspect that the world will continue to change. I'd still like to see a change in US policy with more money directed towards fundamental research. I need to go and dig some statistics I saw once in the ACS publication Chemical and Engineering News that showed a decline, in real terms, in R&D spend.

It will. Where will the best and brightest have the best chance of reaching their peak? We all know it's the US and I don't see any other place in the world attracting talent like it can. By the way the chart came from this BusinessWeek article.

Thanks for the BW link. The US definitely imports a lot of talent, but who knows how long this activity can be sustained. I suspect that as emerging economies grow, fewer people will migrate to US universities.

SoCal90046 · 23-09-2008 8:30am

leninbenjamin wrote: »

yup, there is, tis a bit institutional in nature. I had a lecturer kind of shove down our necks his entire philosophy (his work with a few more from NUIG). he never once showed figures to prove it, he just kept talking about backward linkgages and knowledge flows as if R&D was guaranteed to improve the economy. one of these devout followers to the 'knowledge economy' crap the govt keep spouting.

side note: strangely enough I disagreed with his approach in the exam giving some facts and figures i found on finfacts; he gave me the lowest mark i ever got in Uni. that's when i decided a career in economics wasn't for me

To me there is something intuitive that fundamental R&D must ultimately contribute to increased productivity.

I think one can argue that technology improves productivity. For example, for the case of the farming sector, one can look at the number of people employed per acre of land in 1900 versus 2000 and see an increase in productivity. New technologies depend on applied research; applied research depends on fundamental research. However, I haven't yet got my arms around a model that would support this hunch. It's probably staring me in the face!

leninbenjamin · 23-09-2008 2:25pm

SoCal90046 wrote: »

To me there is something intuitive that fundamental R&D must ultimately contribute to increased productivity.

I think one can argue that technology improves productivity. For example, for the case of the farming sector, one can look at the number of people employed per acre of land in 1900 versus 2000 and see an increase in productivity. New technologies depend on applied research; applied research depends on fundamental research. However, I haven't yet got my arms around a model that would support this hunch. It's probably staring me in the face!

that's because there is no model. R&D is something very broad, too broad to effectively quantify i think. I mean there are plenty of companies out there that need high levels of R&D just to survive because of the nature of the industry they are participating in. and then plenty of other industries that need none. so to have a model where we compare the different levels of R&D across industries is pretty pointless. that's why the R&D graph above means absolutely nothing.

it's also false to say new technology improves productivity; i mean its far from a guarantee. there are more failed technologies in this world than there are successful ones; we just don't hear about the failed ones.

where this leaves us in terms of policy, i'm not sure. I really think one has to look at R&D on a case by case basis. our big problem however is our work force; for the existing companies who do want to invest in R&D in this country we aren't producing enough graduates, so even to simply encourage R&D in them isn't enough. I think we need to go back and look at the primary and second level school systems and encourage more Maths and Science participation, because i think that's where our problems are coming from. the days of doing a science or engineering degree just because it will land you a job are long gone; in my opinion we need to make up for that short fall somehow and sort out our foundations before we should even begin to target the higher level stuff.

professore · 23-09-2008 2:44pm

I think that the question is equivalent to hiring a bad builder to build you a house, paying him top dollar, and then wonder if you paid him enough when your house falls down. A small investment in good R & D is worth a lot more than a large investment in bad/wasteful R & D. We definitely have a shortage of innovative ideas and approaches to problems here in Ireland.

Quite frankly the standard of technical knowledge in any department of companies I deal with in Ireland (outside of IT and engineering staff) is breathtakingly bad. Even things like estimating how long a project will take or will cost, or things like ROI seem to be beyond the abilities of most.

As long as it looks good people don't seem to care if it actually works. If you read our supposed paper for the middle classes, the Indo, it's an embarrassment. This trend has worsened considerably in the Celtic Tiger years. Unless we get our act together fast we are going to continue our fall off the cliff of world economies. Look at how the banks kept lending and lending huge sums of money when it was obvious to anyone with half a brain and a pocket calculator that there was a huge surplus of property out there and the supply and demand curve, plus demographics, made it a loser.

So in short Yes, but the right kind of R&D that generates jobs.

24-09-2008 9:26am

So, if R&D isn't the answer, would you guys be advocating capital increases?

Ie, get more people working to improve our economy?

SoCal90046 · 24-09-2008 10:48am

leninbenjamin wrote: »

it's also false to say new technology improves productivity; i mean its far from a guarantee. there are more failed technologies in this world than there are successful ones; we just don't hear about the failed ones.

There's poor reasoning in this argument. Why not argue that formal education has no influence on productivity, since most people don't receive a formal education. :eek: It doesn't matter that many technologies are poor and fail; the argument is that technological improvements have an impact. I believe that research in basic science, for example, ultimately leaves an increase in productivity.

Are we spending enough on R&D?

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