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Media Should Challenge MIT’s R&D Claims

UncleSamI recently heard a news report on the radio about a new MIT study that finds that the U.S. government is not spending enough on research and development, and it’s putting us at a competitive disadvantage. More detail on this was available from the Wall Street Journal story (“U.S. Is Faulted for Risking Edge in R&D,” Robert McMillan, 4/27/2015). This news comes as Congress is considering the R&D budget.

What both these stories failed to mention is that MIT is a major recipient of government research funds, which may have colored the study findings.

The facts that got journalists’ attention are that federal funding for basic research has dropped from 9.1 percent of total annual federal outlays to just 2.6 percent.

My skepticism caused me to look a little closer at the findings, and I’m glad I did.

First, according to the MIT study, federal outlays on basic research have gone from $16.2 billion in 1968 to $178 billion in the 2015 budget. This seven-fold increase in government spending is characterized as a dangerous reduction in government support, because R&D’s share of total outlays has fallen so sharply.

But is this ratio a relevant metric?

In the years since 1968 the federal budget has seen an enormous shift toward non-discretionary spending (Social Security, Medicare, Food Stamps, etc.). I presume MIT isn’t suggesting we take money from Food Stamp recipients and give it to research scientists.

So wouldn’t the more meaningful comparison be to look at R&D’s share of federal discretionary spending over this period? By this measure, R&D’s share has indeed fallen, but just to 12 percent in 2014 from 18 percent in 1968.

Is it relevant to consider how the composition of the federal research funding has changed?   Maybe special national priorities had boosted R&D spending during the 1960’s and 1970’s.

In fact, another MIT analysis, “66 Years of Sponsored Research” published in the MIT Faculty Newsletter of January 2007, explains that MIT research funding has ebbed and flowed with defense spending. In 1970, Department of Defense was the largest single source of MIT research funding at 28 percent. By 2006, DOD funding had fallen to 15 percent, as the Cold War focus on high tech weapons waned.

Finally, if we are concerned about competitive risks, shouldn’t we look at the entire picture of R&D spending in the U.S. economy? During the time that the federal government commitment was growing by an average annual rate of roughly 15 percent, private sector investments in research and development were exploding. According to the Bureau of Economic Analysis, between 1968 and 2014, gross private investment in intellectual property rose to $647 billion in 2014 from $16 billion in 1968.

Adding this piece, R&D spending in the U.S. has grown faster than the overall economy, rising to 4.5 percent of GDP in 2014 from 3.4 percent in 1968.

My analysis is admittedly simplistic and I’m probably missing some important issues. And there may be a real crisis in R&D funding in the U.S., but lawmakers and taxpayers will be better served by more thorough and objective analyses than are likely to come from institutions with a financial stake in the outcome of the funding debate.

One Comment Post a comment
  1. Luke Delorme, Research Fellow #

    According to World Bank data, U.S. R&D spending (both public and private) as a percentage of GDP is competitive. It was 2.79 percent in 2012, just below Germany’s 2.92 percent but above France (2.26 percent), China (1.98 percent), Canada (1.73 percent), and the UK (1.72 percent).

    http://data.worldbank.org/indicator/GB.XPD.RSDV.GD.ZS?order=wbapi_data_value_2012+wbapi_data_value+wbapi_data_value-last&sort=desc

    Like

    May 4, 2015

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