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Can This Be True?

In revisiting my class discussions on the economics of public goods, I came across a paper from the OECD that incredibly I had never been aware of. One of the major results in the paper is shocking.

RDGrowth

Now the sample size, as with all cross-country analyses, is small, and there are the usual caveats about causality, interpretation, and so forth. But that this table is showing you is something rather remarkable. If you look at R&D expenditures as a share of GDP and correlate how important they are for economic growth, you find, perhaps not surprisingly, a strong impact of R&D on economic growth. Phew, good thing!

However, when you look at regressions that separate out WHO does the Research and Development, and then examine the influences on economic growth, you find the following. It is exclusively the R&D that is performed by private businesses that drives economic growth. In fact, R&D funded and provided by the government has a negative impact on growth. Now, I am sure there are all kinds of explanation for why the public result is negative (e.g. they focus on loss-leading basic research that doesn’t produce immediate returns, thought that is an unproved conjecture), but can you imagine if the results were reversed? It would be front page news. We’d be inundated with “Vox-splainers” telling us why this is not a surprise. We’d be told that, EVERYTHING you were taught about private R&D is wrong. You’d be told that this evidence is yet more ammunition for the need of a systematic overhaul of our short-term focused hypercapitalistic consumption driven society.

Please, do, tell me if you think I am wrong.

Why the heck had I not seen this paper? Why is this paper not common knowledge? Where are the follow-up studies of this paper? I mean, if it had been thoroughly debunked, wouldn’t we see lots and lots of the clerisy proudly pronouncing that too?

Once can only imagine how these results would change when we look at the last 10 years of data, with so much of our public R&D being funneled toward climate change studies. In the meantime, this paper’s result suggests that science itself does not require public funding, that it may suffer from it. A look at the history of the Age of Wonder may be informative here. The Royal Society, once much more highly esteemed, was an aristocratic endeavor, and its work and focus took a sharp turn when it became professionalized in the mid-19th century. I really highly recommend this book.

3 Responses to “Can This Be True?”

  1. Seattle Steve says:

    Wow.

  2. Scott says:

    yikes.

  3. […] tried comparing (Ulku 2004) to the OECD paper that Scott cites, and failed to figure out whether they disagree. The OECD paper is probably consistent with […]

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