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FIGURE 2-2 US farm labor productivity from 1800 to 2000. There was a 100-fold increase in US farm labor output, much of it brought about by advancements in science and technology.

SOURCE: S. Moore, J. L. Simon, and the CATO Institute. “The Greatest Century That Ever Was: 25 Miraculous Trends of the Past 100 Years.” Policy Analysis No. 364, December 15, 1999. Pp. 1-32.

ductivity depends on more than labor and capital.7 Intangible qualities— research and development (R&D), or the acquisition and application of knowledge—are crucial.8 The earlier national commitment to make a substantial public investment in R&D was based partly on that assertion (Figure 2-3).

Since Solow’s pioneering work, the economic value of investing in science and technology has been thoroughly investigated. Published estimates of return on investment (ROI) for publicly funded R&D range from 20 to 67% (Table 2-1). Although most early studies focused on agriculture, recent work shows high rates of return for academic science research in the

7

R. M. Solow. “Technical Change and the Aggregate Production Function.” The Review of Economics and Statistics 39(1957):312-320; R. M. Solow. Investment and Technical Progress. In Arrow, Karlin & Suppes, eds. Mathematical Models in Social Sciences, 1960. For more on Solow’s work, see http://nobelprize.org/economics/laureates/1987/index.html.

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Solow, 1957.



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