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TABLE 2-1 Annual Rate of Return on Public R&D Investment

Studies

Subject

Rate of Return to Public R&D (percent)

Griliches (1958)

Hybrid corn

20-40

Peterson (1967)

Poultry

21-25

Schmitz-Seckler (1979)

Tomato harvester

37-46

Griliches (1968)

Agriculture research

35-40

Evenson (1968)

Agriculture research

28-47

Davis (1979)

Agriculture research

37

Evebsib (1979)

Agriculture research

45

Davis and Peterson (1981)

Agriculture research

37

Mansfield (1991)

All academic science research

28

Huffman and Evenson (1993)

Agricultural research

43-67

Cockburn and Henderson (2000)

Pharmaceuticals

30+

SOURCE: A. Scott, G. Steyn, A. Geuna, S. Brusoni, W. E. Steinmeuller. “The Economic Returns of Basic Research and the Benefits of University-Industry Relationships.” Science and Technology Policy Research. Brighton: University of Sussex, 2001. Available at: http://www.sussex.ac.uk/spru/documents/review_for_ost_final.pdf.

fueling inflation. Policy-makers previously focused almost entirely on changes in demand as the determinant of inflation, but the surge in productivity showed that changes on the supply side of the economy could be just as important and in some cases even more important.12 Such data serve to sustain the US commitment to invest substantial public funds in science and engineering.13

Of equal interest are studies of the rate of return on private investments in R&D.14 The return on investment to the nation is generally higher than is the return to individual investors (Table 2-2).15 One reason is that knowledge tends to spill over to other people and other businesses, so research results diffuse to the advantage of those who are prepared to apply them.

12

E. L. Andrews. The Doctrine Was Not to Have One; Greenspan Will Leave No Road Map to His Successor. New York Times, August 26, 2005. P. C1.

13

US Congress House of Representatives Committee on Science. Unlocking Our Future: Toward a New National Science Policy (the “Ehlers Report”). Washington, DC: US Congress, 1998. The report notes that “the growth of economies throughout the world since the industrial revolution began has been driven by continual technological innovation through the pursuit of scientific understanding and application of engineering solutions.” P. 1.

14

Council of Economic Advisors. Supporting Research and Development to Promote Economic Growth: The Federal Government’s Role. Washington, DC: White House, October 1995.

15

Center for Strategic and International Studies. Global Innovation/National Competitiveness. Washington, DC: CSIS, 1996.



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