What Exactly Did President Obama Promise Today?
April 27th, 2009Posted by: Roger Pielke, Jr.
President Obama gave a nice speech today at the National Academy of Sciences praising science and promising resources, two of the favorite things that scientists like to receive from presidents. But what, exactly did the president promise?
He said:
It’s our character to lead. And it is time for us to lead once again. So I’m here today to set this goal: We will devote more than 3 percent of our GDP to research and development.
What does this actually mean?
The federal budget currently invests about 1.0% of GDP into R&D (PDF). Is the president promising to triple the federal R&D budget? I doubt it.
Public plus private R&D was about 2.6% of R&D in 2007 (PDF), to get to 3.0% would require an additional investment of at least $70 billion from public and private sources (using 2007 values). Is that going to happen? I’m not sure how.
Maybe the President is thinking that with a projected GDP of $14.2 trillion in 2009, that would mean that $22 billion in stimulus funding for R&D plus $151 billion in FY2009 appropriations would require about $250 billion in private R&D to reach the 3% threshold. Will the private sector invest $250 billion in 2009? I don’t know.
What did the president promise today?
April 27th, 2009 at 4:00 pm
This article says it’s currently at 2.6%. http://spectator.org/blog/2009/04/27/did-obama-just-propose-another
Maybe Gibbs will tell us what is going on?
April 28th, 2009 at 6:31 am
He promised to set a goal.
April 28th, 2009 at 8:56 am
Related to the increase proposed by the President, Greg Mankiw today posted the abstract of a Austan Goolsbee NBER paper questioning the effectiveness of federally supported research:
“Conventional wisdom holds that the social rate of return to R&D significantly exceeds the private rate of return and, therefore, R&D should be subsidized. In the U.S., the government has directly funded a large fraction of total R&D spending. This paper shows that there is a serious problem with such government efforts to increase inventive activity. The majority of R&D spending is actually just salary payments for R&D workers. Their labor supply, however, is quite inelastic so when the government funds R&D, a significant fraction of the increased spending goes directly into higher wages. Using CPS data on wages of scientific personnel, this paper shows that government R&D spending raises wages significantly, particularly for scientists related to defense such as physicists and aeronautical engineers. Because of the higher wages, conventional estimates of the effectiveness of R&D policy may be 30 to 50% too high. The results also imply that by altering the wages of scientists and engineers even for firms not receiving federal support, government funding directly crowds out private inventive activity.”
Gary Becker has also written that public support often drives out, or substitutes, for private money.
April 28th, 2009 at 10:01 am
Does the paper account for the suppressed wages of the graduate students that do a significant volume of this work? Generally speaking, graduate student stipends may not be treated as wages, or if they are treated as wages, would likely average out to not much better than minimum wage.
Another conceptual issue with these calculations – not limited to this paper – is the valuation of social rate of return/public rate of return on a striclty monetary basis. The presumption is that it’s the only return the government values on its investment. If this investment attracts new students, who would then be prompted to generate other knowledge and invention, that would be a value the government would seek that the private sector wouldn’t necessarily care about.
April 29th, 2009 at 3:56 am
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