Papers Commissioned for a Workshop on the Federal Role in Research and Development (1985) / Chapter Skim
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Economic Measures of the Returns to Federal Research and Development
Economic Measures of the Returns to Federal Research and Development
Pages 89-114
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From page 89... ...
activities should be sponsored or subsidized, but also by issues of how incremental funds should be allocated among publicly managed proj acts . Recent accelerations in the size and scope of many federal R&D programs, mounting federal deficits, and ~ heightened perception that the United States is toeing technological advantages at home and abroad have reinforced economists' and polic~alcers' demands for more precise measures or forecasts of the contributions made by federal R&D.
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From page 90... ...
A fundamental question that is not addressed easily by economic theory is: What are the relevant units for R&D inpu~cs and outputs? Traditionally, economists have tended to view R&D inputs as an aggregate quantity of physical factors and not a dollar amount (such as federal expenditures ~ .
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From page 91... ...
Those opportunities themselves are influenced by technological change and the varying degree to which technological innovations confer readily appropriable returns Thus, for instance, deco determine the consequences of increasing defense contract R&D funds, one needs to understand how corporate incentives respond deco federal contract provisions. It may well be that the promise of increased federal support encourages companies to divert productive R&D resources to socially wasteful competitions for future governmen~c contracts O As will.
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From page 92... ...
The main methods and topics covered in this section are productivity studies, complementarily analyses, discounted races of return, and surreys. PRODUCTIVITY ANALYSES Productivity analyses relate changes in ache growth rates of outputs Deco changes in ache growth rates o f inputs, inc.
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From page 93... ...
I ~ has not, however, been applied widely to high technology or service sectors such as health, space, and defense, because economists lack detailed information on the outputs of goods and servi ces in those sectors. For example, it would be difficult to use this approach to quantify how much CAT scarers have increased ache produezivi ~y o f doctors or the quality of patient care .
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From page 94... ...
Me baseline production function, F is a summary statement of how d~fferen~c combinations of capital and labor generate output in some base year (when A - ~ ~ .
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From page 95... ...
or Of ~en, ~ he abo~re direc~ app~ oach ~o es.i.mat ~,g =! ~e produc-~on ~u~,c~ion meets with che criticism :;~at i ~ ignores .ne economic simultaneigy created by input and ou-?
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From page 96... ...
Griliches and L:chtenberg interpret those rates of return as es "imates of Cue "gross excess social rate of retuL`." to R&D . That terminology differs from earlier interpretations of roughly the same quantities and is in need of some explanation.
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From page 97... ...
Economists hairy been interested in tests question also, because, to the epicene aches federal R&D increases priorate spending ~n civilian applications, the true contribution of federa1 R&D may be understated. Only recently, however, have there been many large ° scale attempts to gather detailed evidence on the question of whether federal R&D increases the amount of it&l)
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From page 98... ...
Wey found, on the average, that only 3 percent of the private R&D performed w' Ah complementary federal assistance would have been conducted in _~.e absence of that federal support. .hioreo~rer, they found an ir~teres~~.g asymmetry in Ache complementarily relation.
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From page 99... ...
DISCOUNTED COST - BENEFIT METHODS Accounting rate of return methods are used often by corporations and polic ~ analysts to ca;gula~ce the profitability of R&D pro; ecus ~ see, for example, Horr~gren: and Ansani ~ lathe most popular methods for measuring ache ex post profitability of proj ects are discounted cash flow (present value or internal rate of return) and proj ect payback.
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From page 100... ...
The gene rat principle espoused above is that if one is crying to evaluate what the federal government received for its expenditures on R&D, then one must be careful to account not only for easily recognizable public and private expenditures and benefits' but also for spillover effec~cs and other ex~cernalit~es thee affect consumers and competitors. This is easier said than done.
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From page 101... ...
. lathe Mansfield surreys asked ~ variety of questions relating to the effect of federal R&D on private energy R&D and the accuracy of federal engineering employment forecasters; he specific lessons learned from the surveys are s~mrnarized nicely in the Mansfield paper and are not repeated here.
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From page 102... ...
Among the ques Lions asked were ones designed to evaluate the can~cr~butions of universe tv research, government research laboratories, and other government agencies to technological progress. Although the responses have eyed to be punt ° shed, it appears that there are fascinating differences both -within and across industries in the usefulness of the output of government research 4,bora~cories versus the output of other government agencies.
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From page 103... ...
Not only are there such differences across federal proj ects by type of inputs purchased, but there is also a prob lem in knowing whether the government accounting definition of "R&D " matches what we would like to measure . For example, in the data reported by the various federal agencies and publicly managed proj ecus, there appears to be some question as to how to report such items as contract Rap)
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From page 104... ...
Federal research poses special problems in this regard because spillovers and sp inoffs occur over time and across markets . Federal research also tends to require public dissemination of its outputs.
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From page 105... ...
output has led researchers co value outputs according to the inputs that produced them. For example, outputs in the health field come in physician hours or beds occupied He output of federal R&D labors tories is measured in terms of the numbers of outside contacts or numbers or s .udies conducted ~ see Charles River Associates " ~ .
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From page 106... ...
At a minims, it seems _h^what present methodologies do is provide useful tools for anai~zi-5 the cnaracreriscics of proj ects that require federal support. They also, in principle, .
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From page 107... ...
as health and space, as well as detailed i-.fornation on he of go~rernmenc research laboratorie This List of data inadequacies could go on and on ( see also Gr~liches ~ . However, progress coward impro~rtr~g =he re fiance (and pLausibil' tin of economic studies of the contribution of Faders R&D requires snore than progress on data issues.
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From page 108... ...
For exempt e, ~~x ray es . regulation, and patent legislation are important ai~ernat be means bay which ache federal government can influence the rate and direction of technical change.
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From page 109... ...
A recent Department of Justice suit charges ~ division of GTE Corps with gain" so far as to take defense department planning memoranda to discover what future proj acts are p tanned.
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From page 110... ...
Chicago: Uni~rersi~cy of Chicago Press, 1984b. For example, labor inputs, as measured conventionally, often include scientific personnel.
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From page 111... ...
''Economic Theory and Ga~rernment Techno logical Potic-<," Policy Sciences, Vot.
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From page 112... ...
Agriculture: An Analysis of the Role of Invention, Research and Extension. " Yale Economic Growth Center Discussion Paper Number 296, 1Q78.
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From page 113... ...
76. 77 gone ry, op Charles River Associaces, Foster Associaces, Inc., op Inc., op.
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