The social returns of investing in scientific innovation
A new paper makes the case that the social returns of investing in innovation are enormous.
Why it matters: Things seem not great, to say the least, but humans have faced far worse material challenges for most of our existence. That changed largely thanks to the innovations brought about by science, which is why we need to ensure they keep coming.
By the numbers: In a working paper for the National Bureau of Economic Research, former Treasury Secretary Lawrence Summers and Northwestern economist Benjamin Jones attempt to calculate the social returns of innovation investment.
- They write that "even under very conservative assumptions, it is difficult to find an average return below $4 per $1 spent. Accounting for health benefits, inflation bias, or international spillovers can bring the social returns to over $20 per $1 spent."
- That's one reason why per-capita income in the U.S. has risen by 25-fold since 1820.
The catch: Government spending on R&D is currently at a 60-year low as a percentage of the federal budget.
- Corporate R&D spending is making up for some of that, but it is far less likely to be allocated to basic science — the foundational discoveries that must be made before we get the cool stuff.
The bottom line: We may obsess over politics, but scientific innovation is the engine that moves us forward. We fail to fuel it at our peril.