Science research drives economic growth, but it's expensive and slow | The American Ceramic Society

Science research drives economic growth, but it’s expensive and slow

Entrance to the headquarters of the Max Planck Society in Munich, Germany. Its president, Peter Gruss, asks whether nations are investing enough in basic research to drive their economies. Credit: Maximilian Dörrbecker (Chumwa); Creative Commons License, Wikipedia.

“Are nations investing too little in basic research?”

This is the question posed by Peter Gruss, president of Germany’s Max Planck Society, in an editorial in the April 27 issue of Science magazine. Observing that some industrial countries have been cutting their funding for research, he makes the case that they do so at their own peril and risk owning the discoveries that lead to technological innovations. He offers the example of Albert Einstein’s theories, “without which today’s technologies such as lasers or satellite navigation systems would be unthinkable.”

To make his case that prosperity and research investment are linked, Gruss turns to economists for evidence. He goes back to the work of Nobel Laureate, Robert Solow, who showed in the 1950s and 1960s that technological advancement, not labor and capital, was the driver behind economic growth, and that a stunning 80 percent of jump in gross domestic product could be attributed to new technologies. Those years were post-war, Cold War, space race heady times for innovation, so there was plenty of innovation to measure.

Gruss cites the work of Harvard’s Phillipe Aghion and ETH Zurich’s Hans Gersbach, both of whom offer contemporary confirmation of Solow’s work. According to Gruss, Aghions’s work shows “R&D investments become increasingly essential as economies approach the world’s technological frontier,” and Gersbach’s work confirms that “in leading industrial nations it is the basic research that serves as the essential driver of innovation for economic growth.”

However, Gruss is not advocating for private enterprise to step up and fund basic science R&D, saying, “For business management it is risky, and given the long time periods required for practical benefit, not sufficiently profitable, for most companies to finance such curiosity-driven fundamental research.”

Instead, he argues for governments to commit to adequately funding basic science research. He says this mechanism will “produce the skilled problem-solvers needed by the private sector and because the research results themselves deliver substantial benefits to the local economy.” (By ‘local,’ I think he means ‘sovereign.’ He says inventors tend to cite patents and papers originating in their own countries.)

So what does the global R&D investment landscape look like? Gruss says that Europe and the United States are investing at 2 percent and 2.8 percent of GDP respectively. Contrast that to Japan and Korea, which are investing 3.4 percent of GDP. He does not give numbers for China and India, but says they are “also gradually catching up.” He makes the point that higher investment levels allow nations “more flexibility in the scope of their investments,” and that countries with low-level investments are “gambling away opportunities if they do not improve their investments in R&D with an emphasis on basic research.”

All of which is a timely framework for an early glimpse of progress on the US FY2013 budget and the impact on science the election of Francois Hollande as president of France could have.

In the same April 27 Science, budget-watcher Jeffrey Mervis, provides a short summary of how preliminary work on spending bills is shaping up for four of the R&D big spenders: NSF, NASA, NIST and DOE. So, with a collective holding of breath and crossing of fingers, he reports that things are looking pretty good — so far. Of course, as Mervis points out, this is an election year so nobody thinks the budget will be finalized until after the elections, but as he says, “an early lead can’t hurt.”

In mid-April spending panels started “marking up” the separate spending bills, which are before the House of Representatives and the Senate. Paraphrasing the highlights that Mervis calls out:

• NSF — The House is willing to up the budget by 4.2 percent ($299 million). This is $41 million than the president’s request, but is enough to fully fund the agency’s education programs. The Senate was stingier and reduced the president’s request by $100 million and wants the NSF to “protect core research activities.” There appears to be little senatorial support for the $290 million the NSF wants to spend on new initiatives introduced in the last year to promote entrepreneurship, international partnerships and some radical research ideas.

• NASA — The message from both legislative bodies was “Go!,” with the House nixing Obama’s proposed $200 million cut and boosting the budget $5 million over this year’s appropriation. The Senate was less generous, but cut less than the budget request. Both bills wipe out cuts to the Mars program and provide the resources to keep the James Webb Space Telescope on track. There were a few twists: The House emphasized the importance of a Mars sample-return mission, even though NASA has said it’s not affordable, and the Senate wants to transfer in $1.6 billion of satellite work from the National Oceanic and Atmospheric Administration.

• NIST — The House and Senate both are leaning toward increases—$80 million on the House side, $75 million on the Senate’s. Obama had requested an increase of $105 million, but there is unlikely to be any grousing; the House’s $80 million is a 14 percent increase over this year’s budget.

• DOE — The House panel recommended cutting the department’s Office of Science budget by $50 million from this year’s $4.87 billion, which is $168 million less than the president requested. The ARPA-E budget would dwindle from $275 million to $200 million.

Any increase in discretionary spending is significant because the Budget Control Act that became law last August requires $1.2 trillion in cuts, starting in FY 13, be split evenly between defense and nondefense spending. Previously, Mervis warned that R&D budgets could see cuts of about seven percent per year.

In light of Gruss’ editorial, it seems, then, that our vector has the right direction but its magnitude is weak. This seems especially true with respect to energy, and one must wonder how we will ever become energy independent without the science that drives innovation.

The AAAS R&D Budget and Policy Program follows the unfolding of the budget very closely. Also, the science society’s annual report and analysis of the proposed R&D budget is available. See especially Chapter 26, “Materials Research in the FY 2013 Budget” (pdf).

Finally, in yet the same issue of Science, Paris-based writer Barbara Casassus culled through the French presidential campaign chatter to see what the election outcome might mean for science, although neither candidate—winner François Hollande and loser Nicolas Sarkozy—dwelt much on the topic, as there were more pressing issues like unemployment, a fiscal crisis and internal ethnic tensions.

It seems that there are structural problems in the French system for funding basic science research, and they appear to be exacerbated by dwindling budgets. Hollande said in a speech in March that he would shift funding from project to basic research, but he did not promise any new money. His research advisor, Jean-Yves Le Déaut, estimates that the government’s higher education and research commitments will fall €2.8 billion short, which he described in the article as “a time bomb waiting to explode.” A representative of France’s scientific research trade organization said that lab operating budgets have plummeted an average of 20 percent in both 2011 and 2012.

I’m no economist, but according to this Forbes article by INSEAD Professor Theo Vermaelen, Hollande appears to be sending out plenty of “spend” messages, but not of the type Gruss is advocating. Vermaelen says the Hollande government’s plan is to promote economic growth by making itself bigger, for example, by hiring more government employees and subsidizing jobs for young people. Those new hires will have more pocket money to spend on stuff, but Gruss’ point is that those French euros will be flying into non-French coffers.