Saturday, September 28, 2013

Lobotomizing The American Enterprise: Slower R&D Spending

Mark Thoma of Economist's View (whom, according to Paul Krugman, we should all be reading a lot more often than I do) made me aware of something pointed out in the Atlanta Fed's macroblog:

The New Normal? Slower R&D Spending

In case you need more to worry about, try this: the pace of research and development (R&D) spending has slowed. The National Science Foundation defines R&D as “creative work undertaken on a systematic basis in order to increase the stock of knowledge” and application of this knowledge toward new applications.


R&D spending is often cited as an important source of productivity growth within a firm, especially in terms of product innovation. But R&D is also an inherently risky endeavor, since the outcome is quite uncertain. So to the extent that economic and policy uncertainty has helped make businesses more cautious in recent years, a slow pace of R&D spending is not surprising. On top of that, the federal funding of R&D activity remains under significant budget pressure. See, for example, here.

Americans are neither more nor less ingenious and inventive than citizens of most other nations not overwhelmed by civil war or abject poverty. But it is a mistake to think that we can depend on that ingenuity alone to maintain a technological lead in the world: it must be nurtured in both the educational system and the business community. This means, obviously to me but apparently not to GOP members, that education and research must be solidly backed in part by the federal government. When Americans allows a depressed economic circumstance to become "the new normal," we compromise not only our own wellbeing but that of our future generations. Education and R&D are the lifeblood of a nation that would be technologically... and hence economically... dominant. And yet most small- to medium-sized businesses, ever anxious about the bottom line in these troubled times, are under pressure to reduce expenditures in these two crucial areas.

In short, if America is to lead, education and resesarch must be underwritten in part by the only institution large enough and financially stable enough to commit the necessary funding: the federal government. We can commit those large amounts now, or we can (eventually) bequeath to our children a nation that trails the world, not just economically but in quality of life and health. Ultimately it's our choice. Think of the consequences... the long-term consequences... before you are tempted to vote for any Republican. Reflect for a moment, and realize it's not worth it.

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