Does America need to invest more in science? 5 charts to consider.

The 20th century was the American Century. And one reason for that primacy was America’s century-long global leadership in scientific research. That societal effort raised American living standards and helped us win wars both hot and cold. The century has brought new challenges, including climate change and COVID-19, and in China an ambitious new competitor. Pushing forward the scientific and technological frontier is as important as ever. And so is government commitment to R&D investment.

A lengthy and chart-packed Goldman Sachs report out this week gives a great overview of global R&D spending, including America’s. So here are five charts and a few thoughts:

This is the chart I would use if lobbying for more federal research investment or pro-investment changes to the corporate tax code. (Note: This chart includes both private and public spending.) Of course, just looking at raw spending totals misses a lot. What is the money being spent on? And how effectively is it being spent? Quality matters a lot. As GS notes: “Many of the Chinese academic papers are not peer reviewed internationally, and often include repetitions of previously-published material. … Outdated evaluation systems in research institutions have incentivized researchers to focus on the quantity, rather than quality, of their research output.”

OK, this is the chart I would avoid using if lobbying for more pro-R&D investment policies. Quick explainer: The ratio of R&D spending to GDP is how “intensity” is calculated. And as you can see, R&D intensity today is about what it was during the peak of the Space Race. Then again, one might point out that while US intensity has flat-lined, that of many other technologically ambitious nations has risen sharply. Including China from 0.9 percent in 2000 to 2.2 percent in 2018. And if this chart somehow slipped into my deck, I would quickly highlight the paper “Are Ideas Getting Harder to Find?,” which shows the costs of extracting ideas have increased sharply over time across all industries. This “suggests that unless research inputs are continuously raised, economic growth will continue to slow in advanced nations.”

This is the chart that shows why combining private and public investment misses a lot. That especially when you consider government and business R&D don’t serve the same function. The former is more about the R and the latter is more about the D.

As the chart shows, federal funding for both basic and applied research has stalled over the past decade, after almost 50 years of consistent increases. Here is R Street policy analyst Tony Mills in a recent podcast chat with me after I asked how much Washington should spend on basic research: “I don’t think there’s any magic number. It’s more about the downward trends over time, as well as other causes for concern. … A lot of folks are worried that there’s a stagnation happening in physics, and the situation in the life sciences is not all that different. And many of the key breakthroughs in these areas took place at a time when there was substantially more federal support. If you look at all these trends together, you see that we’re not getting as much out of scientific research as we used to, and we’re not putting as much in. This may partly explain some of the productivity problems we have generally when it comes to innovation.”

It’s also worth pointing out, as GS does, that for decades, the National Institutes of Health has been the federal agency with the largest research budget. Around half of federal funding for basic research and nearly 40 percent of applied research in 2018 were granted by the NIH. But overall NIH funding has stalled since the early 2000s.

Now this is the chart I would show if making the case that Big Tech was not comprised of a bunch of dominant companies comfortable in their market-leading positions. And not a sight of corporate short-termism to be found. Also worth noting: “The world’s top 100 companies in R&D spending include 37 from the United States, 15 from Japan, 12 from Germany, 9 from China, and 4 from both France and South Korea. The number of Chinese companies in the top 100 increased significantly in recent years, from two in 2013 to nine in 2018. Five of the companies from China are state-owned enterprises.”

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