Professor Luke O’Neill of TCD reckons that the recommendation of the Bord Snip report to cut €100 million from our state-funded scientific research budget is “crass and ill-informed”.
Professor O’Nell is obviously a man who only puts forward well-informed opinions. For that reason, I was interested in his statement that
it is also well known that investment in basic research, as well as being an investment in what economists prosaically call human capital, pays back on average three to one in the long run. What other sector that the Irish government funds can boast such a return?
Funnily enough, well-known facts are sometimes the trickiest to actually find evidence for.
I’m willing to be pursuaded that Professor O’Neill’s well-known fact is actually a fact. I’m even willing to be pursuaded that it’s well known. But I’ll need some help here—can people tell me the source of this well-informed opinion and whether this source applies well to Ireland?
48 replies on “Crass and Ill-Informed Opinion on Science?”
An Irish Fact, according to Brendan Behan, is ‘Anything repeated three times in public’.
When reading the article earlier, I was struck by how the hard science defenders of the public bonanza, rely on precious few hard facts to support their case.
The late US economist Edwin Mansfield who did a lot of work on the economics of research came up with an estimated return of 28% on basic research, which the Congressional Budget Office said could be more or less. Mansfield himself dropped it in later work.
Most US basic research is financed by the federal government. Commercial applications eg, the Internet, are usually offshoots of research by the Pentagon, NASA etc
Prof. O’Neill’s own biotech sector made a first profit in the US in 2008, after 42 years.
Some 67 of almost 400 public companies reported a profit and three companies accounted for almost all the profits, of about $8 billion: Genentech, Amgen and Gilead.
Maybe, colleagues Philip, Kevin and Patrick should have a word with Luke about the long run!
Like innovation, research is a red herring. We should instead concentrate on quality. By improving quality we increase productivity. Innovators get bought out and money flows into those who multiply the innovation. But robots can cut costs of physical manipulation and computers likewise for services. Blogs like this mayn help by enabling falsehoods to be put to rest. We do not need schools in an internet age. Etc. But that would be innovation. And many children would end up apprenticed. Instead in our system they become 3rd level graduates. And emigrate.
We must re-evaluate all attitudes to investment now that we have the opportunity of a good depression! Don’t waste it, though it may last 19 years.
As Oscar Wilde might have said:
“An economist is someone who knows the price of everything but the value of nothing.”
Part of the problem with the discussion of science funding, SFI and EI in Ireland is that they are always trying to measure everything from the short-term economic returns. If that had been the criterion in the US we would never have had the space program or the Internet. Science education and funding is way too important to leave to the economists to decide.
Really? Because I heard that in general when research is commercialised said commercialisation takes place outside of the state of origin in 90% of cases. Granted this is one statistic from a presentation by ARM, but that’s one hand-wavy statistic against another.
Having brushed up against several academic departments my experience is that most have little interest in commercialisation as they are incentivised to publish, both by the department (who wants their reputation advanced) and by the funding, in that if your publications are down (because you want to patent something for example) your funding is put at risk.
Hong Kong set up a state funded company specifically to commercialise research from their university because it would take more than the academics to ensure a return on investment, I would think that is a lower risk proposal for securing a return on your research investment (and for God’s sake don’t populate it exclusively with PhDs).
Thinking of stones and glass houses, has anyone ever done a cost-benefit analysis of economists?
I think there is a lot that is wrong with the way science is funded in Ireland, and for all I know, the marginal utility of this 100 million might well be zero. But just cutting the money off is rather a silly way of going about it.
Another part of the problem is that we have irrational expectations of what we can realise thru funding research. We are fed this nonsense about being world class, world leaders in this and that, etc.
(Just as an aside, consider what we ‘do’ to our sports stars, all gold medal hopes…., ah despair, and dail committee on why they didnt preform!!)
Most of this science funding is little more than a gamble, based on the view that ‘we can punch above our weight class’.
Maybe we need to recognise, we probably wont be world class. We shouldnt speculate the public purse on it.
What we can be is fitter, faster and cheaper than our competitors, and funding should be based on maintaining these virtues.
One further point, if taxpayers funds are used then price and value has to be measured, or at least attempted.
And preferaby alot more regularly than the snip report.
What about we do a cost benefit analysis of the value of cost benefit analysis? If it comes out negative, what an invaluable finding that would be!
@Garo: Not sure if that’s directed at me, but I’m not an economist. All I’m saying is that there is no point expecting something from an academic institution if said institution does not share that goal. If you are looking for a tangible return then you need to set up the relationship to ensure that, if you want to churn out papers that produce no immediately measureable return on investment, but with a view to engendering an environment suitable for the fabled knowledge economy then you need to define the goals and measure the progress towards those goals. It’s the politicos that are mixing messages by saying that there is no obvious return here, perhaps they are unclear as to what they want?
@Al: Indeed. It is silly to expect world class research when the smartest students prefer to go into architecture or construction management or even pharmacy! Talk about a upside down incentive structure in the economy. Add to that the reports I hear about the dumbing down of the school leaving exams in maths and science and my personal experience with students, Ireland has a long way to go to being world class in science and research.
@Graham: Good one!
@Grow Up: No my comment was not directed at you. I agree that it is inappropriate to expect universities to generate economic return. In fact, I would go so far as to say that EI should be scrapped and SFI should concentrate on funding research with no expectation of a return. The government or its agencies should not be in the job of funding entrepreneurs. Its job should be to fund basic research and education.
I don’t know the source of that “fact”, but there is a demonstrable correlation between spending on research in an economy and the rate of growth in labour productivity. There’s a hastily-thrown-together chart here: http://congregg.wordpress.com/2009/08/18/some-hastily-thrown-together-data-on-the-economic-impact-of-rd/#respond
@Garo: Fair enough. I’m not sure I completely agree with you about EI and SFI, but I’m an engineer, so what do I know eh? 🙂
Isn’t it a shame that there isn’t an equivalent irishscience.ie/irishresearch.ie blog or forum for people involved in such research in Ireland to publish stuff or interact with people outside academia.
Something cross institution, allow experts from industry and academia to interact… ideally across a range of disciplines….
I realise that there are commercial issues etc but I think it could prove very useful to everyone.
“Ireland has a long way to go to being world class in science and research.”
True. But we also have to ask what is a reasonable expense in attempting to achieve this. We also risk this becoming a national distraction.
Reading the learned Prof’s article in the times,….., was going to make a point here, but i cant.
IMHO, this is more nonsense form our funded aristocracies outlining:
based on their own metrics: citations!!!! do we derive revenue from citations!
-The Wimp argument-
our fragile sector needs funding to bring it thru this dark night and on to the glorious dawn.
-The first or last argument-
if we dont fund it to the hilt then we will be last, (third rate) and nobody will ask out to dance!
-The children are our future argument-
And we should invest in them or its neglect of them!
This tripe is the same that is being put out by the:
Keep Irish compulsory in schools gang
Irish arts should be funded gang
Teachers unions wanting more teachers
Sorry if appear to be channelling Kevin Myers here!
I think the issue here, drawn out in the media, is those funded mounting a defense of their funding.
There are those that justify their funding clearly, ar at least attempt to.
Respect to them!
But there are those that wince under the harsh light of economic facts and attempt a ‘three card trick’ attempting to argue about intrinsic values and not dealing with Lady Economics: keeping that card unturned!!
@Al: Wouldn’t you try to argue against your cash flow being cut? Personally I view the SFI as a bit of an elitist organisation, but hasten to add that is most likely an ill informed opinion.
i was at a function a few months back in the science gallery, it was where the ideas there are being put forward as commercial ventures, some of them -seemed to me, the layperson- to be really great ideas if they worked and got some funding. lots of them were medical
given that pharma is one of our sectors still exporting and providing jobs, the move to a knowledge economy (if there is ever to be one) surely must focus on the commercialisation of research ideas? if we stop spending on them then where will the innovation come from?
@Al: It is not rocket science to figure out how other countries have done it. A fact finding mission or two might have gone a long way in observing how the US universities continue churning out sci-tech PhDs at a high rate and how the economy there finds good use for them. Of course Ireland wasted all that money in giving expensive haircuts to ministers and paying first class air fare to all those who were entitled to it.
Granted there are issues of scale involved and it is not possible to be world class in everything. But it is not too much to expect some world class contributions in science and technology.
PS: The basic problem is the stupidity of the same lot who continue getting elected year after year and who believe all problems can be solved by throwing money at them.
I would go easy on the man, he studied for years, worked hard and is a firm believer that he and his colleagues have and are making a valuable contribution to the country’s well being. No doubt there is a benefit. Problem is the gov’t has to rein in its spending and he is now competing with prenatal care, welfare and lower levels of education. Reality is a bummer its enough to drive a man to drink.
@ Mike H.
No disrespect intended to the man. And he is perfectly entitled to make his case in the time. He is in a competition with more deserving causes and alot of less deserving causes too. However the arguments used are part of the formula pursued by all interest groups and, by and large, these are left uncontested or undeveloped.
Absolutely, I am all for Ireland Inc being top of the international class, but not for BSing! which we are quite good at, unfortunately. There is a danger of developing a Church of Higher Education where worship is mandatory, and all causes noble. We also have to acknowledge that we may be ignoring other issues by focusing on high level research.
-Are we sending people(students) into high level research whose talents lie elsewhere but followed the motorway that was the educational route.
-Are we overqualifiying people overall in our ‘everyone goes to uni’ ideology. In Germany?, arent students streamed at 2nd level. How would that go down here if it was advocated as best international practise?
Agreed in general.
But why would good investment opportunities require a function? Was it an auction? Surely presentations would be more effective in private to the investment groups that Prof O Neill identified in his article?
“the move to a knowledge economy (if there is ever to be one) surely must focus on the commercialisation of research ideas? if we stop spending on them then where will the innovation come from?”
Of course I have to say yes!!, but is it that simple?
@ Grown Up
We all have to argue for our funds, true, true, but lets focus on the arguements?
Sorry for the condensed post
A bit of info on RO1 and the timeline from concept to product in the drug discovery/development area. So, early days yet for that type of pay off.
Medical research yields big returns
By Clive Cookson
Published: November 21 2008 02:00 | Last updated: November 21 2008 02:00
Medical research yields an annual return of almost 40 per cent in economic benefits and health gains, according to a study published yesterday by UK funding and scientific institutions. The study analysed research in mental health and cardiovascular medicine carried out between 1975 and 1992 – long enough ago for the effects to feed through. It showed the average time lag between research spending and health benefits was 17 years.
Every ﾣ1 spent by a public body or charity on cardiovascular research “produced a stream of benefits equivalent to earning 39p per year in perpetuity”. The total return is made up of 30 per cent in direct returns to the UK economy (for example through the pharmaceutical industry) and 9 per cent in health gains through new treatments. The combined return for mental health research was 37 per cent.
The study was commissioned by the Wellcome Trust, Medical Research Council and Academy of Medical Sciences, and carried out by Brunel University, the Office of Health Economics and Rand Europe.
Copyright The Financial Times Limited 2009
Were Mary Harney’s haircuts a deserving cause. Is putting enormous amounts of money in the banks without removing the people who caused the problem in the first place a good use of money? You can cut a 100 million off the research budget or you can cut a 100 million off the amount of money Anglo Irish is putting in to keep Galway tent developers afloat. To me the choice is obvious.
The argument isn’t that there should not be R&D expenditure and the production of some PhDs but even before the crash in 2007, the majority were doing more post-doctoral research rather than getting jobs in business.
From a commercial point of view, the results of basic research are incidental.
Basically, the cart is put before the horse rather than responding to perceived market needs.
8 SFI spin-outs since 2002 and some of them may have just a few staff.
On a separate matter, how can one properly handle a teaching job while running a company (it is of course possible but I’m sure there is a risk for an imbalance).
As for the metrics of citations in journals, number of PhDs and patents, Professor Amar Bhidé of the Columbia Business School, argues in his book The Venturesome Economy, that the development and effective use of innovations requires multilevel, multifaceted advances and he asks: Why has the US maintained (or possibly expanded) its productivity and per capita income lead while the EU and Japan have increased their shares of PhDs, scientific articles etc.?
I think you have identified one of our major failings…
We dont execute well!!
No bodies after all the tribunals!
No bodies after all the recapitalisation!
Bodies after Nama?
In fact if we did bodies, we might not have been in this mess..
This paper summarises the evidence very well on the impact of R&D on productivity
I think a lot has to do with the Irish investment mentality, the truth is, we are not investors, we make the generally conservative British look like wild gamblers in comparison.
outside of venture capital/enterprise ireland, we don’t look for business opportunities to exploit (on the whole) and then invest in them, which is why many of the good ideas are instead taken to the US or UK etc. I think a large part of a knowledge economy has to do with people getting involved and not relying on state agencies to get us there.
There was a guy who raised 300m to try out an electric car idea in Israel, think you could raise even 300k for the same concept here?
@Al – people don’t invest for posterity, the do it for profit! of course the ideas have to have commercial utility!
The Wellcome Trust report is at: http://www.wellcome.ac.uk/stellent/groups/corporatesite/@sitestudioobjects/documents/web_document/wtx052110.pdf – perhaps the economists could post a discussion on its contents?
The timelines in biomedical research are very long: in drug research timelines of 15-20 years or more from target isolation to efficacious therapy are not unreasonable (think Alzheimer’s Disease for example).
While it may be true that biotech industry as a whole has just made a profit at last, this seems quite remarkable to me, as the airline industry has a whole apparently has never made a profit since it’s inception, and at a guess I would say the motor industry as a whole is not far from the same position. The biotech industry of course was invented out of some useless research on genetics in Cambridge in the 1950s!
Lastly I am fascinated by a paper from the London School of Economics that shows that the more research intensive your university is, the greater is the lifetime impact on your earnings (http://ideas.repec.org/p/iza/izadps/dp4043.html). Are these the sort of indirect variables that are not being discussed here, as the indirect effects of research on training and hence productivity in general are being missed?
The US biotech sector was sustained on the hope factor in the strong US venture capital industry.
As to the airline industry, there must be some research which contrasts the performance of subsidised national carriers and the rest.
As to the LSE paper, snob value would be a big aspect of university choice and research would tend to be concentrated in the big name unis.
Last April, the UK Cabinet Office published a report which showed that UK professions were riddled with nepotism and networking, which restricts access to top jobs in professions such as the law, accountancy, media and the City – – ditto Ireland.
US CBO report on R&D:
“The primary task of the states and, bear in mind, that with all the talk about minimising the state, in the OECD countries the state continues to grow relative to GNP, notably in the eighties and nineties, is essentially to socialise risk and cost, and to privatise power and profit.” – Noam Chomsky
Scientific research is important but there should be a much bigger emphasis in monetary measuring of research projects.
One thing about working for an American company is that you notice that they are very good at measuring effectiveness of employees and processes.
Perhaps if researchers were given targets in this regard and they were measured against targets which affected their pay, there may produce better results.
I know that certain projects may be difficult to measure but, again working for an American company you notice that they will always at least attempt to measure and if then adapt if needed.
Evereyone, even scientists work better with a carrot and if the state is paying for the research they should be able to use or sell the fruits of that research.
I think the entreprenurial path has our venture capitalists leaving the country for Switzerland, Monaco, etc etc.
I also think that we have to accept with our population base there will be limitations to what we can host.
Was it Airtricity’s Mr O Connor that went to Chile for the next stage of development?
How could we keep them here????
@Garret A FitzGerald
“So, early days yet for that type of pay off.”
Professor Danny Breznitz of the Georgia Tech, an innovation expert, who has advised the Irish government and State enterprise agencies, said in 2007 that Irish businesses lack the confidence to become world business leaders. He said Ireland was not creating enough new businesses, and when new businesses are set up, the financial supports are not there to keep them innovating.
Breznitz said he feared that Irish research is too narrowly focussed on biotech and the ICT (information and communications technology) sector.
If a country wants sustained economic growth it has to focus on innovation, not only on the research side but on the commercialisation and the growth of productivity, he said.
The biggest third-level spin-out from an Irish university was Iona in the early 1990’s — from Prof. O’Neill’s base at TCD.
It was acquired by a US rival in 2008, of more recent vintage.
To the policymakers and the research academics, it was a case of “don’t mention the war.”
Why put the flow of funds at risk asking questions on why promoters cash out early or struugle until acquired, by an overseas firm!
When you have every media outlet, jumped up journalist, academic economist, Revenue, Regulatory Quango, ODCE and Jack of All Trades waiting to berate you when you fail as under the Irish System why would anyone bother to devolop anything in Ireland. This country needs to get real. Failure is part of success in business but it is not acceptable here so real entrepreneurs generally go elsewhere and they are right.
“Science education and funding is way too important to leave to the economists to decide.”
Everybody who benefits from the public purse says that. I don’t see why a natural scientist should have any more right to decide on the allocation of public resources (ie my money) than has a busdriver, an economist or a scribe.
“Failure is part of success in business but it is not acceptable here”
Not so. Small failures are unacceptable. Big ones get NAMAed.
@Brian: I agree with you but there are far far better targets for that right to decide allocation. I mentioned a few earlier, 10.5 billion for the banks and upto 4 times as much more through NAMA. On a smaller scale, Mary Harney’s hair cuts, the unvouched expenses, the pension on top of a salary. And yes the 50 million in Fas. Let us concentrate our energy on the indisputable and egregious waste first. Then we can move on to other more disputable items.
@michael hennigan – i totally agree, this country doesn’t foster innovation then translate it into viable businesses on one of the few fronts that is making a real economic difference (pharma) the commercialisation of ideas and IP isn’t nearly championed the way it should be, the reliance is nearly purely on state hand-holding by enterprise ireland, outside of that you have to leave the country it would appear.
here is an example of something that probably wouldn’t work in ireland
even though it makes sense, why? because nobody would back it or city councils would tie it down in a mire of stupidity.
perhaps its genetic, if alcoholism is why can’t innovation and investment be as well?
the type of person who left europe for america and risked it all might pass on the same genetic qualities and thus yanks are programmed for undying optimism and innovation. who knows.
Excellent point on innovation.
I dont think that it is enough that Govt fund innovation, which seems to be the preferred option.
Surely Government must innovate within too.
There was some excellent stuff within the Mc Carthy report on this.
But, it seems to have ended in the news cycle….
It does seem like politicans in general lack the fortitude to push thru effective long term improvement in govt.
@Michael, there are a lot of lessons to be learned from Iona’s history, but the most important ones lie deep in the past. Iona Technologies was a heroic endeavour to turn world-leading technology into a major technology business. But they were too slow. It was too difficult to raise money in Ireland, and there wasn’t enough expertise in building technology businesses available. A Silicon Valley-based late arriver – BEA Systems – passed them out (I can’t remember exactly when, but let’s say 1998), and in a sector in which the “800 pound gorilla” makes most of the bucks, it was likely thereafter that Iona would struggle, and eventually fold or be bought out. I have vast admiration for Chris Horn and his colleagues and successors for their initial ambition, and for their repeated attempted comebacks.
BEA was able to move fast because it had access to the resources of Silicon Valley, which is tuned to deliver all the world class resources and advice a promising new business needs, pretty much on demand.
The great pity is that we have not produced more Ionas. If we had, some of them would have failed, just as happens in Silicon Valley. Some would have struggled on, just like Iona. And maybe we would have had a small number of big successes. We’re far better prepared now to enable them to go all the way, with much more expertise and experience in building tech businesses, and with much better systems for delivering risk capital. We are also pretty well tapped in to the Silicon Valley networks that gave BEA such an advantage.
As a post-script, I should mention that BEA was itself bought out in 2008 (by Oracle).
Professor O’Neill’s response to the removal of €100m from the state funded scientific research budget is predictable.
It is neither crass nor ill informed as he suggests but it does raise the issue of why we accept the expenditure of big amounts of borrowed money withour having a debate of the value to Ireland.
The response by Proffesor O’Neill reminds me though of the high (almost religious) status the basic science constituency has managed to achieve and in doing so has made it hard to question the allocation of resources to it. It is a further reminder of the damage that can be done through lack of debate.
By this I mean that, listening what amounts to debate about building a well functioning innovation system in Ireland, we could easily conclude that this can be delivered predominantly by the colleges and basic research
We need a certain amount of basic research to keep up the standards of enquiry of graduates and to provide a stock of absorptive capacity for companies, but we should be very analytical about how much we put into the system in terms of what we get out.
A presentation by Darrell Mann providing some interesting data to at least add to the debate that Colm McCarthy has raised, can be acessed at:
In his presentations, Darrell shows shows that every €100 invested in academic research returns on average €3 (gross) in revenue. This presents a very different picture to the one presented by Profesor O’Neill.
Genrich Althuller in his great work in the development in the Theory of Inventive Problem Solving studied the trends of evolution of technological systems and it is now established (on the basis of millions of patents) that only 2% of all patents relate to pioneering solutions whereas 97% of patents do not even recover the cost of filing.
It is also the case that 98% of all innovations come from existing knowledge; putting it together in new ways; working and re-working it to provide solutions to the significant unmet needs of real people.This is emphasised in a paper (Some New Ideas About Research
for Development) by Eric Arnold and Martin Bell (2001) with the comment:
“Countless surveys of OECD firms show that their main sources of technology are internal knowledge and other firms. Public sector research accounts for a vanishingly small share of their knowledge inputs”.
In my view Colm McCarthy is correct to imply that the case for return in investment is not compelling.
Firstly, while economists have associated economic growth with technological progress, they mean more than something that emerges from scientific research. It can, for example, relate to new ways of doing things and in this sense it may only be new to the firm itself.
Working and re-working existing knowledge is a huge source of innovation that is facilitated by the use of ways of thinking and tools that can be summarised under the heading of TRIZ.
Given the economists broad understanding of what they mean by technological progress or change, and given the fact that many products
emerge through technology development and/or technology integration it is easy to see how basic science is credited with development that it shouldn’t be credited with.
Following the debate here with a lot of interest..
I’m a member of the Innovation Task Force although I hope not one that Michael Hennigan classifies as an “insider members from the universities and state sector” – I am not a member of either of those!
What I would like your thoughts on are: Where should Ireland now invest whatever little capital it has, so as to foster sustainable growth into the future ?
Please post back here and/or tweet and tag #itaskforce and/or make a formal submission by 18th sept next as per http://bit.ly/3SSBs
Sincerely would appreciate careful views and suggestions
Also following the debate here and new to this forum.
I’m surprised that in the genuinely difficult quest for ‘ linear evidence’ for the validity of R&D investment everyone on this thread seems to have ignored the something obvious. Whatever about the past, are not the increased investments in R&D (including basic research) around the world lately somewhat compelling? USA (NIH and NSF), Korea, Finland, Germany etc etc.
Evolmaharg has made a very important observation that is worthy of comprehensive comment.
The first thing to say is that R&D is used widely to mean anything from innovation to actually doing the research and development part of innovation management.
In the Technopolis paper I referred to, it is described as having two faces.
As regards countries actually committing to increasing spend on R&D, they do other things to enhance their innovation system and as a Booz study shows, R&D spend isn’t the issue: how well innovation is carried out is the key.
In addition, Deutsches Institut für Wirtschaftsforschung e.V.
(DIW Berlin) carry out studies of nations capability to innovate.
DIW describes three actors responsible for determining
the capacity of a country to innovate:
1 — Companies
2 — State
3 — Society
The overall indicator reflects 7 factors of the innovation system, namely:
— Education system
— Regulations and competition
— Implementation in production
In the top 10 places are Sweden, USA, Switzerland, Finland, Denmark, Japan, UK, Germany, Netherlands, Canada.
Ireland is in 12th place and Korea is in 15th place.
Besides the DIW Innovation Capacity Index, there are other similar indices (notably the Insead Global Innovation Index)
In conclusion, countries who have holistic well functioning innovation systems have a better chance of growing successful sustainable economies because they recognise that doing R&D is only part of the story.
Re-posting http://bit.ly/2DF2yP from last week because of lack of response so far:
In your opinion: “Where should Ireland now invest ?..”
Good to see the debate on Science funding in Ireland proceeds apace. 2 things- first I’m always surprised at being accused of having a vested interest. Of course I have a vested interest having been at this profession for 25 years and really believing in scientific research as an extremely important activity that should in part be funded by governments. Doesn’t everyone have a vested interest of some sort?
The second thing I get accused of is of not providing enough facts. Well there are so many facts out there when trying to measure ROI and its been going on for years and years with no absolute answer. The one conclusion that most countries draw is that it is a good thing for governments to support basic research. I guess in Ireland since the budget is tight the question is can we afford it or not? If we decide that we can’t afford it I think this would be very negative indeed but obviously many think it would not be negative, although what they want instead is not necessarily spelt out. The question then arises as to where a govt should put its money regarding science and technology. What would be good would be for there to be a debate on this and to compare the alternatives with agreed metrics.
Now as to the facts what follows is a series of pieces trying to establish these. I didn’t put many of these in the Irish Times piece I did because I wanted to keep the piece to a certain length and emphasise not only the economic benefits, important though they are.
The ROI ranges from as low as 10% to 40 fold and the whole problem is the assumptions being made when trying to establish the facts. So we can pluck whichever ones suit us, both to support our particular argument or use against another person’s view. Of course we could conclude that because there is no accurate measure, funding should not be given…but that might be viewed as being, dare I say it…crass. Anyway I would appreciate your opinion on each of the articles below. I can provide as many facts as are needed. I also finish with my non-economist’s view of why it’s important for governnments to support basic research.
1. First the 3 to 1 return is normally attributed to return on education (including educating PhD students) rather than research per se http://www.universityofcalifornia.edu/news/article/7685
2. On research this is an analysis of investment in Health research – which is narrower in focus ( just health) but broader in context ( not just basic research) – it estimates anything from 1.5 to 20X http://www.cmaj.ca/cgi/reprint/180/5/528.pdf
( the US Murphy KM, Topel RH. The economic value of medical research. Chicago (IL): University of Chicago; 1999. Available:
3. This is a good balanced book on the topic: McClellan M, Heidenrich P. Biomedical research and then some: the causes of
technological change for heart disease. In: Murphey KM, Topel RH, edi ors. Measuring
the gains from economic research: an economic approach. Chicago (Il):
University of Chicago Press; 2003. p. 163-205.)
A comment from this book: “American investments in science and engineering have driven most of the innovations that underpin our economy today. A wide variety of studies conclude that between 50 and 85 percent of the growth of the U.S. economy over the past half-century-and two-thirds of our productivity gains in recent decades-are directly attributable to scientific and technological advances.”
Some good analysis but no numbers on this one – makes the comment that it is too difficult to measure across all parameters http://www.nsf.gov/oig/hague_presentations/vincent.pdf
5. A 40:1 return attributed to MIT is actually a quote from Hockfield and it refers to return in energy R&D across the board irrespective of institution – not exclusive to MIT just quoted by their president at the Whitehouse with the other president.
6. Another good balanced account which does make the point that for smaller countries investing in basic research can be risky – we must however see Ireland as being in a global context (eg most of the investment into Opsona is from outside Ireland).
Return on Investment in Innovation: Implications for Institutions and
Author: Heher, A.1
Source: The Journal of Technology Transfer, Volume 31, Number 4, July 2006 ,
From the Abstract:
Commercial success in universities in the USA and Canada has resulted in
many other countries taking steps to emulate this performance and major
technology transfer and commercialisation support programmes have been
launched in UK, Europe, Australia, Japan and many other countries‹including
South Africa. Unrealistic expectations have, however, been generated by the
spectacular successes of a relatively few institutions and it is not always
realised that the success from commercialisation is proportional to the
magnitude of the investment in research. Without a well funded, high quality
research system, it is not possible for technology transfer to make any
significant contribution to economic development. The possible economic
returns to higher education institutions from commercialisation of research
can be estimated using international benchmarks. This forecast uses a
combination of an institutional return on investment model and a simple
economic projection. The model is generic and can be adapted for use in any
institution. As more data becomes available from local (and international)
sources, the model will be refined to give better estimates. The model is
dynamic and shows, quantitatively, why it can take up to 10 years for an
institution, and 20 years nationally, to attain a positive rate of return
from an investment in research and technology transfer. The model enables
the long-term impact of policy decisions, in an institution and nationally,
to be examined and alternative scenarios explored. The performance of
individual institutions is, however, highly variable and unpredictable. This
is even for those institutions that are comparable in size and maturity. A
large portfolio of patents and licences is required to give a reasonable
probability of positive returns. This may be possible at a national level,
but is problematic in smaller institutions‹and smaller countries. Because
the benefits of the innovation system are captured largely at national
level, with institutions having a high uncertainty, public sector support to
reduce the institutional risk is necessary to assist institutions to make
the necessary investments. Technology transfer is of course only one element
of the overall research and innovation value chain. All elements must be
functioning effectively to derive the economic and social benefits from
research. In addition to a strong research system, adequate incentives must
exist to encourage academics to participate, particularly with regard to the
crucial initial step of invention disclosure. After disclosure, sufficient
institutional capacity must be in place to take an idea, evaluate it,
protect the intellectual property appropriately and then seek a path to
commercialisation through either licensing or start-up company formation.
7. Another good article:
What does society get for the billions it spends on science?
By Kerry Grens
Double research funding? Be careful
In 1930, the US Congress gave a group of scientists and administrators
$750,000 to start a new agency, the National Institute of Health. Over time,
“Institute” became “Institutes,” and appropriations grew. In 1938, the NIH
received $464,000 for research – roughly equivalent to $6.8 billion in
today’s dollars. This year, NIH will spend approximately $29 billion on
research. The National Science Foundation, founded in 1950, will spend
another $6 billion.
Each year, appropriations are passed around before ending up at a final
figure. For the 2006 NIH budget, the Federation of American Societies for
Experimental Biology (FASEB) requested $30.07 billion. President George Bush
requested $28.8 billion, the House approved $28.5 billion, while the Senate
wanted to appropriate $29.4 billion. Ultimately, NIH received $28.6 billion.
What formula directs such tweaking? With hundreds of billions of dollars at
their disposal for discretionary spending, and numerous other projects to
fund – including education and healthcare – how do presidents, lawmakers,
and their staff settle on what goes where?
For a recent example, I looked to the California Institute for Regenerative
Medicine, now run by Robert Klein, chair of CIRM’s Independent Citizens’
Oversight Committee. Several years ago, Klein was facing a big task:
Identify a figure that California voters would agree to pay for stem cell
research. Rather than start from scratch, Klein looked to the NIH. In 2003,
NIH was spending $220 million on stem cell research. Adjust for inflation,
stretch it out over 10 years, and you get $3 billion, a figure that 59% of
California voters approved.
NIH has some economic evidence to support what it does. In 2000, a report on
the benefits of NIH research by the Joint Economic Commission of the US
Congress found high economic returns from investing in research. In other
words, besides the obvious health benefits of NIH funding for biomedical
research, it also saves Americans money by lengthening their lifespan and
improving healthcare. In their meta-analysis of a number of economic
studies, the authors concluded that if even a minor fraction of the
healthcare savings from healthier, longer-living people were due to medical
research, the payoffs from that research would be many times the initial
Klein used the findings of this report to make a good case that taxpayers
would get something significant back from their investment, arguing that,
overall, federally-funded biomedical research pays back to the economy to a
considerable degree. This is another reason Klein chose to imitate NIH –
what the institutes spend is working. To gain voters’ approval, “it was
important to have a responsible economic plan that had been shown on a
portfolio basis to have some results,”
Klein says. The “Yes on 71” campaign (based on CIRM’s proposal, called
Proposition 71) helped deliver the message to voters.
Initially, at least, some say the gamble California citizens agreed to take
will pay off. An economic impact report conducted by Bruce Deal at the
Analysis Group and Laurence Baker at Stanford University found that
Californians could expect returns of at least 120% to 236% on their
investment in stem cell research over thirty years. At the high end, if
Proposition 71 leads to “major advances in health care treatments,” the
authors say the state could get back more than seven times the cost of the
If we get so much back from biomedical research, why not invest $30 billion?
$300 billion? Certainly there are limitations on how many dollars are
available to invest, as well as competing investments such as Medicaid and
education (on the state level), and the war in Iraq (on the national level).
But if science’s returns are so economically robust, why don’t we put more
“The issue is, are we underinvesting or overinvesting in life sciences
Twenty-eight percent. This is the figure Edwin Mansfield, a now-deceased
economics professor at the University of Pennsylvania, obtained after
wrestling with an army of assumptions to pinpoint a likely return on
research payoffs.1 In 1991, Mansfield estimated that the rate of return on
investing in academic research (across all disciplines) was 28%, meaning
each dollar put into research would yield $1.28 in social and economic
benefits within about a decade.
As part of the study, Mansfield estimated that 27% of drug industry products
would not have been developed, except with significant delay, had academic
research been eliminated from the pipeline. James Adams, an economist at
Rensselaer Polytechnic Institute in Troy, NY, has been able to pick apart
some of the relationship between academic research and industrial
innovation. He surveyed the research and development laboratories of 200
companies to measure the amount they invest in learning about research at
universities, such as attending conferences, hiring and meeting with
consultants, and purchasing publications. On average, companies spent about
six percent of their research and development budgets on learning efforts,
and with each 10% rise in federal funding at universities, the learning
budget at companies rose by more than one percent.2
“What happens next is we found the learning share [of R&D budgets] to be
positively correlated with more patents,” Adams says. So when the federal
investment in university research increases, companies spend more money on
learning about academic research, and companies produce more patents, an
indicator of future economic impact. “There’s no question that [research] is
an incredibly large contributor to all advanced countries’ economies,” Adam
Other groups agree. Looking at a group of 16 developed countries, Dominique
Guellec and Bruno van Pottelsberghe de la Potterie (former and current chief
economists, respectively, at the European Patent Office) found that when
publicly funded research at universities and government laboratories
increased by one percent, countries experienced a 0.17% increase in
productivity, measured as the ratio of industry’s domestic product to labor
Economists have also found that medical research can, not surprisingly, have
an enormous impact on human health, especially longevity. Kevin Murphy and
Robert Topel at the University of Chicago found that, from 1970 to 1990, the
economy earned $1.5 trillion each year solely from reductions in heart
disease death rates. “These values are truly enormous,” the authors write.
Though such changes could be due to improvements in public health or
lifestyle, “if even a small fraction of this improvement is due to medical
research, the economic return to that research could be substantial.”4
Often the relationship between science and savings is hard to tease apart. A
2003 study by the Europe-headquartered Organization for Economic Cooperation
and Development found that private R&D appears to have “high social
returns,” which includes economic benefits, but noted no clear-cut
relationship between publicly funded research and economic growth.5
Joe Cortright, an economist and vice president of Impresa, an analysis
company in Portland, Ore., has found that the benefits of federal academic
funding on biotechnology vary by region (see “The biotech contrarian.”) For
example, Johns Hopkins University receives the most federal money, but is
“not a particularly good performer in terms of commercialization,” says
Cortright. Likewise, Chicago, St. Louis, Houston, and Detroit are leading
research centers with little to show in terms of bringing their work out of
academia and into biotechnology companies.
Mansfield considered his estimate tentative and loaded with caveats, but
still conservative. For example, he looked at the impact of academic
research on only seven industries, and only as far out as 15 years. “Of
course, the roughness of this figure should be emphasized,” Mansfield wrote.
For every estimate of the returns on scientific investment, there are many
reasons why that estimate could be wrong. Each economic study of the impact
of science carries its own assumptions and other potential confounders.
“These claims can always be demolished,” says Terence Kealey at the
University of Buckingham, often because they are loaded with assumptions
that greatly affect the figure. For instance, Mans-field’s 28% does not
account for the cost of development, marketing, or the cost of building
factories, some of which could lower his estimate of the return on science
funding. “He’s assumed in some magical way that scientists do their research
and produce the facts and these instantly become products,” Kealey notes.
“There are all kinds of methodology and measurement problems,” agrees Iain
Cockburn at Boston University. Congress’ 2000 economic impact report on NIH,
for example, assumes the agency is responsible for about 10% of health
advances in the United States. “The question of what’s the rate of return to
NIH budget is fundamentally a very difficult one,” Cockburn says.
8. Interesting comparision between Europe and the US:
Study: Europeans beat Yanks at the R&D game
By John Carroll Comment | Forward
If you asked just about any biopharma exec on this side of the Atlantic if U.S. developers are more productive than their European colleagues, chances are you’d get a good laugh. Everybody knows that the Yanks are more productive than the Europeans, right?
A new study, though, might have you rethinking that bit of common wisdom. Stanford Professor Donald Light decided to take a second look at the data in a 2006 Health Affairs report which concludes that the U.S. developers did indeed bring more first-in-class drugs to market in the 21 years leading to 2003. Light found that if you looked at productivity based on R&D dollars spent, though, the Europeans actually come out ahead. The most productive based on R&D investments: The Japanese.
“It would appear that American research provides poorer value,” Light concludes in a Wall Street Journal piece. U.S. research productivity has been “low and flat in proportion to the large company investments in R&D, while the number of major new drugs credited to Europe is high and increasing in proportion to company investments. Why is American research performance not better?”
– read the story in the Wall Street Journal
Money, money, money and medical innovation
Expert forecasts revolution in drug dev. work
Biotech’s value creation chain starts with research link
Deloitte sees ‘fundamental shift’ in drug dev. Strategies
Now from all the above you can pick and chose whichever facts you want depending on your own vested interest.
What I would say is this:
Let’s say a government invests $1m in research:
1. Universities spend a significant percentage on salaries in skilled labour
market, employees pay income tax and consumption related taxes and use local
services/purchase goods locally. It could therefore be argued that majority of
money recycles locally. (the direct economic value of a University to a
city should be measurable)
2. In many areas eg bioscience, engineering, physical sciences IT etc
research is co-funded by EU or Commercial sector, adding to the tax and
consumption returns above.
3. The percentage of research that enters development attracts more
commercial investment and creates new jobs.
4. Successful commercialisation leads to profits and more jobs and tax
5. In some sectors the products and skills developed have indirect economic
benefits eg health care- countries/regions/cities that research and develop
new treatments have a more skilled medical profession = better outcomes for
patients; and earlier access to improved treatments = better outcomes and
reduced disease burden on society.
6. Successful/trained/experienced people can be recycled to make the circle
of life more efficient.
Why government is essential to this process is that without it the large
volume of highly risky/speculative early research would not attract
investment, leading to vastly reduced choice at stage 2 and beyond and as
success in 3,4 and 5 is related to number of projects and availability of
6.you need govt to prime the process.
Bottom line is do we want Ireland to slip back to the times when our
creativity was restricted to the arts, financial engineering and emigration, or do we want a country that keeps
its scholarly heritage AND stimulates creative activity in emerging
scientific, technical, medical, cultural and commercial areas…
Answers on a postcard please…
Now back to my day job.
Just read the blogs. Excellent response to the naysayers, Luke, and without even trite mention of an alcoholic Irish author! They wanted facts, now they have them. End of debate as far as I’m concerned, although, as a biomedical researcher, I too must own up to vested interest.
The economic return on investment in science is obvious, just look at what the leading economies do and compare with the second tier.
The question we should ask is, what we, as a small country, should do? Well not everything and the governmental focus, initially on Bioscience and ICT, with Energy more recently added, appears appropriate for what was until recently a largely agriculture based economy. Time will tell. A key point is that this is a long-term investment and we should not panic due to our current economic difficulties. Hold the faith, this is, at least, a 20 year plan, not a mere 5 year plan!
In the meantime, we the researchers must ramp up our training of our young people at 3rd and, particularly, 4th level so that they are properly prepared for high-end, high-tech jobs. We could of course decide to opt out of these sectors, dramatically reduce our wage cost and start attempting to compete with India and the emerging economies of Eastern Europe. The politicians will have a hard time selling this option to the voters!
In my view one obvious fact about the university sector needs to be stressed in this debate. Education, at both 3rd and 4th level, is the primary and most important activity of our universities. Commercial start-ups from university research are the icing, not the substance of the cake! In fact, I would go further and say that a period of time spent in what is often termed “blue skies” basic research can be the best training for those of our young people who eventually move from PhD research to commercial environments. There is no better way to learn the scientific method, which can then be applied to solve quite different problems in the commercial sector. That’s not to say PhD level training is appropriate for everyone in the high tech sector of our economy. As usual there has to be an appropriate balance in everything we do, including blogging!
It’s encouraging that there is interest in this debate from so many.
I note the response by Luke O’Neill to the various blogs debating the value of basic research and I take it that he and others who have agreed with him see the references posted as satisfactory proof of his contention. At least one supporter indicated that this closed the debate for him.
If we look at the references Luke cites, the first deals with payback on education and is not of much value to this debate.
Luke then refers to other references, the main ones of which were:
1 – The economic value of medical research by Murphy
2 – Health Research: Measuring the social, health and
3 – A statement by John Holdren, OSTP, USA
4 – Evaluation of return on investment by Patrick
5 – Biomedical research and then some: the causes of
technological change for heart disease by McClellan
The first reference is wooly and in large measure of little value as a basis for proving a significant relationship between what is spent on medical research and the economic value on health and life expectancy.
Coming out with statements like “We estimate that improvements in life expectancy alone added approximately $2.8 trillion per year (in constant 1992 dollars) to national wealth between 1970 and 1990”, is hardly conducive to the promotion of rational dialogue.
We all know that increased life expectancy can be associated with such as better diet, not smoking, exercise, reducing stress and so on, yet the reference only recognises this in passing and indeed the mathematical model is suspect given what we know about consumption expectation over time and of course the assumption of a complete and perfect annuity market is a joke. There are other assumptions relating to the hazard function that do not add up either.
In general terms the assumptions make this reference little more than a piece of academic indulgence.
Reference 2 has similar problems about assumptions and (without going into the details as I find them) it simply is not a credible support for the arguments made by Luke or his supporters.
Dealing with references 3 and 5, the statement “ A wide variety of studies conclude that between 50 and 85 percent of the growth of the U.S. economy over the past half-century-and two-thirds of our productivity gains in recent decades-are directly attributable to scientific and technological advances” has also been used by the Chief State Scientist in his recent article in the Irish Times.
It is time to get this right and it is obvious from a reading of the work of economists (including Mokyr, beloved of our own ESRI) that when they refer to scientific and technological advances, R&D and suchlike, economists mean the whole innovation landscape wherein we can include better ways of doing things, new designs, process improvements and so on.
Accordingly, it is completely wrong to highjack the assertion in the book referred to as implying that basis research is responsible for the growth referred to.
And remember the vast majority of innovations do not need new knowledge.
While it does not suit the colleges to hear this, it is the massive stock of existing knowledge we need to exploit if we are to come up with the kind and volume of innovations to take Ireland to where it should be.
We do need (but not for all innovations) an active applied research capability to develop and integrate technologies to assist this process. What are the colleges doing to build this capability that our innovation system needs right now.
Reference 4 offers nothing to the debate other than to conclude that not much has been done to evaluate return on investment and that this should be addressed.
I will now return to references 1 and 2 where the authors try to make a case for return on investment on medical research. The authors mention a research investment of $35 billion. They say the knowledge produced is a public good and can be enjoyed by all.
I am surprised that the obvious role of poverty in relation to access to health provisions was not mentioned.
Poor people (and poor countries) have neither the material resources or the money necessary to buy health care: they cannot afford prevention before the disease appears and they cannot afford doctors and medicines once the disease has appeared. Thus, poor people are more likely to be unhealthy than rich people.
The fact that poor people cannot afford medicines reduces the incentives for pharmaceutical companies to devote R&D resources to poor men’s diseases as they estimate that the profits that such products would generate will turn out to be insufficient to cover the large R&D outlays.
Hence, they devote most of their effort to rich man’s problems such as colon cancer, baldness or obesity: only about 1 out of every 100 products patented by the pharmaceutical industry are related to tropical diseases (and tropical countries tend to be the poorest countries in the world). The sad result is that, before inventing a cure or a vaccine for malaria, humanity invents Viagra.
This topic is covered in detail in the reference below:
Another reference quotes:
“The data on poverty are truly impressive. In one study, the Chicago area was divided into sections based on socioeconomic class. The difference in life expectancy between the highest- and lowest-class sections was 9 years for white males, 7 years for white females, and nearly 10 years for nonwhites of both sexes. […]
Poverty is well known to be far and away the greatest factor in Loss of Life Expectancy (LLE) .
In other words, if you want to make people live longer, the single best thing you can do is make them richer.
Taking that last point, some of the money spent on medical research might be better spent in a way that helps poorer people to get richer.
In the year 2000, a study showed that the average income of the richest 20% of New Yorkers increased by $51,205 to $130,431 a year, while the average income of the poorest 20% of families increased by just $1,901 to $16,076 a year.
To what extent did the poorer 20% figure in the analysis for the life expectancy mooted in reference 1 above?
Other references are: