Michael Hennigan continues the debate on research funding in today’s Irish Times.
Research funding is good, but so are decent primary schools, a decent health service, and many other things. From what we read in the papers, it seems likely that the state is going to cut social welfare payments this winter. Against that background, vested interests seeking state money need to carefully justify their demands for public funding. If the argument people are making in favour of university research funding is economic, then we are entitled to expect rigourous cost-benefit analysis of some sort from them, rather than the faith-based appeals we generally get.
(My own view, for what it is worth, is that academics are very foolish if they allow the argument in favour of university research to become an economic one. If that argument becomes generally accepted, then the most important research funding which any of us receives — that is, the portion of our salaries not related to teaching, which allows us to study whatever we want, including such arcana as economic history — will presumably come under scrutiny, in which case it will be time to pack it in.)
More generally, Ireland is a small open economy, and we are only ever going to make a vanishingly small contribution to pushing back the world technological frontier. Does it not follow that the priority here should be on innovation policy — helping companies apply best-practice technology — rather than on invention policy — creating the best-practice technology ourselves? In order to evaluate such a proposition, I guess you would need empirical evidence on inter alia the extent to which new technologies are geographically mobile.
As a final note, I am pleased that Michael picks up on the utterly embarrassing references to Stanford we heard earlier in the summer.
35 replies on “Faith versus evidence”
As long as Joe and Mary Public are funding academic research, it’s hard to see how any argument bar the economic one is even relevant. The quid pro quo of confiscating private property for supposedly public ends is that there is some kind of measurable benefit for everyone, such as it is. If the bulk of your money comes directly from private sources, as it does in Stanford’s case, the public at large doesn’t care how you use it. You can pursue niche interests without fear of utilitarianistic critique.
“More generally, Ireland is a small open economy, and we are only ever going to make a vanishingly small contribution to pushing back the world technological frontier.”
The Israelis certainly don’t think this way. Pity we do.
@Jon: if the argument isn’t economic, then I agree that there should be much less funding right now. After all, we still get our salaries and the research time that provides. I thought that was implicit in my post, if not I’m happy to clear that up.
After reading through Michael’s article in the Times and Kevin’s comments, it appears that the real problem is not research and development per se.
Kevin intimates that education and learning should not be funded according to economic criteria. The notion that scholarship should be analysed through the prism of cost-benefit is both philistine and blinkered. Society’s gains from blue-sky research do not satisfy the short-termist prejudices of fiscal prudence because the pursuit of learning and knowledge is by its nature experimental and eclectic.
Micheal’s article doesn’t describe the failure of higher education or R&D, therefore it would be wrong to allow academic scholarship to become the fall guy. The problems of R&D and innovation are more accurately explained as the product of risk-averse business. It’s not that we don’t have enough scientists. We do. The key problem is that Irish businesses do not invest in R&D. The more interesting question to ask is not how much money to spend on supporting research in Irish universities, but how do we create an economic climate that is more open to real innovation and risk-taking.
The public policy discussion of research could do with a dose of very basic economic principles, and thanks to Kevin for initiating a debate and drawing attention to excellent points made in to-day’s Irish Times by Michael Hennigan. Basic research (the kind that academics are best-equipped to do) is a pure Public Good: published results are non-excludable and non-rivalrous. It therefore tends to require subsidy from taxpayers, or not-for-profit institutions. Even applied research, such as undertaken by the ESRI, has similar properties: the main difference is that its utility is more local then global in scope. The existence of patent protection also testifies to the Public Good nature even of very commercially oriented R and D activity.
It should be obvious that research in the natural sciences, technology and medical areas is expensive, requiring large outlays on equipment and often sizeable research teams. Trying to be “world class” in these areas is broadly impossible for Ireland: the best we can hope for is that a few centres of excellence can emerge, perhaps via success in European competitive funding, with some additional support from domestic sources. One sure thing is that comparative advantage in research fields will emerge form some sort of international competitive process, rather than form a plethora of strategic plans at the national or institutional level.
Closer to home, research in the humanities and social sciences is relatively inexpensive. Over-elaborate funding mechanisms are generally unwarranted. A common failure is that the joint-input of teaching and research into graduate academic programmes is not sufficiently appreciated. Neither is the joint-output of teaching and research for individual academics properly understood: this is what lies behind Kevin’s reference to “packing it in”. The pressures on academics in the humanities and social sciences to conform to strategic institutional requirements is I suspect a hugely negative factor (it certainly involves a lot of time-wasting).
Finally, how can we as a society, benefit from research done elsewhere in the world if we don’t engage in the process at all? Externalities are so important in this area that any cost-benefit analysis (irrespective of whether it is used to make a case for more or for less resources) must come with a huge health warning.
@ Kevin
As long as funding comes from the public purse then it should be an ecomomic issue.
Workers in most walks of life are measured on their economic productivity and competitiveness.
Why should you suggest academics would wish to “pack it in” just because they may be asked to do likewise?
I think we both know that if private funding was being used the economic benifits would be scrutinised even more closely.
Some academics believe that economic impreritives curb creativity.
I am not so sure?
Is there evidence to suggest that more creative inventions have come when researchers were not involved in economicly motivated research?
Or is it more a quality of life issue due to increased economic pressures that would disinsentivise academics?
@Eamonn: hard core academics have a vocation to work in their field of interest — to teach and do research in it (the two activities being complementary). They work very hard, but don’t mind since it is what they enjoy doing. Academic freedom is therefore fundamental to them, and if that is threatened they will obviously walk. The good news is that (in the humanities and social sciences — as John says the distinction between these and the hard sciences is crucial) they don’t need a lot of money to do their research.
@John: excellent points all. I think the European funding angle is very interesting, in that this not only provides us with extra sources of funding, but with external quality control. I wonder, are there data on Irish success rates in European competitions, and data on application rates from Ireland and other countries? It would be interesting to see if Irish applications dropped off during the bubble years due to easy money at home.
The main funding mechanisms for Irish research are SFI, IRCSET, PRTLI and to a lesser extent (though clearly important for the likes of us!) things like IRCHSS. Also – the EU Framework programme is an underutilised source of funding for Irish research. Things like the Cooperation, Ideas and People programmes for FP-7 are, in my opinion, good opportunities for Irish researchers and it certainly should be the case that more thought is given to how Irish research funding interacts with this.
It is hard to disgree with anyone who argues that more careful analysis and justification of the Irish schemes is needed. But many on “both sides” seem to have made up their mind that these are either a waste of money or the only hope that the state has for long-term economic survival. For example, much of the research funded in these schemes is applied in nature and often explicitly encourages regional collaborations and industry collaborations. To suggest that they are just funding “basic research” completely unfettered from strategic needs is just wrong. The question is whether the particular incentives used are actually conducive to better science and better application of science and how to rank different policies in this domain including their relative costs.
Currently in Ireland, there are about 3,000 contract researchers in the university system and about 4,500 PhD students. We graduate about 1,000 per year and the SSTI policy is to graduate about 1,300 a year by 2013. It is certainly worth debating whether there is an active labour market for people with PhD qualifications. The fact that some of them will do multiple postdocs is not in itself a problem. Nor is it automatically a bad thing that more people with PhD qualifications might end working in government agencies.
Michael’s point about postdoctoral researchers moving on to other post-docs is not in itself that interesting. Outside of social sciences, multiple postdocs is common and given that the bulk of people in the Irish system are coming into a relatively new environment, its not totally surprising that they are not all immediately setting up companies or getting academic tenure. However, it is generally true that Ireland (as well as most of Europe) does not move PhD graduates into industry at the same rate and productivity as they do in the US. In general, the number of PhD’s and post-docs in Europe who automatically ask “how can I turn my research into a business?” is a lot less than in the US. Nobody has given a convincing argument yet as to why this is not happening in Ireland specifically. Some people argue that it is too early and that we need to give the system more time for really good clusters to emerge. Others have argued that we have focused in areas where we do not have a competitive advantage. It is also possible that we simply haven’t provided either financial or cultural incentives for postdocs in Ireland to think about commercialisation.
Any discussion needs to scrutinise costs but also think of both the potential direct and indirect benefits. Its better that the discussion start to lay all the “hidden” costs and benefits on the table rather than turn into a punch and judy show. Hidden costs that the “pro” side rarely acknowledge include the risk that large scale state funding might displace private R+D, that funding agencies could be captured, that incentives for researchers are harder to monitor in a “soft budget” environment and so on. However, potential indirect benefits of research funding include improving the prestige of the universities involved and increasing the quality and return to education, improving international credibility, improving the “networking” of the country into international innovation and technology networks. For example, some of our computer scientists may be working on “academic” topics but are continuously in an environment and set of networks where modern technological advancements are being discussed. We don’t know yet how these effects might improve the development of technologies among groups who interact with them in Ireland.
@Steve: “The notion that scholarship should be analysed through the prism of cost-benefit is both philistine and blinkered. Society’s gains from blue-sky research do not satisfy the short-termist prejudices of fiscal prudence because the pursuit of learning and knowledge is by its nature experimental and eclectic.” – Be careful here. Surely we can acknowledge a distinction between basic and applied research and then have a debate about how much the government should support both kinds. For example, it would be crazy (though Im sure possible) to try to justify economic history research on the basis of patents generated and immediate revenue flow. Though it would also be somewhat difficult to justify government funding of applied energy research on the basis of its contribution to cultural and historical understanding.
the Ireland FP7 office is below. it has some information but not exactly what Kevin is looking for in terms of a detailed trend analysis. Whether FP7 is a complement or substitute for Irish funding is dependent on a number of things. One potential mechanism is that Irish funding can act as a ladder to EU funding. I think the benefits of being involved in Framework are more than just getting funded though. It is a good way of having more detailed networks across Europe and it has been overlooked in this discussion. The EU is signing agreements with many countries and its now possible to include places like the US and China in EU funding proposals. Speaking as a “research active” academic this does open an awful lot of doors and I would be very surprised if we don’t see big increases in framework participation among researchers in Ireland.
http://www.fp7ireland.com/
I certainly wouldn’t want Frederick Taylor clones doing measurements in the academic world.
One of my favourite cartoons is a monk with quill in hand, and an adorned “God is…” on his canvas, barking to his abbot: “Deadline?? Nobody told me about any f—–g deadline!”
In 2006, when the science strategy was launched, there was a general objective to be recognised as a world-class knowledge economy by 2013.
It seemed a ridiculous aspiration at the time, given that an economy flush with cash couldn’t implement a credible broadband system. Eircom may have been an impediment but more an excuse as countries such as Denmark, overcame the transition from monopoly State telcos.
As inevitably happens with fatuous political aspirations when a deadline comes closer, the world-class knowledge economy palaver was quietly dropped and the insiders are now singing the mantra of the “smart economy,” which has a longer time horizon.
It’s still unclear if the policy is geared towards supplying PhDs to multinationals, developing a significant knowledge-based indigenous sector or both.
There is no data on the expected demand and there is always so much spoof when a collaboration with a business firm is announced, that it is difficult to assess in terms of significance.
However, some of these collaborations are no-brainers for the business firms as their 50% contribution can be grant aided, which would bring the public cost to maybe 70%.
US consultants Booz Allen and Hamilton published a study in 2005 of the top 1,000 corporate R&D spenders. They concluded that there is no direct relationship between R&D spending and significant measures of corporate success such as growth, profitability, and shareholder return.
http://www.booz.com/media/file/151786.pdf
Sony had the market for mobile music from the launch of the Walkman in 1979 but lost it when Steve Jobs and his brilliant design team linked up the computer with the hip iPod – – and every aspect of the manufacturing is based in Asia, Sony’s home base.
How can that be replicated or a 19th century paper manufacturer becomes the world’s biggest mobile phone company?
However, innovation in a wider sense can result in great business success and it can be surprising how old business models can be adjusted to new needs and still thrive.
So, back to measurements, it is a relevant question as to whether the total NDP of €8.2bn to a science strategy geared towards basic research, could well have the same result if teh amout was €4bn?
In the context of the times, it’s certainly not a big ask to trim 15% at a time of national adversity.
At least the well-funded folk in the universities can continue to have the dream of a cash-out from a discovery when their spin-out is hopefully nevitably sold to a bigger US firm.
What dreams can many other victims of the crash have, who have no public megaphone?
What can we produce, better than anyone else, that other people will buy and will create sustainable enterprise and jobs? Surely national policy, its structuration and funding should primarily focus on what is required once these questions have been answered.
The article below makes the case for global science investment. It is written by a leading scientist and advocate for advancement of science (indeed its the presidential address to the society for advancment of science that, among other things, publishes “Science”). Economists are not fans of advocacy but better well-argued advocacy than poorly. This is one of the strongest articles written for why the world should be investing more in science and technology.
http://www.sciencemag.org/cgi/reprint/319/5862/424.pdf
One of the strongest cases for why the world should invest more in technology and science is below. Written as the presidential address to the American Association of the Advancement of Science in 2007, it is a global call for greater funding of science and greater engagement of scientists with major global issues.
http://www.sciencemag.org/cgi/reprint/319/5862/424.pdf
Kevin, this whole research discourse thing that’s being led by Coughlan, is just Maoist fantasising. The real opportunities in the Irish economy are in productivity mainly around making flexible rigidities in markets (e.g. law, health, academia, local government…). But standing in the way are vested interests (unions, trade bodies, professional associations standing on the bridge points in law, health, academia and planners….) McCarthy’s recommendations are surely right. If Ireland needs to do 100 things right now to get out of this mess and prosper, R&D isn’t in the top 99.
@Bill
Who would have taught that milk would be sold to a maker of gin?
Nestlé has over 3,000 researchers.
Tony O’Reilly used to often talk about the need for Ireland to develop international brands when he was head of Heinz and then he invested in Waterford Glass.
Food and drink are the two areas where Ireland has international recognition – – sectors where there will always be a market. Ten countries in Asia, accounting for half the world’s population are changing their diets with rising incomes.
New Zealand is already stealing a march in Europe on the Irish, in the chilled lamb market.
Michael’s article raises valid questions about the strength of researchers’ arguments for continued state funding following An Bord Snip Nua’s judgement that its impact on economic activity is not compelling. These, and the assocated comments, represent important contributions to a policy issue deserving of more debate.
Measuring the impact of state funded R&D on economic activity is not easy. But it needs to be done, particularly when the stakes are so high.
Irish business’ spending on R&D (BERD) is changing according to recent data from the Central Statistics Office. The potential implications for indigenous firms could be a concern. http://www.cso.ie/releasespublications/documents/information_tech/current/berdpre.pdf
While the data are preliminary, this BERD survey suggests a reduction in the rate of growth and the number of enterprises engaged in R&D. There is also an apparent concentration towards companies spending larger amounts. According to Forfás, 75% of the firms active in R&D in 2005 were Irish-owned, however, foreign-owned firms spent 70% of the total. Combining this with the new data, suggests that fewer small indigenous firms are engaging in R&D. However, increasing the quality and quantity of R&D performed by indigenous companies is an Enterprise Ireland objective and is seen as critical to the development of a competitive knowledge based economy. On the other hand, a concentration of R&D spending could be a more effective and efficient use of resources. It will be interesting to see the final data.
@ michael
agreed enterprise led applied research targetted at where there might be potential to craft competitive advantage makes sense – value add innovation that keeps the jobs at home.
“Research funding is good, but so are decent primary schools, a decent health service, and many other things. ”
Those are two other things that history has shown throwing money at doesn’t get you far.
@billhobbs gotta agree with Michael Hennigan. We’ve had state-led product/production development with Teagasc and Bord Bia and BIM for donkeys years – how are we going to make a quantum leap in the food sector if we haven’t to date?
We have to look at where the world is spending its money now and figure out how to get some, like stimulus-led infrastructure and energy. Let’s not try and invent markets which turn out to be niches.
sorry for double post. some bug in the system today.
It is not unknown for red herrings to be strewn where there might be more profitable discussion on the real problems.
One of the problems of being a thorn in the side of TPTB is that they retaliate. They will be cutting as much as they can unless you know where some bodies are buried ….. We are running out of money. Seriously!
The debate on research funding in Ireland has not been helped by being pretty uninformed and full of fairly basic misunderstandings.
The key problem is that a whole lot of people seem to be quite unaware of what the appropriate outputs should be from state funding of R&D. In the short term at least, it’s not jobs, not spin-outs, not even (or at least not necessarily) IP: it’s third party investment. Right now the IDA would have to let go of about half of its client search if we were not funding academic research, since a majority of companies contemplating an investment in Ireland are doing so because of the research base being developed here. And as for research leading to indigenous start-ups, the key targets are probably ‘spin-ins’ rather than spin-outs: i.e. non-academic entrepreneurs who are able to exploit research discoveries in collaboration with universities.
I might add that, as far as I can see, there seems to be a particularly odd blind spot in university economics departments about research, so much so that I am just undertaking a little analysis of what research is actually being conducted in these departments (as distinct from being critiqued). Someone recently observed that economics is really just ‘ideology with numbers’.
Or maybe I’m just in a tetchy mood this morning…
I have covered some of these issues in my own blog, and you can find it at http://universitysiary.wordpress.com/.
Some readers may find the following of some use: two policy papers I put together a few years ago, in order to inform a working group of ICSTI considering the evaluation of research funding.
The first paper takes a look at some of the economics of innovation literature with a view to teasing out what might constitute (and what might not) rationales for public funding, particularly of ‘basic’ research. That paper is
here.
The basic idea was that before we begin to evaluate innovation policy systematically, we might as well be clear on what the rationales for it were, and therefore the objectives, against which we are to evaluate. A particular theme, emerging from the the literature, (and perhaps not surprising) is that those rationales for policy depended very much on the underlying model (often implicit) of innovation being used. I think a good deal of the continuing discussion reflects that simple point.
A second paper looked at the literature on the range of quantitative indicators and evaluation methods, then in use, for undertaking such evaluations.
I guess both papers are dated by now, (much more has happened on the indicators side, particularly in respect of evaluating networks etc.) but they may of be of some use to readers seeking an ‘in’ into the economics of innovation/science policy literature.
I’d add that that while individual agencies make some efforts on collecting coherent data related to the area, and indeed the CSO appears to have taken up the baton, I’m not sure that (ironically enough) enough attention has been given to systematically studying (at least measuring) the scale and nature of this domain of policy.
@Ferdinand: TCD and UCD both rank pretty highly, given their size, in international economics research rankings. So: no attempted ad hominems please. It is precisely because we are well-trained economists that we find it natural to ask questions about costs and benefits, especially in the context of the appalling fiscal crisis the state finds itself in, and to favour empirical evidence over assertions and jargon. I would humbly submit that it is up to those seeking public money to provide such evidence.
Ferdinand – economists in Ireland have been producing analysis of their own productivity for a long time now. The most widely used ranking and publication file for economists is below. Almost all economists who publish in journals are listed here though not neccesarly all of their publications, particularly those who publish outside of economics also. But by and large, few would grumble too much with the individual ranking and productivity produced in the IDEAS system though there is an ongoing debate about how exactly people with dual affiliations should be counted when constructing institutional rankings.
http://ideas.repec.org/top/top.ireland.html
No ad hominems intended, Kevin. Nor do I have any problems with asking questions, which is quite right. But what seems to have taken place here is that the question is the answer. McCarthy/Bord Snip made a number of assertions which were totally untroubled by any evidence. I suppose I have become concerned that we are driving policy on the back of prejudice rather than analysis.
I am delighted of course that good research is being done in Irish economics departments; though I am bound to say that only one – UCD – is in the global top 150, at 124:
http://ideas.repec.org/top/top.econdept.html
Overall Irish economist departments are under-performing, I think. But before anyone gets too angry, all disciplines probably need to look critically at how they fare in the global context.
@Ferdinand: In my view, the onus is on the people asking for the money to provide the evidence, and this they have singularly failed to do in this instance.
You need to look at per capita measures of output to think sensibly about research performance in economics. There are roughly 60 full time economics staff at LSE, for example, versus 20 in TCD. However, I am the first to argue that Irish academic economics — and Irish academia in general — is sufficiently far behind the world frontier that the phrase ‘world class’ should be abolished in connection with Irish universities. From your remarks it seems we at least agree on this.
But it is equally true that Irish academic economics has come on in leaps and bounds since I returned from the US 20 years ago, thanks to a fairly single-minded focus by department heads on improving standards. We are now pretty competitive within Europe, comparing like with like. To try to argue that Irish academic economists are sceptical about the ‘knowledge economy’ cutting-edge world class jargon that is regularly tossed out by vested interests in our own sector — at a time of unparalleled fiscal problems which will severely impact the poorest and most vulnerable in our society — because Irish academic economists have a problem with research is silly.
Kevin wrote: “In my view, the onus is on the people asking for the money to provide the evidence, and this they have singularly failed to do in this instance.” – Kevin, that’s the kind of statement I am objecting to! The evidence for this is available by the ton, and is all one way. I am shocked when economists tell me that they don’t know about this, because it is freely available and even a minor research effort will assemble it.
Much of the evidence was generated initially in the US, when in the 1970s the National Science Foundation took the view that, in order to justify research money, it needed to assemble a coherent case for it on economic grounds. This led to a whole raft of research papers and exercises, many of them undertaken by US economists, with results all pretty much the same. We now know that in the United States, it is estimated that business generated from university R&D contributes about $40 bn to the US economy annually.
In Ireland there have been a number of studies of this, by no means all of them undertaken from within universities themselves – e.g. one undertaken by KPMG. All of these reach the same conclusions. The only dissenting voices come from a relatively small group of economists, who reject these conclusions, not by producing any counter-evidence, but really just by making assertions. So I would respond to you, Kevin, by saying that if you want to reject all the available evidence and dismiss it, you need to have some better arguments, or indeed any, based on evidence.
I am happy to note that Irish economics departments are improving, but they do still have a long way to go. You say you are competitive within Europe: well, the highest place Irish economics department (UCD) comes in at No. 36 in Europe. That’s way behind where we should be.
@Ferdinand
You have written that various studies “have all reached the same conclusions” and that Kevin is somehow rejecting some mountain of evidence. But you didn’t actually say what these studies were or what specifically they concluded?
Can I ask what specifically these conclusions are? Even better, would it be possible to provide links to this evidence? It’s hard to debate the conclusions of research without seeing it.
I have also discussed this issue occasionally on this blog — for instance here http://www.irisheconomy.ie/index.php/2009/06/29/innovation-taskforce-appointed/
In that post, I cited Richard K. Lester of MIT, a world expert in issues relating to technology and its impact on the economy. He wrote the following in a recent paper:
“the aggregate economic contribution of the university technology transfer model, as well as its economic potential in individual cases, has sometimes been exaggerated. The number of university-related startups is only a tiny fraction of the overall rate of new business formation. In the United States more than half a million new businesses are formed each year, while the number of startups directly licensing intellectual property from American universities,though growing, was still only about 600 in 2005, the latest year for which data are available.
Similarly, university-held patents are only a minor contributor to the overall stock of patented knowledge. In the U.S. the rate of patenting by universities is less than 3% of the overall patenting rate, and even the most prolific university campuses are awarded patents at a rate that is modest by corporate standards. If the two leading patenting universities, MIT and Caltech, were companies, neither would be ranked among the top 100 corporate patenters in the United States. And the entire institutional membership of AUTM was granted fewer patents in 2005 than the single largest corporate patenter (IBM).
This is not to dismiss the role of university-related patenting and new business formation. In specific regions, as well as in certain sectors such as life sciences, the impact is considerable. But it is helpful to keep these contributions in perspective relative to the growth and job-creating capacity of the economy as a whole.
It is also important not to hold unrealistic expectations about the economic benefits of technology transfer activities to individual universities themselves. The probability that any given institution will derive significant financial benefits from its technology transfer activities is fairly low.
The total royalty income received annually by all American universities from their patent portfolios is growing, but even today amounts to only a few percentage points of the total flow of research revenues to these institutions. Moreover, most of this royalty income is generated by a handful of highly remunerative licenses. It has been estimated that only about 1 in 200 U.S. university patents generates annual royalty income of a million dollars or more, and the vast majority of them will never generate any income at all. The distribution of income is thus highly skewed, and although most technology licensing offices do not report their net financial performance, it is probable that many of them do not break even.”
Do you have any thoughts on Professor Lester’s conclusions? And could we keep the international perfomance of Irish economics departments out of it? It’s a fair issue for discussion but not related to the question at hand here.
As an aside, I’d like to add that US GDP last year was $14441 billion. So the $40 billion figure Ferdinand cited as the contribution from businesses generated by university R&D is about one third of one percent of US GDP.
Thanks, Karl. I am just writing an article that will be published by a newspaper that will give a lot of the details of the evidence, including references etc. Maybe you can just wait for that; and in the meantime there’ll be stuff on my blog also.
Richard Lester is a very much respected academic, and what you quote here is absolutely right. But if you were to read what I have written here and elsewhere, you’ll note that this is not relevant to the case for R&D funding. We all know that university research does not produce fast commercialisation, and that royalties are not a major contributor to revenues, at least not in general and not for some time after investment. We also know that many start-ups fail. None of that is in dispute, at least not from me.
My point is a different one. The case for research/R&D funding is not based on the direct value it creates (though in the longer term there is such value), but on the business climate it generates. It encourages knowledge intensive investment by third parties, particularly international companies. I have now spoken with four companies that made major investments in Ireland over the past two years, and each of them states (not prompted by me) that this investment would not have happened but for the government’s investment in Irish research. The FDI involved is of the kind that is our best bet for the foreseeable future.
Or if you want a negative case, when the government ‘paused’ PRTLI in 2002 a number of companies contemplating investments in Ireland decided to go elsewhere, particularly to Asia. Some of these cases are well documented.
We can no longer be a manufacturing country, and while we can build up some service industries (and should do so, on a competitive basis), some of our most attractive opportunities for growth are in areas such as biopharma, that simply will not come here unless we have a strong research culture.
If what some of you guys appear to be advocating is adopted, and investment in S&T and research is scaled down, it will have terrible consequences for us.
I am also, frankly, sick and tired of people claiming that saying things like this is based on the pursuit of vested interests. DCU for example now has the highest per-staff-capita research income in Ireland, but it doesn’t actually produce financial benefits of any real kind, as it is all knife-edge, and in some cases requires us to raise other (non-HEA) income in order to subsidise it. This is not a self-interested campaign.
The work of Brandeis Professor and NBER Fellow Adam Jaffe is well worth reading in connection with the ongoing debate on Science policy. His IDEAS page is below. His work examines evaluation of research funding in a number of areas.
http://ideas.repec.org/e/pja49.html
An example of his approach is below (may require subscription)
http://www.springerlink.com/content/k21061n4u5k25j51/fulltext.pdf
The ‘‘Science of Science Policy’’: reflections on the important questions and the challenges they present
Adam B. Jaffe
Abstract
Developing the ‘‘Science of Science Policy’’ will require data collection and analysis related to the processes of innovation and technological change, and the effects of government policy on those processes. There has been much work on these topics in the last three decades, but there remain difficult problems of finding proxies for subtle con- cepts, endogeneity, distinguishing private and social returns, untangling cumulative effects, measuring the impact of government programs in a true ‘‘but for’’ sense, and sorting out national and global effects. I offer observations on how to think about these issues.
I want to return to the basic question asked by Kevin. Does blue-skies research at universities pass the benefit-cost test?
I think yes, for the following reasons.
1. Highly paid jobs require high quality third and fourth level education.
2. High quality education requires high quality professors.
3. High quality professors demand jobs with a few hours of teaching and lots of time to do research.
So, the alternative to fundamental research is educating our children abroad.
You can also make the argument that applied research feeds on fundamental research. While applied research feeds on fundamental research from all over the world, I believe that applied researchers need fundamental researchers nearby for inspiration and for keeping them on their toes.
As to the worth to economic history, I’d say the world economy would be in an even bigger mess were it not for the likes of Kevin O’Rourke. Even if Kevin and co prevented only 0.01% of economic shrink in one year, then their life-time earnings are paid for many times over.
@Karl: The ad hominem/ad disciplinam stuff speaks for itself. As regards the question de fond, I think there is another point, which I mentioned in my post. Ireland is a small open economy — globalized, if you will. The US is a very big economy. Assume any reasonable model of technological diffusion, and I’ll bet that the ratio of benefits to costs of R&D will be smaller in the more open economy — at least if the benefits of R&D are those typically captured in our growth models (better technologies, and new products and/or more productive production processes). So, US studies prove very little in the Irish context.
I think it follows that for us the primary focus should be on innovation, not invention. And here, there are a whole bunch of factors that help firms adopt best practice technologies that have nothing to do with education, but with the general business environment. I suspect these factors are pretty important.
That is not to say, however, that education in general (better maths anyone?) and higher education in particular may not have a role to play. But in that case, it is presumably in supplying firms with the right type of labour. And I think that Richard may have a case in suggesting that research can play a role there, in that a good research environment attracts good professors, good students, good postdocs, and all the rest, and that some of these people may end up working in the private sector. But this is a very different type of argument than the one the smart economy types typically make.
The real point, though, is simple. The government’s fiscal position is terribly precarious. I deeply regret that previous governments’ incompetence means that we now have to engage in procyclical fiscal policy, but if that is the situation we find ourself in, then cuts have to be made somewhere (and in addition taxes are going to have to be raised). Why on earth would anyone think that 3rd level research funding should not face cuts along with everything else, in such a situation?
(Of course, one way of maintaining the quantity of R&D activities while reducing R&D expenditure would be to cut its price…)
I think the discussion here has been useful. I think we may have established that the economists contributing here have, in fact, read some research on the role university R&D plays in the economy.
More importantly, though, I take from Ferdinand’s comments that he agrees that the argument for government-funded research programs should not be focused on jobs and spinoffs. This is useful common ground.
Unfortunately, however, the jobs and spin-offs argument is the key point being put forward by advocates of initiatives such as the Innovation Alliance. For example, from the IT on March 12
“THE NEW research alliance between UCD and Trinity has the potential to create 300 new businesses and up to 30,000 jobs over the next decade, the two colleges said yesterday.”
Link here — http://www.irishtimes.com/newspaper/ireland/2009/0312/1224242738378.html
And from the op-ed by Hugh Brady and John Hegarty:
“The Innovation Alliance is setting out to stimulate the creation of up to 30,000 new sustainable jobs over 10 years. Without such a target, and equivalent targets from all other bodies in the State, Ireland will find it difficult to thrive.”
Link here — http://www.irishtimes.com/newspaper/opinion/2009/0314/1224242847311.html
I also agree with Ferdinand that the idea that research funding may attract multinationals to Ireland is a better justification. From an Irish Times article last month I was quoted as follows:
Whelan argues that the focus on innovation and start-ups loses sight of other important reasons why research is good for an economy.
“There are reasons to sponsor PhD-led research and to believe that it’s good for the economy, but the notion of relying on these people to start up their own firms to boost the economy, when by and large the evidence is that most spin-off/start-up firms aren’t successful, is incorrect.
We need to think in the broader sense than just these start-ups,” he says. “It might be also good to train PhDs to help attract MNC investment and to keep what we have.”
End quote.
Link here — http://www.irishtimes.com/newspaper/innovation/2009/0706/1224250001121.html
So I am not opposed to research funding. But, like all public spending it should be subject to cost benefit analysis. And when those who lobby for a particular type of funding focus on benefits that are, in reality, very limited, then it is fair for economists to call a spade a spade.
It also doesn’t help when those lobbying for funding insult their critics as crass, ill-informed and uninterested in research while at the same time citing non-existing research findings to justify their claims.
Kevin said: “Why on earth would anyone think that 3rd level research funding should not face cuts along with everything else, in such a situation?”
No idea. I certainly don’t say that. I *do* say however that the case for cutting is not its ineffectiveness. Some cuts are inevitable, but in doing so the government needs to be aware of both the risks of any apparent stepping away from research as an objective and of the need to be strategic about what to fund.
Abandoning PRTLI (which is what McCarthy/Bord Snip suggests) would be insane.
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