Summary: In general, funding research can be very effective in terms of expected value. Research has enabled incredible technological achievements; is quite tractable and ‘shovel-ready’ given that researchers are often looking for money to mobilize idle talent and can use existing university infrastructure; and both philanthropic and government spending on research should probably be higher given that richer countries tend to spend more on research.


Scale

In the US for instance, information-technology–related productivity increases explain 75% of all productivity growth in recent years[4], with similar results found around the world [5] . This is not to say that all research is valuable. In fact, a lot of research might have had little to no value (see our report on meta-research), so it’s crucial for research funding to try and selectively target high impact research. However, research funding seems on average to have had very high value. Donations to research might have had a big impact historically. For instance, the Rockefeller Foundations has funded scientists such as Norman Borlaug who were credited with being instrumental for the Green revolution [6].  Another example is the Ford Foundation which has funded the Indian Council for Research on International Economic Relations (ICRIER), a think tank that has been suggested to have been instrumental in causing good economic policy choices resulting in the creation of $3.6 trillion in additional output for India[7].

Giving scientists prizes frees up their time from grant writing and might induce more innovation[10]. Additional grant money can be spent on research supplies, scientific editing, teaching buyouts, lab managers or personal assistants, and research assistants or researchers for the lab to speed up research.

For instance, there were almost 1 million AIDS-related deaths in 2017 globally[11]. Thus, a naïve back-of-the-envelope calculation suggests that speeding up the invention of an affordable cure or vaccine by one year might have the potential to save a million lives. Even if the costs of speeding up the arrival of a vaccine was $1 billion, this would lead to a marginal cost-effectiveness of less than $1000 per life saved ($1 billion ÷ 1 million). It is marginal because about $1 billion is already being spent on HIV/AIDS vaccine research annually[12] and so the average cost-effectiveness would be much lower. This model is just a crude oversimplification of a very complex issue intended to give a rough idea of orders of magnitude, but it is roughly in line with estimates of both historical cost-effectiveness of vaccination roll-out (e.g., smallpox eradication was fantastically cost-effective with some estimates[13] suggesting that the cost per death averted was less $100) and also estimates of future vaccine development (see [14],[15] for more on the cost-effectiveness of developing vaccines).

In one study, a 10% increase in US funding for a given disease was associated with a 4% funding reduction for the same disease by other governments[17]. Private companies do not do much research because private R&D returns cannot be protected sufficiently: patents expire and industry know-how diffuses easily to other firms, so the firms cannot capture all the rent from their investments. Thus there will often be socially suboptimal underinvestment[18],[19]. In other words, since private capital can only capture a fraction of the social surplus pie, additional public investment through basic R&D funding and subsidies can adjust the market failure.

Tractability

Neglectedness

References


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