We have some big picture stuff pretty nailed down. To start, long-run improvements in material living standards have long been understood to arise primarily from improvements to technology, which emerge from R&D. It’s also pretty settled that much of the value of R&D spills over to people who are not the performer of R&D, and this means that in a laissez-faire system, R&D will be supplied at less than desirable levels. This problem is especially acute for fundamental science, which is primarily aimed at understanding how the world works. Most economists think the government is going to have to play a role in supporting, for example, fundamental scientific research.
Given that a laissez-faire system is going to undersupply R&D, what’s the best set of policy interventions? Here, there’s a lot more debate and uncertainty. For example, in this 2019 paper by Bloom, Van Reenen, and Williams, they try to describe some of the main policy tools available to influence innovation. In a table at the end of the paper, they evaluate the quality and conclusiveness of the evidence for different policies.
Settled issues, with high quality evidence:
Skilled migration is good
R&D tax credits work
Stuff we’re less sure about, either because evidence conflicts a bit, or we lack very good evidence:
We have some big picture stuff pretty nailed down. To start, long-run improvements in material living standards have long been understood to arise primarily from improvements to technology, which emerge from R&D. It’s also pretty settled that much of the value of R&D spills over to people who are not the performer of R&D, and this means that in a laissez-faire system, R&D will be supplied at less than desirable levels. This problem is especially acute for fundamental science, which is primarily aimed at understanding how the world works. Most economists think the government is going to have to play a role in supporting, for example, fundamental scientific research.
Given that a laissez-faire system is going to undersupply R&D, what’s the best set of policy interventions? Here, there’s a lot more debate and uncertainty. For example, in this 2019 paper by Bloom, Van Reenen, and Williams, they try to describe some of the main policy tools available to influence innovation. In a table at the end of the paper, they evaluate the quality and conclusiveness of the evidence for different policies.
Settled issues, with high quality evidence:
Skilled migration is good
R&D tax credits work
Stuff we’re less sure about, either because evidence conflicts a bit, or we lack very good evidence:
Direct R&D grants
Patent boxes
Impact of universities on STEM supply
Stuff that we’re very unsure about:
Impact of providing incentives to universities
Effects of intellectual property rights
Mission oriented policies (like DARPA)