CBO Analyzes Study of Economic Benefits from Academic Research

“Since World War II, U.S. science policy has been guided by Vannevar Bush’s vision that, if funded and left to set their own agenda, scientists would amply reward the nation for its investment. Mansfield has shown that, on average, academic scientists have indeed kept their part of the bargain. The return from academic research, despite measurement problems, is sufficiently high to justify overall federal investments in this area.” -- CBO Staff Memorandum

What have scientists contributed to the economy of the nation in return for federal funding of academic R&D? This topic has been addressed in a series of studies by University of Pennsylvania economist Edwin Mansfield over the past few years. His results, although admittedly very tentative, show a 28 percent rate of return for federal investments in academic research. These results helped dictate the Bush Administration’s policy for R&D funding.

In recent years, House science committee chairman George Brown (D-California), has been at the forefront of the inquiry into the benefits of scientific research. Brown asked the Congressional Budget Office (CBO) to analyze the usefulness of Mansfield’s results. CBO’s response, in the form of a 26-page staff memorandum, addresses the precision of Mansfield’s estimate and its relevance for federal science policy-making.

Mansfield’s analysis focused on the percentage of products or process improvements introduced by a manufacturing firm in a given period that would have taken at least an additional year (according to the firms surveyed) to bring to market without the benefit of academic research. The CBO memo finds that while many uncertainties exist, they “stem from the nature of the problem rather than from Mansfield’s method, which tries to be conservative and generally seems reasonable.” The memo goes on to say that the 28 percent figure “probably establishes a reasonable order of magnitude, but the actual figure may be significantly higher or lower.”

CBO cautions that the estimate “cannot shed much light on the details of federal science or budget policy.” Firstly, the 28 percent figure “is for the average, not the marginal, rate of return” and thus cannot predict the return from additional dollars spent. In addition, for the manufacturing industries surveyed, much of the academic research utilized would be considered applied rather than basic. The memo advises that Mansfield’s method “may not be appropriate to determine the rate of return from basic research.”

CBO concludes that, although there are many issues that might influence Mansfield’s numbers, “overall . . . there appears to be convincing evidence that the resulting estimate of the rate of return from academic research would still be high.”

To obtain one copy of the CBO memo, “A Review of Edwin Mansfield’s Estimate of the Rate of Return from Academic Research,” call the CBO Publications Department via the Congressional Switchboard at (202) 224-3121 or 225-3121.