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In Matt Ridley's The Evolution of Everything: How New Ideas Emerge he repeats a claim originally made by Terence Kealey (my emphasis):

In 2003, the OECD published a paper on ‘sources of growth in OECD countries’ between 1971 and 1998, finding to its explicit surprise that whereas privately funded research and development stimulated economic growth, publicly funded research had no economic impact whatsoever. None. This earth-shaking result has never been challenged or debunked. Yet it is so inconvenient to the argument that science needs public funding that it is ignored.

This idea is clearly counter to the belief that government R&D is good for the economy (British scientists are currently campaigning for more money, for example, largely on the grounds that government R&D is important to the economy).

So who is right, Ridley or conventional wisdom? Is Government R&D demonstrably beneficial to economic growth?

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  • I was looking for a tag for something like "R&D" but there doesn't seem to be one. While a tag like "research" could be used for everything, it would be good to have one reserved for issues about the process of research and development that excludes things that are the result of R&D which would include a large proportion of questions here. I'm open to better suggestions.
    – matt_black
    Oct 12, 2015 at 16:12
  • Does government funded R&D include things like grants? What is the time horizon for "growth"? Some fundamental research may not have measurable impact on economy for quite a while.
    – user5341
    Oct 12, 2015 at 16:43
  • @user5341 Grants are a mechanism for governments to fund R&D so they should be included. And the question of timescales should be addressed in an answer.
    – matt_black
    Oct 12, 2015 at 16:52
  • I don't have the economics background to really get the details, but this analysis from OECD in 2001 seems to come to a different conclusion, using data from 1980-1998, rather than 1971-1998 as in the OP claim.
    – Is Begot
    Oct 12, 2015 at 18:03
  • This Matt Ridley guy seems to have two separate claims, both on flimsy ground on the Skeptics board at the same time. It could just be coincidence; but, it seems that he's prone to making statements that are pretty poorly supported.
    – Edwin Buck
    Nov 30, 2021 at 14:03

1 Answer 1

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Matt Ridley's claim

In 2003, the OECD published a paper on ‘sources of growth in OECD countries’ between 1971 and 1998, finding to its explicit surprise that whereas privately funded research and development stimulated economic growth, publicly funded research had no economic impact whatsoever.

is completely false.

You can read the paper conclusions yourself where, on the contrary, it is stated

The results also point to a marked positive effect of business-sector R&D activities and growth, at least in the short term. The significance of this latter result should not however be overplayed as there are important interactions between public and private R&D activities as well as difficult-to-measure benefits from public R&D (e.g. defence, energy, health and university research) from the generation of basic knowledge that provides technology spillovers in the long run.

In practice, Ridley is completely wrong: while there is no evidence of short term gains from public R&D, it is clear that:

  • There is no evidence that it has no economic impact
  • OECD itself challenges Ridley's claim
  • There are strong theoretical reasons why public R&D is actually beneficial.
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  • 3
    "Completely false" is a poor characterization. The snap you show clearly says "no clear-cut relationship" and Ridley's claim is "publicly funded research had no economic impact whatsoever". Overstated, maybe, but far from false, based on your citation. That citation oddly then just claims, "well, we know there's an impact, actually, so..."
    – user11643
    Nov 29, 2021 at 5:29
  • @fredsbend the claim (that the research found this link) is indeed completely false. What is not necessarily false is that the link exists.
    – Sklivvz
    Nov 29, 2021 at 11:36
  • Even supposing it were true, one would have to ask: So what? Obviously the purpose of private R&D is economic growth. The purpose of public R&D could be a lot of other things, such as expanding the depth and breadth of human knowledge, even if there's no obvious scientific benefit.
    – Kyralessa
    Nov 29, 2021 at 13:18
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    Economists never look for evidence that something has no effect. The baseline assumption, for anything worth studying, is that it has no effect and then research is done to see if there is evidence of an effect. For instance, there's no evidence that there's no tea kettle orbiting the Sun between Earth and Mars. You say OECD itself challenges Ridley's claim. Do you just mean your cited snippet is at odds with Ridley's claim or is there a citation where they explicitly do so?
    – Dean MacGregor
    Nov 29, 2021 at 21:42
  • The claim is that the OECD paper had the surprising finding that "publicly funded research had no economic impact whatsoever". The paper is linked, it says nothing like that. It says that in some sectors (e.g. ICT) investing in private research has more impact than investing in public research. I've cited the passage.
    – Sklivvz
    Dec 1, 2021 at 11:31

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