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In Matt Ridley's latest book he repeats a claim originally made by Terence Kealey (my highlighting):

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?

  • 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 '15 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 '15 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 '15 at 16:52
  • @nomenagentis I rejected your suggestions because, while editorialising sometimes confuses the issue, the words here reasonably describe the situation. And I like to provide some context for why the question is interesting. I don't think my characterisations prejudice the question and the link to the current campaign in the UK both adds context and demonstrates that the belief about the value of R&D is widely held. – matt_black Oct 12 '15 at 17:05
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    This makes the question much better for inclusion here. We don't need editorializing in the questions...like those phony surveys where you can tell the intended answer from the wording of the question. – GEdgar Oct 12 '15 at 17:34
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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

paper

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, Matt 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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