The Trump administration’s proposal to cut National Institutes of Health (NIH) indirect funds has been widely attacked, with heated claims it will annihilate biomedical scientific research in the United States. Leading with a picture of a 12-year-old child with muscular dystrophy, Shetal Shah, a neonatology professor, that federal cuts would have “negative impacts on the economy” and that a “substantial part of U.S. prosperity after World War II was due to the country’s investment in science and technology.” The aforementioned Shah wrote, “With these losses, we risk losing both scientific progress and economic vitality.”
The most thorough review of the relationship between scientific funding and economics does not support the link between government scientific research money and positive macroeconomic outcomes. Terence Kealey, in his 1996 book The Economic Laws of Scientific Research, thoroughly examined centuries of international trends and found that countries that operated under laissez faire science policies enjoyed greater economic growth and technological innovation than those who chose dirigisme—state control of economic and social matters. Britain had little to no government support for science in the 18th and 19th centuries, and yet it enjoyed the agricultural and industrial revolutions. France, on the other hand, promoted government funding of science since the late 17th century and ended up far less prosperous.Â
In the United States in the 19th century, the government did have a scant number of offices for mission-oriented research such as the U.S. Office of Coast Survey, but by and large, science was not widely supported by the government. Despite various government research offices growing at the beginning of the 20th century, Kealey found the U.S. private sector was still providing just over 76 percent of R&D funds as late as 1940. As we have seen, this changed in the 1950s with a massive expansion in public funding.
If economic prosperity results from a country’s investment in science, post-1950s economic trends should vindicate this assertion. They do not. After an impressive growth of real gross domestic product (GDP) in the immediate postwar years, annual growth of real GDP was fairly static during the “Golden Era” of NIH funding. The trend of real GDP between the late 1940s and early 1980s confirms growth proceeded at roughly the same rate with little deviation during this time. We should be thankful the economic effect of U.S. public research endowment was only neutral, as other countries were not so lucky. Britain’s Labour Party in the 1960s, ignoring the historic success of the country’s laissez faire approach, believed government funding for science would be the backbone of prosperity, but by 1976, it was already applying for a loan from the International Monetary Fund to curtail Britain’s poor economic conditions.
The greatest counterargument to the economic myth is, ironically, a series of audits performed by the government itself. The Bureau of Labor Statistics (BLS) was assessing returns on R&D investments as far back as 1989, and reported, “the far more dominant pattern is that federally financed expenditures have no discernable effect on productivity growth.” The BLS reviewed the literature again in 2007 and found R&D had a large rate of return—but only if it was privately funded. “Returns to many forms of publicly financed R&D are near zero,” the BLS reported.
Internationally, the findings on R&D have been the same. In 1999, the Organization for Economic Cooperation and Development sought to understand why some countries, particularly the United States, had enjoyed such marked economic growth while others had not. Their findings, published in 2003, showed positive returns for private R&D but “could find no clear-cut relationship between public R&D activities and growth.”
Despite the readily available mountain of literature showing publicly funded science has no clear economic benefit, the NIH funding cuts were followed by a myriad of reports that such action would threaten “economic stability.” Some myths are so pervasive that no matter the evidence, someone is always ready to revive them yet again.
