the sign of the true social cost-benefit analysis.
The most important factors determining the outcome are:- Additional R&D volume attributable to the public investments
- Social return to the additional R&D
- Social rate of depreciation of R&D
- Opportunity spillovers of additional R&D workers
To the extent that the outcome of R&D has public goods character, the internalization of the
associated spill-over effects calls in principle for government intervention.
This is perhaps most relevant as far as basic research in concerned, although it should be pointed
out, that spillovers in this case are likely to be global or regional in nature. This implies, in turn,
an argument in favour of, e.g., EU-wide financing of basic research projects although a
successful outcome requires a network of well-functioning research institutions, including
sufficient competition. This may be in areas where institutions are under-developed and where
EU member states may learn from the experience from the US.
8. Indicators of R&D
When measuring the amount of R&D you have the choice to look either at input or output
measures ā or both. The simplest input indicator is the amount of investments undertaken in
R&D. The most interesting thing to look at, however, is the output. The social return of
governmental investments in R&D is typically examined on the basis of the following three
categories:
- The scientific return (measured by the production of scientific articles etc.).
- The technological return (measured by the number of patents).
- The educational return (measured by the supply of highly qualified labour in the form of
candidates and ph.dās).
Whether it is possible to realize a high return of the governmental investments in R&D, and
hereby ensure the quantity and quality of the research based results, will indeed depend on the
organization of the research system.