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Everything national governments do affects their own nation, the world, or both. But often nations need to choose which they want to help more, and for too long the United States has been the global good Samaritan, designing its policies in ways that help the world, while the rest of the world free rides off of this and designs their policies to help just their own country.
One way to differentiate between policies and programs is on the basis of what economists call spatial externalities. In other words, domestic policies can have affects beyond the border, either helping or hurting other nations.
Some activities principally help nations themselves, with few spatial externalities. An example is investing in physical infrastructure where the lions’ share of the benefits are domestic.
But some domestic activities spill over and help other nations. One example is funding basic research. Scholarly research shows that when a country, even one as large as the United States, funds basic research, that the majority of the benefits “spill over” to other nations who can use the knowledge discovered to help their own economy. In contrast, a much larger share of the benefits of funding later stage applied research and development are retained in the country.
Given that this is the case, the rational thing for any country wishing to maximize its welfare is to invest in later stage research that firms in its own country largely benefit from. And that is what virtually every country other than the United States does. These nations understand that basic research is a global public good and that more is better. But they don’t want to be the ones providing more. Instead, they want to free ride off of other nations, hoping at least some other countries will do the “responsible thing” and invest in basic research to improve global welfare.
For too long the United States has been doing the responsible thing, and other nations the “selfish” thing. The United States has long invested significant funds into basic research at agencies like NSF, NIH and DOE. In contrast, nations like China, France, Germany, Japan, South Korea, and Taiwan devote a significantly larger share of their R&D budgets to applied research to benefit their domestic industries.
This is why the Senate U.S. Innovation and Competition Act was so refreshing. The drafters understood that more basic science alone is not going to be enough to ensure U.S. advanced technology competitiveness. That is why the bill proposed creating the technology directorate at NSF so that funding would be more oriented to industry needs, with the results more likely to be captured and used in the United States. In contrast, the recent House Science bill to reauthorize NSF was a traditional bill, strongly supported by the science community, that for the most part proposed to increase basic research funding.
It would be one thing if other nations, especially China, stepped up to their global responsibilities and invested much more in basic research that the whole world benefits from. Then the House bill might make more sense. But these nations, especially China, do not. Most of China’s research is later stage designed to give its firms advantage. China knows that it can free ride off of U.S.-funded basic research. Chinese researchers attend international conferences to hear U.S. researchers present their findings. They subscribe to all the scientific journals that NSF recipients publish in. They send their graduate students to U.S. universities.
Absent a major change in the orientation of foreign research funding—something that will not happen—it is time for Congress to put America first when it comes to science and tech policy.