By James Pethokoukis and Benjamin F. Jones

Science and innovation
are central to economic growth and technological progress, but are we investing
enough in scientific research? In this episode of “Political
Economy,” I discussed the importance of research and innovation with
Benjamin F. Jones.

Ben is a professor of Entrepreneurship and Strategy at Northwestern University as well as the faculty director of the Kellogg Innovation and Entrepreneurship Initiative. This summer he authored “Science and Innovation: The Under-Fueled Engine of Prosperity.”

Below is an abbreviated transcript
of our conversation. You can read our full discussion here. You can also subscribe to my podcast on Apple Podcasts or Stitcher, or download the podcast on Ricochet.

Does the composition of research and development funding between
public and private matter?

It matters in the sense
that what a lot of the public money is doing is science, and what a lot of the
private money is doing is application and the creation of specific goods and
services. And those are, of course, complements. You can think of the science
as opening up new doorways, and then the private sector is walking through
those doorways and making applications from the new knowledge that’s been
generated.

The fact that we’re doing
less science as a share of our resources is, I think, concerning because it’s
something that’s opening up many fewer doorways and, therefore, not creating as
many opportunities. We’re not giving as many opportunities to the private
sector, in a sense, for them to make use of.

Why doesn’t government invest in R&D the way it used to?

I think the answer is
probably salience to the public. The public, and I think I would include
policymakers, don’t fully understand the value of these investments to our
future potential and progress. I think that our public interest waxes and
wanes. I think it probably becomes more salient in moments of fear and with a sense
of competition internationally. So the Sputnik moment was a moment that sparked
the Apollo program, a moment where the US suddenly feels behind.

Today, where there’s
COVID, we have a very clear challenge. You get Operation Warp Speed. Suddenly,
the government is very invested in trying to solve that challenge. I think the
sense of China rising today is also something that is pressing on Congress,
effectively in many ways, to increase our investments in this space. I think a
sense of threat can make it more salient to the public.

But in some sense, the
deeper question is, why isn’t it more salient in general? Why are we investing
so little all the time? Even in Apollo moments, we’re not investing that much,
given the benefits that it seems to bring.

One of the debates is how much should be basic science versus more
applied research. How do you think about that debate?

I think what we know is
that the returns look high in both cases. We don’t know which return is higher.
Nor are they necessarily separable, because applied research builds on the
basic research. But also, this actually may be more surprising to people, basic
research often builds on applied research. A lot of the really interesting
understandings we’ve developed of nature actually come from people solving very
particular applied work. What we’d probably do best with is spreading our bets
and doing more of both.

There are somewhat contending
imperatives in R&D. The question at some level is, do we just want to get
as good as we can ourselves, or is it really about how we rate versus somebody
else? In a health context, if we can live a longer life and we can solve
Alzheimer’s, we’re pretty happy. Whereas in a national security context, it
might seem like you need to be ahead.

How does human capital come into play if you’re trying to boost R&D
in the long run?

Basic research is done by
people who are very specialized and have very deep understandings of certain
kinds of phenomena. And when you invest in the basic research, you’re not just
investing in the creation of ideas — you’re investing in creating the people in
your country who are the best world masters of those ideas and are the ones who
are going to be able to fully understand them, and also use them and take them
to the next level. I think, in a sense, the way you hold onto the advantage of
basic research is investing in the people in your country who are in fact doing
it.

I think, yes, it will be the case that basic research will spill over, to some extent, to other countries. In many ways, that’s a good thing because other people can benefit. But in terms of keeping ahead, that human capital piece is a key part of why you do keep ahead through those investments. I think we have lots of talented people who are not going into this space, and there are certainly lots of people abroad who, traditionally, are very eager to come to the United States and participate but cannot do so because of visa category limitations.

If we want to expand government research funding, will Americans have
to become more tolerant of the failures that naturally come with bleeding-edge
research?

Solyndra, of course, is
the common example people like to throw around of a government investment
misfire. But this is why I go back to salience: People often don’t see the
benefits directly. And then they see failure, to your point, and they’re like,
“Ah, we wasted taxpayer dollars.”

First of all, venture
capitalists waste money all the time, because they know they don’t have a
crystal ball. They’re making the best bets they can possibly make with their
own money and they’re failing all the time. And that’s okay, because that is
the nature of R&D. We have to get into a mindset where we allow for failure
and that we expect failure.

We need the public to
come to an orientation where they don’t expect to understand every detail — this
is science — and don’t demand that you’re going to succeed when it’s impossible
because there’s going to be failure and you need to fail. And the public needs
to recognize that the stakes here are so high for our standard of living, our
workforce, our health, our national security, that we can just go and make
these investments that drive those things.

James Pethokoukis is the Dewitt Wallace Fellow at the American Enterprise Institute, where he writes and edits the AEIdeas blog and hosts a weekly podcast, “Political Economy with James Pethokoukis.” Benjamin F. Jones is a professor of Entrepreneurship and Strategy at Northwestern University.

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