even from 1997 levels. In addition, support for astronomy, chemistry, and atmospheric sciences remained flat or declined between 1997 and 1999. Support for materials engineering, which had grown between 1993 and 1997, fell back to roughly 1993 levels by 1999.

The fields where federal support increased throughout the 1993 to 1999 period include aeronautical, astronautical, civil, and other engineering; biological, medical, and computer sciences; and oceanography. Fields that experienced reductions between 1993 and 1997 but recovered by 1999 include environmental biology, agricultural sciences, mathematics, social sciences, and psychology. Unless Congress or the agency managers have a sudden change of heart, we can expect the shift of federal research funding toward the life sciences, and toward NIH in particular, to continue.

The STEP board warns that although federal spending is contributing a declining share of the nation’s total R&D expenditures, federally supported research is still a critical contributor to the nation’s innovative capacity. Federal spending makes up 27 percent of all U.S. R&D and 49 percent of basic research. The board concludes that “reductions in federal funding of a field of 20 percent or more have a substantial impact unless there are compensating increases in funding from nonfederal sources, which does not appear to be the case the last few years.” What’s more, federal funding is usually more stable and has a longer time horizon, which is conducive to breakthrough research.

The STEP board also notes that maintaining a good balance of research among fields is particularly important because of the growing importance of crossdisciplinary work in vital fields such as bioinformatics, nanotechnology, and climate change. Because it is impossible to predict where breakthroughs will occur, it makes sense to attend to the well-being of the full spectrum of research fields. Advances in hot fields such as biomedicine and computer science will depend on progress in fields such as physics, chemistry, and the engineering disciplines, which have had declining federal support. The board argues that achieving a better balance in the federal research portfolio is important to maintaining the pace of innovation that the nation wants and expects.


Many people in industry see a far more important federal role for regulation than for R&D. Certainly regulation has a more direct effect on day-to-day decisions, and whereas industry can (in theory at least) compensate for the deficiencies in federal R&D investments, it is helpless in the face of a regulatory barrier.

Although regulation seldom stops development of a technology, it can often slow it. For example, the Lewin Group, a health policy consulting firm, found that the Food and Drug Administration is very slow in approving hybrid products such as laser-activated drugs that combine device and drug technology into one treatment. The problem is that the various components of the treatment must be

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