Keynote Address: Importance of Intangible Investments to Congress
The workshop’s keynote address was delivered by Senator Jeff Bingaman of New Mexico. Senator Bingaman, one of Congress’s members with a longtime interest in innovation policy, was architect of the America Competes Act. He is chairman of the Senate Energy and Natural Resources Committee, placing him at the nexus of two of the most important elements of America’s economic future, innovation and energy.
Let me thank Steve Landefeld of the Bureau of Economic Analysis and Steve Merrill of the National Academies for inviting me to give these remarks. This is an appropriate conference at a time when our nation is deeply concerned about its world economic standing.
In 1995, at the peak of the dot-com bubble, Alan Greenspan made the now famous quote that sums up the importance of investments in R&D that perhaps is the forebear to today’s conference: “Had the innovations of recent decades, especially in information technologies, not come to fruition, productivity growth would have continued to languish at the rate of the preceding twenty years.”
About 10 years later, the value of innovation to our economy was quantified by Carol Corrado, Dan Sichel, and Charles Hulten of the Federal Reserve by looking at the broader category of so-called intangible assets, which include research and development, intellectual property, information technologies, re-organization of companies and worker training. Though these intangibles cannot be physically seen or touched, they account for nearly 11 percent of our GDP, or roughly $3.1 trillion in 2003.
In 2007, the Bureau of Economic Analysis looked at a more narrow set of R&D data provided by the National Science Foundation and, instead of treating R&D as an expenditure, it is treated as an investment. The result is that the GDP would have been on average about 3 percent higher—that is a pretty big number. The BEA reported that, for my state, treating R&D as an investment would actually increase my state’s average GDP by about 8 percent. That makes intuitive sense given the strong role that Los Alamos and Sandia National Laboratories have in science and technology.
So it is clear to me that R&D and perhaps a broader set of economic measures have an important effect on our economic well-being. The question for those of you assembled today is how we can accurately measure these economic factors so the Congress can be informed and enact the right incentives for today’s knowledge-based economy. In the are a of R&D, the BEA points out the strong linkage of R&D funding and GDP growth, but the question we ask is how much money should be appropriated and what is the right mix of basic and applied research?
The OECD annually reports R&D as a percentage of GDP. The United States is currently at 2.5 percent while Japan is 3.1 percent. Is there a strong correlation with GDP growth in these data? In terms of the federal funding of R&D, are there