2

National Goals and Assets

NATIONAL GOALS

In the course of our history, our nation has set grand goals that have defined us as a nation. And then we accomplished them. We created a republic, defeated totalitarianism, and extended civil rights to our citizens. We joined our coasts with a transcontinental railroad, linked our cities through the interstate highway system, and networked ourselves and the globe through the Internet. We electrified the nation. We sent men to the Moon. We created a large, strong, and dynamic economy, the largest in the world since the 1870s and today comprising one-quarter of nominal global gross domestic product (GDP).

In this century, education, research, new ideas, and technological innovation will help us sustain our quality of life and ensure our health, security, and prosperity.

•  Advances in medicine and health care:

  – Biomedical research, such as that funded by the National Institutes of Health, seeks “fundamental knowledge about the nature and behavior of living systems.” The application of that knowledge enhances health, lengthens life, and reduces the burdens of illness and disability.1

  – Behavioral and social research help us understand and address mental illness, addiction, and health disparities; provide insights that allow us to increase prevention and wellness, manage disease, and support

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1 See http://www.nih.gov/about/mission.htm (accessed March 12, 2012).



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2 National Goals and Assets NATIONAL GOALS In the course of our history, our nation has set grand goals that have defined us as a nation. And then we accomplished them. We created a re- public, defeated totalitarianism, and extended civil rights to our citizens. We joined our coasts with a transcontinental railroad, linked our cities through the interstate highway system, and networked ourselves and the globe through the Internet. We electrified the nation. We sent men to the Moon. We created a large, strong, and dynamic economy, the largest in the world since the 1870s and today comprising one-quarter of nominal global gross domestic product (GDP). In this century, education, research, new ideas, and technological in- novation will help us sustain our quality of life and ensure our health, security, and prosperity. • Advances in medicine and health care: – Biomedical research, such as that funded by the National In- stitutes of Health, seeks “fundamental knowledge about the nature and behavior of living systems.” The application of that knowledge enhances health, lengthens life, and reduces the burdens of illness and disability. 1 – Behavioral and social research help us understand and address mental illness, addiction, and health disparities; provide insights that al- low us to increase prevention and wellness, manage disease, and support 1  See http://www.nih.gov/about/mission.htm (accessed March 12, 2012). 25

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26 RESEARCH UNIVERSITIES AND THE FUTURE OF AMERICA an aging population; suggest approaches to improve the development and use of health information technology; and formulate policies that improve the use of resources in health care. • A sustainable, healthier environment: – Basic research in the environmental sciences helps us better understand our natural environment, how and why it is changing, and the policy options for maintaining and restoring environmental quality. – Social science research helps us understand how population change and economic development affect the environment, how societies adapt to environmental change, how people understand environmental risks, and ways to encourage the invention, adoption, and use of tech- nologies that improve environmental conditions. – Advances in technology improve water and air quality, reduce pollution, facilitate environmental cleanup, and improve agricultural pro- ductivity and sustainability. • Energy security: – Basic and applied energy research leads to new or improved technologies that improve the efficiency of existing technologies or pro- vide new alternatives that diversify or enhance our energy sources. – Social and behavioral research helps encourage and measure the adoption of new technologies, match technological design to societal needs, and facilitate more efficient energy consumption. • Improved standards of living: – Research in the physical and life sciences creates knowledge and ideas that can be developed into new products, and into processes that create companies, jobs, and economic growth and new solutions for health, agriculture, transportation, communication, and information tech- nologies and infrastructure. – Social and behavioral research provides insight into how re- search impacts innovation, economic growth, and other aspects of societal well-being so that our policies help to facilitate these changes. The tools of social and behavioral science are instrumental in the design, marketing, and distribution of new products and services. • Education for our children and adults: – Research in cognitive sciences has provided new knowledge and insights into the way students learn, creating the potential for power- ful changes in curricula, teaching, and learning in all fields, but especially in science, technology, engineering, and mathematics. • Enhanced security: – Scientific and engineering research lead to the development of technologies that improve public safety and emergency and public health preparedness, counter terrorism, and ensure homeland security, national defense, and cybersecurity.

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NATIONAL GOALS AND ASSETS 27 – Research in the social sciences and humanities has allowed us to better understand other cultures we may be allied or in conflict with so we can adapt strategies to improve diplomatic and military outcomes. Research in the cognitive sciences and on computerized language tech- niques has improved intelligence analysis and improved threat detection. • Civic life: – Research in engineering and the information sciences has led to the development of computing technologies that permit the analysis of large and complex bodies of data and elegant communication of findings from such analyses. – The behavioral and social sciences have provided tools—social surveys, censuses, and administrative record systems and the methods for analyzing them—that inform governments, businesses, and the general public about the state of our nation and about political, social, and eco- nomic processes. As the National Governors Association notes, “colleges and universities play a critical role in state economies through the production of workers in critical occupations, the conduct of research, and the dissemination and commercialization of new knowledge.” 2 These institutions have a global impact as well as their research which translates into new knowledge and innovative technologies plays a strong role in addressing global grand challenges that affect all of humankind (see Box 2-1). University basic research and education are investments for the long term that ensure we will have new ideas not just for today but also for driving change that will improve the lives of our children and grandchildren. ASSETS FOR INNOVATION Our assets strongly position the United States to accomplish its goals and lead the world in the 21st century. These assets include the following: • A large country geographically, with substantial natural resources and a large, barrier-free internal market. • A political culture characterized by freedom, democracy, and the rule of law. • An economic culture that rewards entrepreneurship, openness to change, and a willingness to take and reward risk. 2  National Governors Association, Higher Education’s Contribution to Economic Growth Strategies. Available at: http://www.nga.org/cms/home/nga-center-for-best-practices/ center-issues/page-ehsw-issues/col2-content/main-content-list/higher-educations-contri- bution-t.html (accessed September 16, 2011).

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28 RESEARCH UNIVERSITIES AND THE FUTURE OF AMERICA BOX 2-1 Grand Challenges of Engineering From urban centers to remote corners of Earth, the depths of the ocean to space, humanity has always sought to transcend barriers, overcome challenges, and create opportunities that improve life in our part of the universe. In the last century alone, many great engineering achievements became so commonplace that we now take them mostly for granted. Technology allows an abundant supply of food and safe drinking water for much of the world. We rely on electricity for many of our daily activities. We can travel the globe with relative ease, and bring goods and services wherever they are needed. Growing computer and communi- cations technologies are opening up vast stores of knowledge and entertainment. As remarkable as these engineering achievements are, certainly just as many more great challenges and opportunities remain to be realized. While some seem clear, many others are indistinct and many more surely lie beyond most of our imaginations. Today, we begin engineering a path to the future. Here are the Grand Challenges for engineering as determined by a commit- tee of the National Academy of Engineering: • Make solar energy economical • Provide energy from fusion • Develop carbon sequestration methods • Manage the nitrogen cycle • Provide access to clean water • Restore and improve urban infrastructure • Advance health informatics • Engineer better medicines • Reverse-engineer the brain • Prevent nuclear terror • Secure cyberspace • Enhance virtual reality • Advance personalized learning • Engineer the tools of scientific discovery Source: National Academy of Engineering, Grand Challenges of Engineering, http://www. engineeringchallenges.org/ (accessed September 16, 2011). • A strongly growing and increasingly diverse population, enriched by its capacity to attract talented immigrants from around the world. • A historic commitment to education that, until recently, pioneered and led the world in the expansion of high school and college education. 3 • An ecosystem of public and private research universities that in- 3  Claudia Goldin and Lawrence F. Katz, The Race Between Education and Technology. Cambridge, MA: Harvard University Press, 2008.

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NATIONAL GOALS AND ASSETS 29 cludes, according to one ranking, 35 of the top 50 such institutions in the world.4 • Tremendous wealth, with substantial public and private capital to fund education, infrastructure, research, and corporate growth. By mixing stability, freedom, knowledge, and individual empower- ment, our culture creates a fertile milieu for opportunity, innovation, and change. Consequently, our assets have allowed us to make the United States a nation of unparalleled economic, cultural, and military strength. Yet the late-twentieth-century creation of a global knowledge economy has made the environment for innovation and competitiveness more com- plex and the need for action to sustain and strengthen our assets central to any strategy for meeting our national goals. We cannot take our continued strength for granted. While economists have attributed much of our economic growth in the last half-century to technological innovation,5 the relative ranking of the United States in the global knowledge economy has shown that other countries are investing in their own competitiveness. Recently, for example, indexes of innova- tion and/or competitiveness have placed the United States variously at 4th, 8th, or 11th globally, depending on the indicators and methodology used.6 The National Academies’ Rising Above the Gathering Storm, which provided a detailed analysis of our nation’s competitiveness, expressed pride in the vitality of the American economy, “derived in large part from the productivity of well-trained people and the steady stream of scientific and technological innovations they produce.” However, they also noted, 4  Shanghai Jiao Tong University, Academic Rankings of World Universities—2010. Avail- able at: http://www.arwu.org/ARWU2010.jsp (accessed February 9, 2011). 5  Robert M. Solow, Technical change and the aggregate production function,” The Review of Economics and Statistics, Vol. 39, No. 3 (Aug. 1957), pp. 312-320, identified technological change as a key driver of economic growth in the twentieth century. Since its publication, economists have continued to explore through complex formulations just how much our economic growth is due to technological change, and how much is due to human capital, managerial improvement, process innovation, and other factors. A recent examination of the economic returns more specifically to research can be found in National Research Council, Measuring the Impacts of Federal Investments in Research: A Workshop Summary, Washington, DC: National Academies Press, 2011. 6  Information Technology and Innovation Foundation and European-American Business Council, The Atlantic Century II, July 2011. Available at: http://www.itif.org/files/2011- atlantic-century.pdf (accessed September 16, 2011). Boston Consulting Group/National Association of Manufacturers, International Innovation Index, March 2009. Available at: http://www.bcg.com/media/pressreleasedetails.aspx?id=tcm:12-8040 (accessed May 13, 2011). INSEAD, Global Innovation Index Report, 2009-2010. Available at: http://www.global innovationindex.org/gii/main/analysis/showindexranking.cfm?vno=a (accessed May 13, 2011).

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30 RESEARCH UNIVERSITIES AND THE FUTURE OF AMERICA BOX 2-2 The Context for Innovation and Competitiveness Policy “The United States takes deserved pride in the vitality of its economy, which forms the foundations of our high quality of life, our national security, and our hope that our children and grandchildren will inherit ever greater opportunities. That vitality is derived in large part from the productivity of well-trained people and the steady stream of scientific and technical innovations they produce. Without high-quality, knowledge-intensive jobs and the innovative enterprises that lead to discovery and new technology, our economy will suffer and our people will face a lower standard of living. Economic studies conducted even before the information- technology revolution have shown that as much as 85% of measured growth in U.S. income per capita was due to technological change. “Today, Americans are feeling the gradual and subtle effects of globaliza- tion that challenge the economic and strategic leadership that the United States has enjoyed since World War II. A substantial portion of our workforce finds itself in direct competition for jobs with lower wage workers around the globe, and leading-edge scientific and engineering work is being accomplished in many parts of the world. Thanks to globalization, driven by modern communications and other advances, workers in virtually every sector must now face competitors who live just a mouse-click away in Ireland, Finland, China, India, or dozens of other nations whose economies are growing. This has been aptly referred to as ‘the Death of Distance.’ “Having reviewed trends in the United States and abroad, the committee is deeply concerned that the scientific and technological building blocks critical to our economic leadership are eroding at a time when many other nations are gathering strength.…Although the U.S. economy is doing well today, current trends indicate…that the United States may not fare as well in the future without government intervention. This nation must prepare with great urgency to preserve “A substantial portion of our workforce finds itself in direct competition for jobs with lower wage workers around the globe, and leading-edge scientific and engineering work is being accomplished in many parts of the world. Thanks to globalization, driven by modern communications and other advances, workers in virtually every sector must now face competitors who live just a mouse-click away in Ireland, Finland, China, India, or dozens of other nations whose economies are growing. This has been aptly referred to as ‘the Death of Distance.’” The authors of the report were “deeply concerned that the scientific and technological building blocks critical to our economic leadership are

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NATIONAL GOALS AND ASSETS 31 its strategic and economic security. Because other nations have, and probably will continue to have, the competitive advantage of a low-wage structure, the United States must compete by optimizing its knowledge-based resources, particularly in science and technology, and by sustaining the most fertile environment for new and revitalized industries and the well-paying jobs they bring.” —Excerpted from National Academy of Sciences, National Academy of Engineering, and Institute of Medicine, Rising Above the Gathering Storm: Energizing and Employing Americans for a Brighter Economic Future, (Washington, DC: National Academies Press, 2007), pp. 1-4. “Because we have been so blessed in this country, we tend to assume that we are the best in the world. Yet we should take note of the areas in which we are not, by most metrics, ranked number one. For example, we are sixth in global innovation-based competitiveness and fortieth in the rate of change in that measure over the last decade. We are eleventh among OECD countries in the fraction of our young adults who have graduated from high school (a number that is truly appalling) and sixteenth in college completion rate. We are twenty-second in our provision of broadband Internet access to our citizens; twenty-fourth in life expectancy at birth; and twenty-seventh among developed nations in the fraction of our college students receiving degrees in science or engineering. Finally, ac- cording to the World Economic Forum . . . we are forty-eighth in the quality of our K–12 math and science education. These figures put American exceptionalism in context: we are number one, except when we are not.” —Excerpted from Charles M. Vest, Remarks in “Making America More Competitive, Innovative, and Healthy,” Bulletin of the American Academy of Arts and Sciences, Summer, 2011, p. 32. eroding at a time when many other nations are gathering strength”7 (see Box 2-2). Consequently, they provided recommendations for improving K–12 science and mathematics education, science and engineering hu- man capital, research, and the innovation environment. These critical recommendations are the starting point for ensuring a competitive U.S. innovation capacity. In the past quarter-century, several deeply significant developments 7  National Academy of Sciences, National Academy of Engineering, and Institute of Medicine, Rising Above the Gathering Storm: Energizing and Employing America for a Brighter Economic Future. Washington, DC: National Academies Press, 2007, pp. 1-4.

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32 RESEARCH UNIVERSITIES AND THE FUTURE OF AMERICA have changed the global economy and the kinds of actions that nations must take to remain competitive: • Coinciding with the end of the Cold War, the economic policies of the world’s two largest countries—China and India—shifted in two im- portant ways: (1) They moved from planned to more capitalistic economic systems, and (2) they developed strong export sectors that produced low- cost goods or provided low-costs services (e.g., call centers) through the use of abundant low-wage labor.8 • Global trade intensified and supply chains have extended further and further. Because of revolutions in shipping (e.g., containerization) and telecommunications (i.e., the Internet), global sourcing moved production of many goods to low-wage economies.9 • Countries that benefited from lower-cost production of goods for export—first, Japan, then Taiwan and South Korea, now China and India—took the profits and reinvested them in the innovation capacity— including educational and research infrastructure—that will allow them to advance further.10 • More advanced countries have also noted the importance of and have invested in education and research, particularly in science and tech- nology. So, while the United States has increased the percentage of its 24-year-olds who have earned a first university degree in the natural sciences or engineering, other countries such as Finland, France, and the United Kingdom, have increased it further and now outpace us on this key indicator.11 Similarly, while the United States has continued to fund research and development at a high level, other countries have increased their spending at a still faster rate.12 These are powerful trends that led Thomas Friedman to argue that “the world is flat.”13 The United States must continue to capitalize on its assets in this flatter world, but to do so requires a concerted and strategic effort. In this competitive world, the ingredients for national success are 8  L. Alan Winters and Shahid Yusuf, eds., Dancing with Giants: China, India, and the Global Economy. Washington, DC: The World Bank, 2007. 9  Thomas Friedman, The World Is Flat: A Brief History of the Twenty-First Century, Re- lease 2.0. New York: Farrar, Straus, and Giroux, 2006. 10  National Research Council, The Dragon and the Elephant: Understanding the Devel- opment of Innovation Capacity in China and India. Washington, DC: National Academies Press, 2010. 11  National Science Board, Science and Engineering Indicators 2004. Arlington, VA: Na- tional Science Foundation, 2004, Figure 2-34, p. 2-36. 12  National Science Board, Science and Engineering Indicators 2010. Arlington, VA: National Science Foundation, 2010, Figures 4-13 and 4-16, pp. 4-35 and 4-36. 13  Thomas Friedman, The World Is Flat. Op. cit.

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NATIONAL GOALS AND ASSETS 33 many.14 They include the assets outlined at the beginning of this chapter. Models for understanding the role of scientific research and technological innovation more specifically and indexes for ranking countries on their innovation and competitiveness capacity include a lengthy range of di- verse indicators. One index, developed by the Information Technology and Innovation Foundation (ITIF) in coordination with the European- American Business Council (EABC), placed the United States fourth glob- ally in 2011. This index was built on 16 indicators measuring human capital, innovation capacity, entrepreneurship, information technology infrastructure, economic policy factors, and economic performance. (See Table 2-1 for ITIF–EABC rankings of the United States on each of these indicators in 2011.)15 A “scoreboard” on science, technology, and industry, developed by the Organisation for Economic Co-operation and Develop- ment (OECD), examines country performance on 57 indicators, includ- ing competing in the world economy, connecting to global research, and investing in the knowledge economy.16 Rising Above the Gathering Storm, Revisited: Rapidly Approaching Category 5 examined multiple “ingredients for innovation” across knowledge capital, human capital, and the innova- tion environment.17 The importance of research universities to knowledge generation and innovation is evident in all of these indicators. Five of the ITIF–EABC indicators—corporate research and development (R&D), government R&D, higher education attainment, science and technology researchers, and science and technology publications—are inputs to or outputs from our nation’s research universities. The OECD looks intensively at R&D funding and performing trends across sectors and fields, international cooperation in research, trends in researchers, human resources in sci- ence and technology, new university graduates, new doctoral degrees, 14  The relatively new field of the “science of science and innovation policy” seeks to increase our understanding of knowledge generation and innovation; to improve models, metrics, indicators, and data for measuring them; and to enhance the scientifically rigorous and quantitative basis for science policy. See NSF, Science and Science and Innovation Policy Program. Available at: http://www.nsf.gov/funding/pgm_summ.jsp?pims_id=501084 (ac- cessed May 13, 2011), and Executive Office of the President, Office of Science and Technology Policy, Science of Science Policy, available at: http://scienceofsciencepolicy.net/ (accessed May 13, 2011). 15  Information Technology and Innovation Foundation and European-American Business Council, The Atlantic Century II, July 2011. 16  See http://www.oecd-ilibrary.org/content/book/sti_scoreboard-2009-en (accessed May 10, 2011). 17  Members of the “Rising Above the Gathering Storm” Committee, Rising Above the Gathering Storm Revisited: Rapidly Approaching Category 5, Prepared for the Presidents of the National Academy of Sciences, National Academy of Engineering, and Institute of Medicine, Washington, DC: National Academies Press, 2010.

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34 RESEARCH UNIVERSITIES AND THE FUTURE OF AMERICA TABLE 2-1  U.S. Ranking Relative to Other Countries on Innovation and Competitiveness, 2011 Indicator U.S. Rank 2011 Overall Rank 4 Higher Education Attainment: 10 Percentage of adults aged 25-34 with a tertiary degree Science and Technology Researchers: 6 Science and technology researchers per 1,000 population Corporate Investment in R&D: 5 Investments in research and development by business as a percentage of GDP Government Investment in R&D: 8 Investments in R&D by government as a percentage of GDP Share and Quality of World’s Scientific and Technical Publications: 14 S&T publications per million people and the relative prominence of those publications Venture Capital: 11 Venture capital investment as a percentage of GDP New Firms: 11 New corporations as a percent of total corporations E-Government: 2 A measure of the utilization of digital technology in national government Broadband Telecommunications: 11 Broadband quality and subscription rates per capita Corporate Investment in Information Technology: 5 Business investments in IT as a share of GDP Effective Corporate Tax Rates: 35 Average 5-year effective marginal corporate tax rate Ease of Doing Business: 4 A measurement of the regulatory and business climate Trade Balance: 37 Trade balance as a percentage of GDP Foreign Direct Investment Inflows: 34 Inflows from foreign direct investment as a share of GDP GDP per Working-Age Adult: 1 GDP (PPP) per adult age 25-64 Productivity: 3 GDP (PPP) per hour worked Source: ITIF–EABC, Atlantic Century II.

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NATIONAL GOALS AND ASSETS 35 international mobility of doctoral students, and foreign students in the United States. Gathering Storm, Revisited argues, “Given the trend of industry to in- vest less in fundamental research, focusing on more predictable develop- ment projects, it is increasingly left to government to fund the former type of activity. This is consistent with the notion that governments should assume responsibility for supporting activities that produce benefits to society as a whole but not necessarily to the individual performer or underwriter. In such a scenario the nation’s research universities will have to assume even greater responsibility for performing much of the nation’s research—with that research largely being funded by the federal government.”18 18 Members of the “Rising Above the Gathering Storm” Committee, Rising Above the Gathering Storm, Revisited: Rapidly Approaching Category 5, p. 45.

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