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Introduction The Changing Perspectives of This Study The perspectives adopted by this Committee have been characterized by change. On the one hand, there have been changes in the over-all external en- vironment in the course of the study, changes in the ordering of federal ad- ministrative and congressional priorities and concerns with regional issues, and changes in the public attitudes toward the role of the federal government or of private industry in dealing with state or regional problems. Furthermore, the insights and understanding of the Committee have changed in the course of time. The topics that generated much discussion in the early stages of the study have given way to others, due partly to growing insight as to the pri- orities to be assigned, and partly to changes in the national setting. The environment in which this study was initiated is typified by the con- gressional hearings carried out in 1966 and 1967 by such committees as the Subcommittee on Government Research of the Committee on Government Operations (United States Senate), Fred R. Harris, Chairman; the Subcommit- tee on Science, Research, and Development of the Committee on Science and Astronautics (United States House of Representatives), Emilio Q. Daddario, Chairman; and the Subcommittee on Employment, Manpower, and Poverty of the Committee on Labor and Public Welfare (United States Senate), Joseph S. Clark, Chairman. The proceedings of the hearings of the Harris Subcommittee are entitled "Equitable Distribution of R&D Funds by Government Agencies,"1 a title suggestive of the political and economic issues encompassed. They pro- 1
vide striking evidence of the great expectations that society has generally as- sociated with science and technology and of the increasing sophistication with which Congress is searching for answers in its decision-making roles. What are the public expectations concerning the impact of R&D on the economy? These are varied and seem to depend greatly on the context in which the question is posed. There would seem to be consensus as to the relationship between a powerful R&D program and a growing national economy. However, when the impact of R&D on specific regional development is at issue, there are considerable differences of opinion. The statements of public figures rep- resenting individual states or districts often show great optimism as to the eco- nomic impact of a given R&D installation or contract. Typical of this viewpoint is the following statement of the Senate Subcommittee on Employment, Man- power, and Poverty: Research and development funds in conjunction with trained manpower have both direct and indirect economic effects, which often act as a significant spur to growth and development. Industry and education play major roles in the growth process, and thus the research and development funds awarded to busi- ness and schools in a particular area are of vital concern to the inhabitants of that area. Despite the difficulty of making precise measurements, the connec- tion between research and development funds and regional development-or stagnationâis both clear and obvious. (Emphasis added.) Consider, however, the effects upon the area that receives little or nothing in the form of research and development awards from the Government. Scien- tific and technical talent is less attracted; the best scientists its universities pro- duce are more likely to leave. Its industry tends to become obsolete; new industry is rarely drawn. Its schools are more likely to be inadequate; better schools are less likely to be constructed. Its inhabitants are less likely to pros- per, for if a critical mass produces an industrial and educational oasis, its ab- sence may well produce a wasteland.2 Whether such strong expectations are borne out by the evidence to date is seriously open to question. The more conservative views of expert observers are typified by the statement of Mr. John G. Welles of the Denver Research Institute: Any region, whether composed of a few counties or a number of states, is vastly more complicated and difficult to understand than the most sophisti- cated space or weapons system. We humans know how to develop the speci- fications, to produce, and to operate the latter, but not the former. A region may be viewed as a varied and intricate combination of interacting systemsâ social, economic, political, psychological, and technological. We simply do not know very well how to predict what will happen within the region in response to actions of the Federal government.3 In view of such wide differences in expectation of benefits to the regional economy derivable from the expenditure of R&D funds, it is one of the cen-
tral purposes of this report to delineate the relationships between R&D and regional economic development. It should be expressly noted that the Committee recognized from the outset that many activities other than research and development may have an im- pact on the economy of various regions, and furthermore, that many national policies at both the federal and the state level affect regional economies though not specifically addressed to R&D. The emphasis of this report on the impli- cations of R&D for the economy of various regions originates with the specific charge to this Committee and not with the parochial view that R&D constitutes a panacea for all problems. Similarly, the emphasis in this report on the role of the federal government is also attributable to the nature of the task assumed by the National Academy of Sciences and the National Academy of Engi- neering. Although this report is addressed largely to the implications of federal policies concerning R&D, we have recognized from the outset that the key to the solutions of many regional problems lies in the encouragement of local ini- tiative at the state and regional levels, and of entrepreneurial and innovative activities in both the private sector and the public sector. It should have been expected that although addressed to the special policy issues related to R&D, this study would inevitably be confronted with the broader questions regarding national policies and objectives for regional eco- nomic development. In the course of our work, it soon became apparent that while certain broadly stated premises might be generally accepted, there does not as yet exist a well-established conceptual framework within which to con- sider or, in operational terms, to specify many regional problems. Neither is there as yet a clearly established policy for regional planning on a national scale. Although there is obviously an increasing national interest in these issues, the "definitive book" on this subject has not as yet be^n written. For these reasons, the Committee has sought to establish a framework with- in which national policy for R&D in support of regional development may be considered in the future. Thus, many of the findings and recommendations of this report are set forth in terms of broad objectives rather than in terms of specific program recommendations. Since the process of establishing broad perspectives is difficult and time- consuming this report does not address all the issues that the Committee has encountered. A number of issues, though recognized as important and relevant, have been referred to in passing, but were not sufficiently resolved in the course of our deliberations to justify specific recommendations. Examples of such is- sues are the mechanisms within the federal government for relating or evaluating the R&D efforts of various agencies in support of given regions, the needs for resource planning at the national level, and the "brain drain" problem stated in regional terms. Finally, it should be noted that the Committee views this report as a part of a continuing process of study and restudy. Broadly stated, the issues we
have addressed involve the concern for the sponsorship and management of science and technology in the general public interest. For the most part, the support of R&D has been sought and justified in terms of the principal mis- sion for which it was initially sponsoredâe.g., national defense, industrial ef- ficiency, or agricultural productivity. Yet, in virtually all cases, an expanding technology has brought about secondary or long-term consequences for soci- ety, which, though seldom anticipated, were even more profound. To examine present federal policies for R&D in the context of the social or economic wel- fare of a community or region is to enter into a new and difficult domainâ particularly since the program objectives for most of the presently sponsored R&D are aimed at other primary missions, whereas the impact on a given region, however significant, is often an unintended by-product. In submitting this report, we are conscious of how many questions we have addressed and how few we have resolved. In no small measure, this circum- stance is inherent in the broad terms of our task statement: in a sense, we have been asked how science and technology may be used in the common interest without having specified what is in the common interest. To address issues of this broad character calls for qualifications to which no one discipline or field of expertise can lay special claim; if this Committee may set forth a claim to be heard, it lies in the diversity of the educational background, institutional affiliation, and professional experience represented by its membership. The insights which we have gained from this attempt make us more aware of the need for further study, particularly to consider some of the recommendations of this report in more quantitative terms. We are persuaded that the issues raised deserve such study. Some Basic Premises A first premise underlying this report is the widely held view that the economic well-being of our nation is dependent on the development of its technological potential. For example, the 1964 Annual Report of the Council of Economic Advisers noted that ". .. the crucial element in the rise of our national well- being has been the progressive utilization of our ever-growing store of knowl- edge of the world in which we live."4 That the role of science and technology is considered to be of great signifi- cance to the social and economic welfare of the nation is manifested by the number of studies that have been initiated and carried out in recent years. In February 1966, the National Commission on Technology, Automation, and Economic Progress, appointed by the President, issued its report, Technology and the American Economy. This report, which represents a significant step forward in the common understanding of the role of science and technology in our society set forth the following observations:
5 There has been widespread public recognition of the deep influence of tech- nology upon our way of life. Everywhere there is speculation about the future possibilities for human life, and much public attention is directed toward sci- entific and technical trends. The vast majority of people quite rightly have ac- cepted technological change as beneficial. They realize that it has led to better working conditions by eliminating many, perhaps most, dirty, menial and ser- vile jobs; that it has made possible the shortening of working hours and the in- crease in leisure; that it has provided a growing abundance of goods and a continuous flow of improved and new products; that it has provided new in- terests and new experiences for people and thus added to the zest for life. On the other hand, technological progress has at various times in history, one of them in recent years, raised fears and concerns which have led to some questioning of its benefits. . . . When the impact of economic and technological change has caused certain re- gions to fall behind the progress of the nation as a whole, the Federal govern- ment has found itself with new responsibilities. . . .5 The last sentence in the above quotation summarizes a second major premise: namely, that federal policies must be established on the basis of a concern not only for the well-being of the nation as a whole but also for the well-being of the various regions within it. Indeed, the purpose of the Public Works and Economic Development Act of 1965 was: to provide new industry and permanent jobs in areas where they are most needed. Its main emphasis is on long-range economic development and pro- gramming for areas or communities that are burdened with persistent unem- ployment and low family incomes. . . . The new act has a single primary objective: to create a climate conducive to the development of private enterprise in America's economically distressed communities.. . .6 The Act is a prime example of concern in our representative democracy with the economic welfare of its individual regions as well as that of the nation as a whole. Not only is a depressed region a negative element in the economic well-being of the nation as a whole, and hence of national import, but the in- dividual congressional representative from such a region has specific responsi- bilities for the social and economic well-being of his constituency. Major fed- eral policy decisions and programs can not in the long run avoid the careful scrutiny of the legislators from all states of the Union in terms of the implica- tions for the people of their own regions, nor can major new programs be es- tablished without broad support. That national policies with respect to science and technology have become a matter of political as well as economic interest is testified to by the increasing attention given to science policy by Congress in recent years. Indeed, during the past year, the Subcommittee on Government Research of the Senate Com-
mittee on Government Operations found it useful to publish "An Inventory of Congressional Concern with Research and Development."7 This interest in and preoccupation with science policy stems from the growing public awareness of the great leverage provided by modern science and technology in opening new areas for industrial, educational, and governmental development. In addition, the total federal expenditures for research and development have grown to in- creasingly significant proportions of annual congressional appropriations. The total national expenditures for R&D rose from approximately $140 million (or 0.15 percent of the Gross National Product) in 1930 to over $20 billion (approximately 3 percent of the GNP) in 1965, while the federal contribution rose in this period from about $23 million to almost $15 billion. On the basis of such financial commitments, quite apart from the multiplying factors that R&D is presumed to have, science policy is likely to occupy the keen attention of our major decision-makers in the foreseeable future. A third major premise in this study is that the relationships between sci- ence, technology, and a national or regional economy are complex and must not be described or assessed in terms of one-to-one relations or direct causal connections without reference to external factors. To begin with, the polit- ical interest in this element of the national budget is not based solely on the short-range economic implications of federal expenditures, but on the much greater long-range implications that R&D is presumed to have. Indeed, the direct employment and income created by R&D is quite small even in Cali- fornia, the recipient of more dollars for R&D than any other state (approxi- mately 6 percent of the total personal income). Rather, the expenditure on R&D is typically viewed as an investment; most researchers estimate that money spent on research has its greatest impact on the economy long after it is spent, as the subsequent benefits from this investment are adopted into the framework of society. Despite the disproportionate attention given to this segment of the national effort, its role in the national economy is not easy to appraise or to quantify. The relationships of R&D to national or regional economic welfare are so com- plex that resorting to statistical data may lead to oversimplified and invalid con- clusions. This is so because there is not a simple causal relationship between the R&D activities or the institutions in which they are carried out and the subsequent effects on the economy. Dollars spent on R&D in a corporation's central research laboratory in New Jersey may have little effect on the econ- omy of that state; rather, it may have a far greater impact on the economy of Georgia, where a manufacturing division of that corporation is located. Funds spent on R&D in one industry, e.g., the computer data-processing industry, may have a revolutionary impact on another industry, e.g., banking or insurance. In some cases (e.g., solid-state electronic devices), technologies developed with federal funds for military purposes have had far greater impact on civilian in-
dustries than comparable amounts of funds spent by the same industries on the development of their own civilian products. In such a complex interplay as to where or when new technologies may have an economic or social impact, it is essential that an assessment of policy decisions take into account the nature of the research and development functions and the manner in which the results of such efforts are incorporated into the economy. Harvey Brooks has indicated the complex interplay between science and technology in the context of regional or national economies: Although a decade ago there was a simplistic notion of the relation between science and economic development, it is now generally realized that, while the two are connected in a general but important way, they are not particu- larly closely coupledâindustry by industry, region by region, or even country by country. Thus, while there is little question that general industrial advance in all the developed nations depends on the continuing advance of science, it is also true that the diffusion of knowledge in fundamental science throughout the world is so rapid that the local advance of industry depends more on its coupling to science and to markets than it does on the particular location of scientific activity. Thus, for example, the United Kingdom, which has the highest per capita production of Nobel Prize winners, and produces the highest proportion of fundamental scientific papers in relation to population, has been notoriously lagging in economic growth. By contrast, the two most rapidly growing industrial nations, Italy and Japan, are among the largest importers of foreign technology.8 It is a fourth major premise of this study that the long-range general physi- cal and social welfare of man are of overriding importance in the development of policies for the utilization of science and technology. The technological revolution in agriculture, which has made American agriculture the universal model for achievement and hope in feeding the world's population, brought in its wake regional problems in the southern states that have been distributed though not alleviated by transferring the burdens of an underprivileged, poverty-stricken portion of the society to all the major urban centers of the nation. Technological advances have tended to place the "have" regions of the nation and of the world in positions of greater relative advantage over the "have-not" regions. And even in the affluent regions of our country, the in- troduction of technology has often been accompanied by many deleterious consequences for individuals or for society that were not previously consid- ered or taken into account. In the words of Charles Frankel: Technology, plainly, is the fundamental dynamic element in modern society. It affects everything from the size, shape, look, and smell of our cities and suburbs to the mobility of populations, the character of social classes, the sta- bility of the family, the standards of workmanship that prevail, and the direc- tion and level of moral and aesthetic sensibilities. The decision as to when,
8 where, and how to introduce a technological change is a social decision, af- fecting an extraordinary variety of values. And yet these decisions are made in something very close to a social vacuum. Technological innovations are regularly introduced for the sake of technological convenience, and without established mechanisms for appraising or controlling or even cushioning their consequences.9 The great challenge to our society is whether technology, which has helped make our country the symbol of affluence to the other nations of the world, can be used to solve the problems it has helped to create. The Implications of R&D Activities and of R&D Location for Regional Economic Development Much of the ambiguity in the discussions of R&D vis-a-vis regional economic development has resulted from the fact that underlying the discussions there are two distinctly separate though related assumptions regarding the potential contributions of R&D. First, there is the assumption that many of the economic or social prob- lems of various regions of the country are amenable to solution through the use of the techniques of modern science and technology. Analogy is often made between the solution of the problems of a region such as Appalachia and the problems of space travel. In this case, what is involved is research and de- velopment as an activity, and the contribution that the R&D activity can make to the solution of the stated problems, but independent of the location of the laboratory or facility in which it is carried out. Second, there is the assumption that the deployment of R&D facilities in a given region has a positive economic effect on the local environment, independ- ent of the objectives toward which the R&D activities are directed and whether funded by local or outside sources. The facilities in question may be industrial laboratories, governmental laboratories, not-for-profit research institutes, or universities. Since the R&D activities in each of these facility categories receive financial support in major proportion from federal agencies, the distribution of federal support is viewed as a mechanism by which regional development may be strongly affected. Some of the confusion and concern in this discourse might be alleviated if it were recognized that both of the above assumptions may be valid in many instances (indeed, we believe them to be so); to fail to distinguish between them, however, may lead to serious confusion in the discussion and formula-
tion of policy. One can find profuse examples not only of communities that received economic benefits from locally situated R&D institutions but also of communities that received comparable economic benefits from R&D activities carried on elsewhere. If R&D activities are considered outside the context of the institutional relationships in which they are carried out, it is highly un- likely that such considerations will lead to valid policy recommendations. It has been one of the objectives of this study to examine R&D and economic development in the framework of the variety of mechanisms by which they may relate to each other.