Is research a waste of taxpayers’ money?

The answer to the question is ‘no’, by the way, but there is no shortage of people who will claim otherwise. There appears to be a particular tendency for Irish economists (or at least some of them) to play down the economic impact of research.  The tone for this was set by the ‘Special Group on Public Service Numbers and Expenditure Programmes’ (‘An Bord Snip Nua’, chaired by UCD economist Colm McCarthy). Its report in 2009 stated:

‘Research and development (R&D) funding for the third level sector is provided through the Programme for Research in Third-Level Institutions (PRTLI) and the research councils…  In general, the Group is strongly of the view that substantial reductions in funding are warranted given the significant amounts invested to date, the lack of verifiable economic benefits resulting from these investments and the inflationary impact of funding on research and administration salaries.’

More recently Michael Hennigan, founder of website Finfacts, wrote the following:

‘Minister Batt O’Keeffe said this week that nearly half of the new projects won in 2010 by IDA Ireland, the inward investment agency, were research and development-based. This claim cannot be relied on as it could range from little to a lot! No detailed information is available. Foreign-owned companies are responsible for about 90% of Ireland’s tradeable goods and services exports and it is believed that very little original research is done in Ireland.’

This follows a fairly frequent pattern of commentators claiming that there is no evidence to support the view that research has a positive economic impact, when in fact such evidence is freely available; just because someone doesn’t look for evidence doesn’t mean it isn’t there. Also, when Hennigan says that ‘it is believed’ that little research is done in Ireland, this is a particularly inappropriate way of backing an argument. ‘Believed’ by whom? What kind of evidence is that? In this case the IDA regularly publishes information confirming the significance of R&D to foreign direct investment. Most recently the IDA has announced that, in 2010, over €500 million was invested by foreign companies in R&D in Ireland, and the volume and significance of original research done here is regularly set out by the various national agencies.

Ireland’s ability to escape from the recession and to build up its economy depends critically on a successful national research programme, allowing the country to be identified as a centre of excellence in a selected number of key areas. This will not only help to secure much of the inward investment which we can now attract, but it will also be the key to a significant proportion of indigenous entrepreneurship.

Funding the national research programme is not an easy decision, given the competing calls on the country’s scarce resources. But that is where our future lies – not particularly because these research projects will themselves create many jobs, but because they will create the conditions in which others will do so. A debate on whether investment in research is money well spent is perfectly legitimate, but contributors to that debate would do well to get their facts straight first.

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22 Comments on “Is research a waste of taxpayers’ money?”

  1. Given that no enterprise policy announcement is without a rich dose of spin, scepticism is in order.

    The estimate of €500m from the IDA when they give no overall estimate of investment, is hardly much help.

    John Harpur of Maynooth University is one of the rare insiders who has raised questions about the science strategy.

    A review of his book is included here:

    Innovation: Ireland’s ‘smart economy’ strategy, universities and free-lunch entrepreneurship

    University research as the main driver of innovation policy, is doomed to fail.

    Even where there is a successful spin-out, the default exit for a VC investment, is a sale to a US firm before there is any return to the Irish economy.

    • Michael, my problem with your approach is that you make a series of assertions for which you offer no evidence. For example, you say that university research as a driver of innovation is ‘doomed to fail’. Why? Evidence?

      You say the IDA doesn’t provide details. It does. I can give you details, but I’m alarmed you haven’t made any attempt to get them yourself before making claims.

      As for spin-outs, that’s not really the critical issue. Most value comes from licensing deals rather than spin-outs. But in any case, that’s not where the value for the economy lies – that’s in the conditions created for bigger investment or start-ups.

      Your comments on research read as if they are driven by an ideological position rather than genuine analysis.

  2. Al Says:

    I think the Govt have muddied the waters with what actually is research.
    Some of the job announcements recently were characterized as research were questionable.

  3. anna notaro Says:

    Here is the British perspective at least as far as the AHRC (Arts & Humanities Research Council)is concerned with their financial allocation for 2011-2015. Of particular interest is the Delivery Plan, follow the ‘Publications Section’ link.

  4. Read the Forfás reports on business R&D spending; check the definitions and see how easy it is to determine what type of research is done in various types of firms.

    The Taoiseach announced in 2009 plans by HP for a multi-lingual support centre.
    The announcement said: “An element of the operation will also involve research and development.”

    Does this mean a little or a lot?

    As to your statement: “Ireland’s ability to escape from the recession and to build up its economy depends critically on a successful national research programme, allowing the country to be identified as a centre of excellence in a selected number of key areas. This will not only help to secure much of the inward investment which we can now attract, but it will also be the key to a significant proportion of indigenous entrepreneurship.”

    You do not appear to understand the challenges faced by the economy and the changing model of globalization.

    Most innovation does not have its genesis in universities; successful high tech companies depend on many other skills besides those provided by PhDs and Israel for particular reasons, is the ONLY country that has successfully cloned the Silicon Valley model.

    The biggest flaw in your position is that a local market is needed for success and without that firms would not generally become successful exporters.

    In Nov, O’Keeffe established the fourth advisory panel since Dec 2008 as the policy is failing.

    It’s a coup that Ireland gives a US VC company $50m to open an office in Dublin!

    So you want an economy of high paid R&D people and the rest on the dole?

    In the UK, after 30 years, there are 30,000 employed in the UK’s ‘Silicon Valley’ in the area around Cambridge University; most firms employ less than 10 people.

    The Innovation Taskforce report is a faith-based document with no credible data to support its aspirations; some credible research to support the faith is in order.

    As for entrepreneurship, who among the policymakers know anything about it?

    Your prescription will never provide an engine of growth.

    • I am not necessarily convinced myself by everything in the Innovation Taskforce report, but you absolutely cannot say it is based on ‘no credible data’. It collected its own data and received dozens of submissions with further substance.

      I have no idea what point, if any, you are making about Cambridge. There is little doubt that it has acted as a magnet for investment.

      ‘Most innovation does not have its genesis in universities’. Your evidence? I can give you hundreds of examples to contradict that. Clearly there is also significant innovation that does not come from universities, but almost all of that has depended on the prior training of researchers in university research labs.

  5. Niall Says:

    Innovative high-tech companies have grown out of research in Irish universities. Iona Technologies and Changing Worlds come to mind. I agree that such companies are unlikely to solve our unemployment problems on their own but they do create jobs and export income. They do not require a large (or any) domestic market to succeed

  6. kevin denny Says:

    From what I can see here, “research” is being used very differently by different commentators with a rather incoherent thread as a result. Also, one or two commentators, however prominent, should not be seen as representative of the economics profession.
    Some R&D research may well be a waste of money but if it is expenditure by private companies thats their business (though of course it may also attract some public support).
    Research in higher education is a different matter. Sure, some of the research may well be a “waste of money” in the narrow sense that it doesn’t generate additional economic activity but that’s a fairly peculiar definition and one that does not follow from economics. Indeed lots of research by economists is a “waste of money” by that criterion.
    Whether the taxpayer gets value for money from PRTLI and other similar investments I don’t know. The nature of the beast means that it is very difficult to tell as a lot of it is to do with externalities and these are hard to pin down with any precision. But one should not assume that they are therefore zero.

  7. Gerry Boyle Says:

    This is a topic that always generates heat but little light. If we stick to the evidence, however, there are strong grounds to believe that, as a general proposition, investment in R&D ought to generate substantial social returns. A variety of robust endogenous growth models (Romer et al) provide powerful intellectual arguments as to why invetsment in knowledge capital would be expected to be hugely benficial to society in contrast to other forms of capital. Yes returns are “limited by the extent of the market” but for an SOE we face no such constraints. In my own area of interest – the agri-food sector – there is also a powerful and extensive body of evidence that R&D pays handsomely. Typically standard partial and general equilibrium analyses generate social rates of return in excess of 40%, e.g. check out the following meta analysis

    I’m not for one minute suggesting that highly scarce taxpayers’ resources should be spent without rigorous ongoing monitoring and approval. Afterall it is not reasonable to expect taht public invetsment is justified in all sectors. Standard scientific metrics should of course be measured and benchmarked to international norms, see, for example,,7210,en.php

    but impact indicators also need to be tracked. But I also think that we have to be mindful that these societal benefits that have been estimated result of course from transfers from different groups within society. This raises the very important question of who should pay for the investment?

  8. Ernie Ball Says:

    Obviously any activity that doesn’t enhance Joe Bloggs’ ability to buy that SUV he’s always wanted is a complete waste of time, energy and money and should, accordingly, be abolished.

    • Al Says:

      It may be more that Govt can see a return on its investment and this growth can allow it to fund more or save more?
      For interesting times like these!!

  9. There are of course different aspects of research; what is at issue here is the Government’s goal to see commercialisation of specific areas of research as a potential jobs engine. Let’s term it enterprise-related research.

    The 2006 science plan was repackaged in late 2008 as the ‘smart economy’ strategy to fill the void that was left after the bursting of the property bubble.

    Von Prondzynski says: “A debate on whether investment in research is money well spent is perfectly legitimate, but contributors to that debate would do well to get their facts straight first.

    The problem here is that there is little data available on outputs and it’s the likes of Von Prondzynski who need to move beyond aspirations and present some facts.

    I have got data from Enterprise Ireland which shows that many spin-out firms have few employed and the agency has no credible firm survival data.

    Policymakers haven’t been very interested in facts and I said back in 2006 that it was surprising that the contrast between the high hopes for the indigenous tech sector in the 1990s and the subsequent failures, had been ignored. The inconvenient facts did not fit the political agenda and the opportunity of university presidents for public spending largesse.

    Parthus was acquired by an Israeli firm; Iona was sold to a US firm in 2008 and last year Cognotec collapsed while a struggling Trintech was acquired by a US private equity firm.

  10. jfryar Says:

    One of the points I would make regarding research funding is our tendency to think small. We fund research in institutes and university departments but ignore the fact that Irish researchers often have to travel abroad to use large-scale facilities hosted in other EU nations.

    Why didn’t Ireland bid for the huge number of EU-based projects? Why didn’t we see EU facilities coming to our shores? We will always be a second-class research nation until such time as we build or host something scientifically substantial. A good example might be an ultrashort laser facility, x-ray source or supercomputer facility that would have applications in a wide variety of fields.

    Ireland wants to conduct ‘world-class’ research but we aren’t prepared to pay for or even host ‘world-class’ facilities.

    • jfryar Says:

      Sorry … internet connection was a bit dodgy so I’ll complete the point with the following. Between 1995 and 2004 the public spent 12.6 million pounds on the synchrotron radiation source in the UK. It employed 250 staff, and around 700 researchers and PhD students used the facility. 698 papers were published and work contributed to the 1997 Nobel Prize. Specialised software developed at the site is generating 800,000 pounds per annum. The equipment allowed the measurement of protein structures which one can only estimate contributed millions to the economy via drugs produced by pharmaceutical companies.

      Sometimes big science is a big earner. Ireland needs to think big.

    • Al Says:

      I dont buy into this world class research agenda.

      Where we can fit in is the rapid utilisation of research or the implementation of such research in a disciplined low cost (Ryan Air) type approach.


  11. Martin Ryan Says:

    On a micro-level, there is evidence that publicly funded university research translates into patents – particularly in pharmaceuticals, chemicals and electronics (Jaffe, 1989). Knowledge also spills out from universities into local firms in the form of knowledge spillovers (Lester, 2003). In addition there is evidence for improvements in bibliometric performance due to government investment in basic scientific research (Indecon, 2008). There is also suggestive evidence that the development of spin-out companies follows government investment in basic scientific research (U.S. Science Colaition, 2010).

    On an aggregate level, there is a very strong body of evidence pointing to positive returns from private investment in research and development; Mansfield (1993) is a prominent example. Of course, here we are primarily concerned with government investment in basic scientific research; there is some evidence pointing to positive returns from government investment in research and development; for example: Toole (2008). Also, it has been shown that basic research has a higher return than applied research (Lichtenberg and Siegel, 1991).

    There is a wider array of research pointing to much larger (though admittedly more difficult to measure) indirect returns to government investment in research and development. Prominent examples are the U.S. National Academies (2010), Access Economics (2003) and Murphy and Topel (2003). There are also strong suggestions about the importance of total factor productivity (via research and development) for growth in the American economy over the latter half of the twentieth century (Jorgensen et al., 2008). This is the source material for the quote by the U.S. Government Chief Scientific Advisor to the United States Congressional Committee that “between 50 and 85 % of the growth of the U.S. economy over the past half-century, and two-thirds of our productivity gains in recent decades, are directly attributable to scientific and technological advances.”

    In addition, due to time-lags (as discussed by Mansfield, 1998) and unexpected outcomes (as discussed by the U.S. Committee on Science, Engineering and Public Policy, 1999), estimates of the return to government investment in basic scientific research may be downward-biased. Finally, sometimes concerns are raised about crowding out in relation to public investment – that is, that government investment in scientific research would crowd out private investment. However, this is not a valid concern in the United States as the Congressional Budget Office (2007) has shown that firms’ spending on scientific research increases in response to federal spending on scientific research.

    Everything that has been mentioned above is heavily contextualised by the fact that Ireland is a small open economy. In relation to multiplier effects, the openness of the Irish economy is a notable concern (Ilzetzkiet at al., 2010). There are also concerns as to whether Ireland has the scale to develop clusters of scientific research; it is known that biotechnology firms, for example, tend to cluster (Prevenzer, 1997). However, there is some suggestive evidence that government investment in research and development encourages multinational firms to locate in Ireland (Siedschlag et al. 2009).

    A central idea in the Irish case is to ultimately focus on being a clever copycat – as discussed by the Innovation Task Force (2010). There is good evidence that the absorption of foreign knowledge is an important factor for economic growth (Bye et al., 2009), and it has also been clearly stated that the absorption of foreign knowledge is a function of human capital (Dorwick, 2003). In other words, if Ireland is to absorb foreign knowledge related to basic scientific research, it needs researchers who have been trained in how to conduct basic scientific research. The availability of researcher-labour is cited by Veltri et al. (2009) to be the most important factor in the location-decisions of multinational firms who invest in research and development. One potential challenge for Ireland is the suggestion that knowledge spillovers can be geographically bounded (Jaffe, 1998).

    • kevin denny Says:

      Thats a very useful summary of the evidence: good to know someone is keeping an eye on the research literature.

  12. Al Says:

    Looking at it from a different analysis, with the hospitals clogged and the water system shagged it could be argued that we arent funding the basic nation housekeeping stuff and should concentrate on that first.
    Maybe we can research it….

  13. Bernie Hannigan Says:

    Martin Ryan’s extensive list of evidence is excellent. A key point is the need to have a cadre of people experienced in research in order to benefit from research findings gained elsewhere. I would extend that, and reference Al’s comment, by saying that health and social care services, with their extraordinary need to be based on strong evidence, require staff who are also research-literate. (Literacy can be gained through direct involvement in research or research –based postgraduate education). Its current absence in many cases is a strong reason why we perceive a gap between expenditure on medical/health research and the care/treatment received by the population generally. Educating people in research takes time and must continue throughout people’s professional career. Therefore it is costly. Unfortunately the nature of cutbacks is that this is not seen as a frontline, essential expenditure. But it IS essential. There is skepticism about industrially – supported research however that can be minimized within a fit-for-purpose, transparent regulatory environment – also a cost for the public purse, but yet another essential one. Summary: Public funding must meet the cost of translating research findings into tangible outcomes that affect people.

    A useful new systematic review

    • Al Says:

      I have to inquire into the meaning of research literate!
      Is it someone skilled in research or is it some one able to digest research?

  14. Bernie Hannigan Says:

    OK, good question – sorry to have used jargon.

    Research literacy is the ability (and willingness)to access research papers, to decide accurately whether a particular study is ‘robust’ (more jargon – the research was carried out appropriately, e.g. sample size was large enough, correct analyses and statistics, all methods clearly set out, conflicts of interest and funding sources declared) and to be sufficiently up-to-date to understand the context(s) in which the results would be relevant. It will be evident that experience of carrying out research in a high quality research environment, that includes good supervision, is important for gaining literacy. Involvement in even a short research project such as at Masters level can contribute significantly to a person’s research literacy.

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