Generic Policy Issues 5 



(Percent 



1961 63 65 67 69 71 73 75 77 79 81 



FIGURE 2. National Expenditures for Performance of R&D' as a 

 Percent of Gross National Product (GNP) by Country. 



'Gross expenditures for performance of R&D including associated capi- 

 tal expenditures, except for the United States where total capital expendi- 

 ture data are not available. 



"Detailed information on capital expenditures for research and develop- 

 ment are not available for the United States. Estimates for the period 

 1972-80 show that their inclusion would have an impact of less than one- 

 tenth of one percent for each year 

 Note: The latest data may be preliminary or estimated. 

 Source: National Science Foundation. Science Indicators. 1980. 



directly related to economic growth (for example, man- 

 ufacturing, transportation, and telecommunications) than 

 in the United States. Governments of the United King- 

 dom. France. West Germany, and Japan also allocate a 

 higher proportion of their total funds for support of re- 

 search in universities and national laboratories than does 

 the United States. That is most markedly the case in West 

 Germany and Japan (SISO). 



In the United States, private industry engages in and 

 supports R&D primarily to produce or improve marketa- 

 ble, profitable products and processes or, increasingly 

 during the 1970s, to meet environmental, safety, and 

 health regulations. American industry also provides some 

 support for university research and teaching, but that 

 support is small relative to the expenditures it makes to 

 support its own R&D. 



The rationale for Federal support of R&D in the United 

 States, both in its own laboratories and in other institu- 



tions, is varied. Since World War II, the Federal Govern- 

 ment has assumed responsibility for supporting science 

 and technology to fulfill three broad objectives: 



( 1) to support its own direct responsibilities (in such areas 

 as national defense, space, and air traffic control): 



(2) to accelerate the rate of technological development in 

 the private sector in areas of overriding national need, 

 particularly when financial risks are large and the 

 costs are inordinately high relative to potential short- 

 term returns on investments (in such areas as agricul- 

 ture, health, energy, and transportation): and 



(3) to support the research needed to maintain, develop, 

 and replenish the store of knowledge, tools, person- 

 nel, and skills that underlie and provide the base for 

 the U.S. science and technology enterprise. 



Research and development activities in all three categor- 

 ies are carried out both in the Federal Government's own 

 laboratories and in other settings. In the latter, performers 

 are supported by either contracts or grants. 



Since the Federal Government is the primary, if not the 

 sole, consumer of the results of the first type of activity, 

 levels of support can be related directly to its own specific 

 end-use requirements. For example, a high priority of the 

 Administration is to rebuild the Nation's defense ca- 

 pabilities. Thus, the President's fiscal year 1981 and 1982 

 budgets proposed appreciable increases in defense-related 

 R&D in order to narrow the aggregate gap between U.S. 

 and Soviet expenditures in that category (NS). 



Among the three categories of Federal R&D support, 

 the most intense policy debates during the next 5 years are 

 likely to surround the second. Not only is there no con- 

 sensus about how to determine which areas of national 

 need are sufficiently important to justify Federal develop- 

 mental support of the private sector, but there is disagree- 

 ment about appropriate levels of support, distribution of 

 effort between Federal laboratories and private industry, 

 and whether Federal support should come directly as a 

 contract, subsidy, or low interest loan, or indirectly 

 through such means as tax incentives and procurements. 

 The Reagan Administration will no longer support pro- 

 grams of an economic subsidy nature. For this reason, the 

 President's budgets have proposed significant reductions 

 in many R&D programs that appear to have near-term 

 commercial payoffs. 



CRITERIA FOR FEDERAL SUPPORT OF BASIC SCIENCE 

 AND ENGINEERING 



Issues associated with resource allocations in the third 

 category — often called the basic research category — re- 

 quire somewhat more discussion, since that category, of 

 the three, is most directly linked to maintaining and 

 developing the U.S. science and technology base. 



The assertion that the Federal Government has a re- 

 sponsibility to invest in developing and maintaining the 



