In this and subsequent chapters, data on R&D 

 funding are presented in both current and 

 constant 1^67 dollars. The use of constant 

 dollars is an attempt to reflect the reduction in 

 the purchasing power of R&D resources which 

 is caused by inflation, thereby providing a more 

 accurate indication of the "real" level or 

 magnitude of R&D funding and effort. Inflation 

 in the economy at large has reduced the purchase 

 value of the 1067 dollar to 69 cents in 1974, with 

 the largest reductions occurring in the most 

 recent years. In the absence of a price deflator 

 specifically for R&D, the calendar year implicit 

 price deflator for the gross national product 

 (GNP) is used to convert current dollars to 

 constant dollars; 1967 is chosen as the base or 

 reference year, in keeping with Federal 

 statistical standards. The GNP implicit price 

 deflator, which applies to the economy as a 

 whole, is necessarily general in scope and is only 

 approximately appropriate for use in connection 

 with R&D as a whole, or with specific R&D- 

 performing sectors, types of costs, and fields of 

 research. It is believed, however, that a uniform, 

 though approximate, conversion method is 

 preferable to various intuitive estimates of the 

 effects of inflation on R&D. 



The present indicators fall short of providing 

 comprehensive and in-depth measures of trends 

 in the allocation and use of resources for R&D. 

 These shortcomings reflect both conceptual 

 problems and data limitations. The indicators 

 presented in this report do not include the full 

 costs of R&D, and thus the magnitude of the 

 R&D activity resulting from the investment of 

 resources cannot be determined. The indicators, 

 in addition, do not provide measures of the 

 extent to which the resources engage the 

 Nation's full R&D capacity. Furthermore, in- 

 dicators have not been developed for gauging the 

 general effectiveness with which the R&D 

 resources are utilized, nor the efficiency with 

 which these resources are translated into R&D 

 activity. Another deficiency is the lack of indices 

 of the quality of the resources which are directed 

 to R&D, particularly the qualifications of the 

 scientists and engineers involved and the 

 adequacy of their research equipment and 

 facilities. And finally, data and information are 

 incomplete regarding the national purposes to 

 which total R&D resources are directed; only in 

 the case of Federal funding are R&D resources 

 classified according to areas of national concern 

 such as health, energy, and national defense. 



NATIONAL RESOURCES 

 FOR RESEARCH AND DEVELOPMENT 



Trends in total national expenditures for 

 research and development indicate an in- 

 creasingly strong commitment from available 

 funding resources; however the impact has been 

 reduced by declining purchasing power due to 

 inflation. Total expenditures in current dollars 

 rose steadily from 1960-74 to $32 billion, almost 

 two and one half times that for 1960 (figure 2-1). 

 R&D funding, however, slowed concurrently 

 with acceleration in inflation. As a result, 1968 

 was the peak year of total expenditures in 

 constant dollars. Funding since then has been at 

 a lower level; in 1974 the constant dollar total 

 was $22.9 billion, 7 percent below the total for 

 1968. 



The numbers of scientists and engineers 

 employed in R&D rose and fell in close parallel 

 with levels of constant dollar expenditures 

 (figure 2-2), reaching a high of 558,000 in 1969. 

 The subsequent decline occurred largely in the 

 industry sector, as a result of reductions in 

 Federal funding in defense and space programs. 



The share of the Gross National Product 

 represented by R&D has dropped continuously 

 over the last 10 years (figure 2-3). From a high of 

 2. 90 percent in 10o4, it declined to 2.29 in 1974. 

 R&D funds from the private sector, particularly 

 industry, kept pace with the GNP throughout 

 the 1960-74 period. The growth of Federal R&D 

 funding, however, fell behind, and as a percent- 

 age of the GNP declined from 1.99 percent in 

 1964 to 1.22 percent in 1974. 



Sources of support 



The Federal Government has been the prin- 

 cipal source of R&D funds throughout the 1960- 

 74 period, although the proportion of its support 

 within total R&D funding has declined. Federal 

 support of R&D in 1974 in current dollars was 

 almost double its 1960 support and 18 percent 

 higher in constant dollars (figure 2-4). The peak 

 year for Federal support of R&D in constant 

 dollars was 1966, followed by a 19 percent 

 decline by 1974. Industry-supported R&D 

 expenditures, which together with Federal 

 support accounted for 9o percent of total 

 national R&D expenditures in 1074, were at 

 their highest level in current dollars in 1974, and 

 had diminished only slightly from the 1073 peak 

 year in constant dollars. 



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