Bernanke: Increase Government Support for Research
May 16, 2011 – Government support for technology research and development must supplement private market research in order to create growth in the economy, Federal Reserve Chair Ben Bernanke said during a May 16 speech at Georgetown.
“The tendency of the market to supply too little of certain types of research and development provides a rationale for government action,” Bernanke said during his keynote address at the “New Building Blocks for Jobs and Economic Growth” conference. “No matter how good the policy environment, ultimately big new ideas are rooted in well-executed research and development.”
The Organisation for Economic Co-operation and Development (OECD), the Athena Alliance, The Conference Board, the Kauffman Foundation and the U.S. National Academies presented the conference, hosted by the Georgetown Center for Business and Public Policy at the McDonough School of Business.
Bernanke said despite research spending being relatively stable in relation to the United States’ gross domestic product (GDP), the government’s actual monetary spending on research and development has trended downward over time.
“Expanded government support for research and development over time could significantly boost economic growth,” Bernanke said.
Bernanke cautioned that the country’s economic climate could force the government to make tough decisions if America wants to reverse that course.
“Congress and the administration would have to carefully weigh competing priorities as they make their budgetary decisions,” he said.
Students in the audience found the talk intriguing.
“I think it’ll be interesting to see how the government balances all the recent spending with what he said about the need to continue spending,” said Katelin Kennedy (MBA’12). “I think they are really important, but it’ll be important also to consider how to balance the debt we already have with the need for future spending to increase our growth and innovation.”
The Long Haul
Bernanke said if governments want to see the fruit of their research and development investments, they must be focused on the long haul, not just a quick gain.
He noted that the 1990s Internet revolution started with government-supported research in the 1970s and 1980s.
“Thus governments that choose to provide support research and development are likely to get better results if that support is stable and long-term oriented rather than feast or famine,” Bernanke said.
Bernanke said increasing the number of American students studying science and engineering as well as an increased number of immigrant scientists will contribute to a better research and development environment.
“Scientists and other highly trained professionals who come to the United States tend to enhance the productivity and employment opportunities for those who are already here…” he said.
Issues and Challenges
John Mayo, professor of economics, business and public policy at the business school, said the conference later focused on links between intangible assets and long-term economic growth, something Bernanke talked about.
“[Bernanke’s] role at the Federal Reserve Board is often focused on the latest economic indicators such as employment and inflation,” Mayo said. “His Georgetown speech gave him an opportunity to focus on a more subtle, but equally profound, set of issues and challenges facing the long-run prospects for our economy.”