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My Two Cents

Mandel on R&D

Chris Farrell Oct 1, 2007

Mike Mandel at Business Week has a very important post on new numbers from the Bureau of Economic Analysis on his blog.

The Bureau of Economic Analysis took a big leap into the 21st century today. The agency released a new set of figures on R&D spending and how it affects the economy, a big improvement on what it has done in the past. As the BEA says,

Current national economic accounting treatment does not separately identify the contribution of R&D and many other intangible assets to U.S. economic growth. The satellite account, or experimental format, provides a means to illustrate the impacts of adjusting the treatment of R&D activity in the national economic accounts. The current release is part of BEA’s long-term efforts to improve its measures of intangibles in the economy.

Mandel then highlights three aspects:

1) First, the new figures show that the R&D contribution to growth was much bigger in the second half of the 1990s–the New Economy years–than in the preceding 30 years (measured as investment).

2) Second, the new figures from the BEA show very clearly how the R&D slowdown in 2001 and 2002 helped worsen the recession and impede the recovery. The same thing was true in 1974 and 1975 as well.

3) Finally, the new data dramatically increases the contribution of the pharmaceutical industry to the growth of private industry and to total value-added of private industry.

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