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Of course, factors other than aggregate economic growth contribute to changes in living standards for different segments of the population, including shifts in relative wages and in rates of labor market participation. SRC:MixSentence, IDs:AF24C528;6B520626;8AE00EE6;5B7C9030;BF1C8051;6F4F7993;0E3D6250;FA6D331A;04EFBA12;DCA74BA0;FAD9CA2D;8A9D7DB7;686A5530;C9571794;75B58E06;E73F66B8;5AD61E1B;24F0BE8E;ED732AD7;580A0BE2;1BB88423;953A87C9;F42FD8B5;103B5D06;3AD5669B;A2107323;56E21973;2603B15B;33F4E1AB;029700BB;C50AEBBB;A363888D;AD2F6436;4001EF39;8AA5A084;936E05A7;45417567;CF23534A;4F45A2FE;EA73E075;9DDE16A1;D16FA106;CE505E59;B7B2D198;FCAFA917;99219F16;07431703;1401C56F;20C02786;4BCDBA06
Although the system of higher education in the United States remains among the finest in the world, numerous concerns have been raised about this country’s ability to ensure adequate supplies of highly skilled workers. However, innovation and technological change are undoubtedly central to the growth process; over the past 200 years or so, innovation, technical advances, and investment in capital goods embodying new technologies have transformed economies around the world. And, contrary to the notion that highly trained and talented immigrants displace native-born workers in the labor market, scientists and other highly trained professionals who come to the United States tend to enhance the productivity and employment opportunities of those already here, reflecting gains from interaction and cooperation and from the development of critical masses of researchers in technical areas. Over long spans of time, economic growth and the associated improvements in living standards reflect a number of determinants, including increases in workers’ skills, rates of saving and capital accumulation, and institutional factors ranging from the flexibility of markets to the quality of the legal and regulatory frameworks.
To the extent that countries gain from leadership in technologically vibrant industries or from local spillovers arising from inventive activity, the case for government support of R&D within a given country is stronger. The technological leadership of the United States was and continues to be built in substantial part on the contributions of foreign-born scientists and engineers, both permanent immigrants and those staying in the country only for a time. For example, technological prowess may help a country reap the financial and employment benefits of leadership in a strategic industry. Governments in many countries directly support scientific and technical research; for example, through grant-providing agencies (like the National Science Foundation in the United States) or through tax incentives (like the R&D tax credit). On the one hand, the diffusion of scientific and technological research throughout the world potentially benefits everyone by increasing the pace of innovation globally. Of course, the rationale for government support of R&D would be weakened if governments had consistently performed poorly in this sphere.
Indeed, some economists have argued that because of the potentially high social return to basic research, expanded government support for R&D could, over time, significantly boost economic growth. This research suggests that technological progress and the accumulation of intangible capital have together accounted for well over half of the increase in output per hour in the United States during the past several decades. Similarly, I don't give too much thought to the multitude of provisions for sharing revenues from foreign translations, from selling the rights to produce my books as stage plays and movies (yep, those provisions are in the contracts), etc. Certainly there have been disappointments; for example, the surge in federal investment in energy technology research in the 1970s, solicitor advertising a response to the energy crisis of that decade, achieved less than its initiators hoped. There are other things I care about more than those things, so I leave my editor alone on those topics and save my political capital for other matters. I will focus on one important component of innovation policy: government support for R&D. Economic policy affects innovation and long-run economic growth in many ways. The economic arguments for government support of innovation generally imply that governments should focus particularly on fostering basic, or foundational, research.