The Economics of NIH Research

While the austerians will never be convinced that God doesn’t shed a tear every time a federal tax dollar is spent, among the Coalition of the Sane, it’s acknowledged that government spending can stimulate economic growth beyond the amount initially spent by government. While the most important thing about NIH funding is the science that gets done, the economic consequences are also important. Year after year, one dollar of NIH spending leads to two dollars of economic activity–one of the highest rates of economic activity for any government spending.

The reason is straightforward–most NIH spending travels through many hands before winding up sitting in a bank account. About seventy percent of a grant’s direct costs are salaries, and these are salaries that range from lower-middle class to upper-middle class. While some saving does occur (hopefully), much of the money is spent: just how much savings are grad students, post-docs, and junior lab techs able to save? The remainder is spent on supplies and equipment and these are typically not high profit margin businesses (i.e., the rate of return is low). When universities receive overheads they spend all of the money (if not always wisely…) on things like middle class salaries (staff) and construction (more middle class salaries).

Given the positive effects of NIH spending, if we had any sense (which we don’t), we would increase the NIH budget, not decrease it. Yes, we would have to be smart about it–no need to double the number of PhD trainees (we tried that experiment and it didn’t work). We would get more science and more economic activity, both things we want and need.

We now return to our current ideological idiocy and apologize for any hope this might have caused….

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3 Responses to The Economics of NIH Research

  1. Potnia Theron says:

    Two paws up.

  2. coeruleus says:

    “While the austerians will never be convinced that God doesn’t shed a tear every time a federal tax dollar is spent…”

    In fact, before the sequester cuts took effect, we tried pointing the ROI out to [certain TEA-Party-type] Congresscritters and they stopped us before we could even begin to explain, saying that they already know precisely how much economic activity the NIH creates and that cutting the NIH budget (or keeping it flat) is the dumbest thing they could possibly do, especially right now with the economy as slow as it is…but they’re going to do it anyway. As long as there are just barely enough of these politicians elected to office in the US, we’re doomed.

  3. albanaeon says:

    Heck, forget about multipliers. Right now, we should take a dollar for dollar spending if we had to. Anything to keep the nimrods from removing them from the economy when its in the state its in.

    But nope. We’ve got TeaPers running amok, GOPers more afraid of being primaried by a TeaPers than any Dem challenger, Obama and the Dem leadership plowing ahead with a Grand Bargain whatever the cost, and the few sane and/or progressives out of favor because we’re still living under zombieReaganomics.

    I really hope that our children are generous and just shake their heads at our current foolishness in history books, because the other options aren’t that pleasant.

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