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Where the U.S. is Building Knowledge Capital

  • December 21, 2010
  • Michael Mandel

I’ve been posting about knowledge capital writedowns, so now it’s time for a post on where the U.S. is building knowledge capital.

Let’s start with research and development: R&D is not the only type of knowledge capital investment, but it’s one of the more important parts.  In my upcoming paper “Biosciences and Long-Term Economy Recovery”, I wanted to compare biosciences R&D  in the U.S. with infotech R&D.  (Biosciences, by my definition, includes pharmaceuticals, medical equipment makers, and biotech).

Now, these numbers are not published by the government,  but I was able to take a decent shot  using NSF data. Take a look at the chart below:

By my calculations, the U.S. R&D effort, outside of defense, is divided into thirds–one third biosciences, one third infotech, one third everything else.

I estimate that  biosciences accounts for  approximately $100 billion a year in domestic R&D spending. This includes domestic business spending, nondefense federal spending and nondefense academic spending.

U.S. domestic infotech R&D totals roughly $95 billion, outside of defense. However, my calculations don’t pick up the portion of the government defense R&D that goes into IT-related projects, which would gross it up to $100 billion. For all intents and purposes,  domestic IT R&D is roughly equal to biosciences R&D.

In these two areas–biosciences and IT–it’s likely that the rate of U.S. knowledge capital creation exceeds the rate of knowledge capital writedown. Other areas of R&D? Much dicier.

Note: These are preliminary estimates. I will likely update them in the full version of the paper.

This piece is cross-posted at Mandel on Innovation and Growth

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