Monday, 23 June 2014

Various teaching links

The long term discount rate is 2.5%.  Vital for climate change

Successful London schools: it's early intervention 

Friday, 20 June 2014

The Economic Significance of the UK Science Base: A New Report

We have a new report [pdf], summary page,  out on 30th April, 2014, "The Economic Significance of the UK Science Base".  It's done for the Campaign for Science and Engineering and is by Jonathan Haskel, Alan Hughes and Elif Bascavusoglu-Moreau.

We look at two main questions:

1. How does public-sector funding of the science base affect private involvement?

The caricature is that research-orientated universities and academics are removed from the "real world" and so have no connection to anything useful.  In fact, completely the opposite is the case.  Surveys of academics indicate there is a strong positive correlation between public-sector funding and private involvement in research both for universities and individual researchers.
  • Universities that receive higher levels of public research funding generate more research income from other sources (e.g. charities, industry, overseas).
  • Regardless of institution, individual scientists who hold Research Council grants are more likely than non-grant holders to be ‘outward-facing’ and interact with the wider community, for example through the commercial application of their research.

2. How does public science funding affect private sector productivity?

Looking at data for industries over time, we find that public science funding generates substantial returns to the private sector:

  • Public investment in research increases private sector total factor productivity growth 
  • This effect is greatest in industries that themselves conduct significant R&D or report co-operative interactions with universities.
  • The rate of return to public investment is around 20% (in our most conservative estimate) which is a large rate of return for government projects.  If government made a one-off increase in public spending on R&D of £450m (5% of its £9bn total R&D spend), market sector output would rise by £90m per year, every year. Discounting this flow of extra output at 5% per year gives a total boost of £1.8bn to business sector output over time.

Meeting to discuss the findings. Taken from CASE website
CaSE will be holding a panel discussion on the economic significance of the UK science base in May. The panel and audience will discuss findings from Jonathan Haskel and Alan Hughes’ new report, ‘The Economic Significance of the UK Science Base’. This report, commissioned by CaSE and funded by a consortium of CaSE members, provides crucial economic evidence to support claims that Government can boost growth by investing in science and engineering research. The event is kindly hosted by The Department for Business, Innovation and Skills on 7th May, 2pm-3.30pm. The event is open to CaSE’s organisational members and collaborators. Please RSVP to

Saturday, 14 June 2014

Piketty summary

1. Solow's review of Piketty, a brilliant summary.

But the case against:

Making predictions about future technology

Is very hard. Here's the Competition Commission, reviewing a meger in 2001 between Kodak and ColourCare, two photo developing and printing companies.

Para 2.6

So it's not wholly wrong to b
e fair...but this graph of Kodak's fortunes says just how fast the market collapsed.

Wednesday, 11 June 2014

More on the public science base

Here's a new report

The economic impact of Russell Group universities

It's an example of the kind of work that HM Treasury will not be convinced by.  Some of the work, see Chapter 8, takes spending on universities and multiplies it by a rate of return.  For medical research, this rate of return is poorly estimated. Other parts of the work take  e.g spend on construction by employment in construction plus employment supported by constructoin workers buying cups of tea etc. But what is the counterfactual?  Would all those workers and tea-makers be unemployed if these projects did not go ahead?

Thursday, 29 May 2014

Where are public sector cuts really?

An incredibly helpful piece from Jonathan Dupont gives the answer and shows how salience is so key in understanding economic policy: boring things like indexation are just not salient to voters.

1. capping each household’s benefits to average take-home pay will save only £387m a year
2.  By far, the biggest saver for the government has been the early decision to switch the indexing of benefits, tax credits and public sector pensions to CPI. By 2018-19, the OBR estimates that this will save £6.6bn in total a year.

Saturday, 24 May 2014

UK relative productivity again

The ONS has helpfully an international productivity comparison page,  here.  
What does it show?

First, teh UK performance in the 2000s was pretty impressive: better than the US.  Italy was very poor.  Second, our performance after the shock was also very poor, note the US in particular.
Third, note that the real puzzle is the post 2011 data.  This is mostly due to the rise in UK hours worked relative to other countries, see below.

I wonder if the hours data might be under revision at some point. 

Friday, 23 May 2014

Returns to medical research

We have just produced a report on the public sector spillovers from science spending and find a 20% rate of return on public sector science spend. 

This medical paper, What’s It Worth report, very widely quoted finds

We estimated that the GDP gains that result from
increased public/charitable medical research deliver
an additional rate of return in the range 20–67% (with a
best estimate of 30%). (Page 7)

How does all this relate?

Page 5 explains this

Economic returns to medical research comprise two,
additive, elements:
• health gains net of the health care costs of delivering
• GDP gains, that is to say the UK national income
that results directly and indirectly from the medical
research and the further activity stimulated by it.

How do they get the first? By counting how much life has been extended due to a drug, valuing that life over time and figuring out what the drug cost to develop and whether it was done in the UK or not.

How do they get the second?  P.36 sets out two methods

1 two-stage approach:
a) estimating the private R&D stimulated by public
b) estimating the social rate of return to the private
R&D so stimulated
2 one-stage approach: a direct estimate of the social
rate of return generated, by whatever transmission
mechanisms, by public medical research

The one-stage method uses estiamtes of the social rate of return that are derived from agriculture. See their page 36

But because  empirical estimates to enable the one-stage approach
to be taken come only from non-medical sectors (mainly
agriculture), we considered it desirable to provide a
check by undertaking the two-stage estimates as well,
as described in the following paragraphs.
The one-stage method uses data from the US to get 1a above, that is, the crowding in effect of public R&D and then uses an average of the public rates of return of private R&D , see page 38, based mainly on US manufacturing studies.