R&D gets underinvested by the private sector because it generates benefits beyond what the company can capture for itself. For that reason, the US government heavily subsidizes it.
Austan Goolsbee, who would later on serve as Obama’s chief economist, found that public subsidies for R&D has very little impact on the amount of R&D activity. Instead, most of those subsidies just go into scientist and engineer salaries. That’s because labor supply in those fields are not very responsive to salary. A 10% increase in subsidies results in 3% increase in the salaries.
Of course, in Taiwan we want more of that, since salaries are so low relative to GDP. And the nature of those subsidies are different in Taiwan and the USA, as the USA funds mostly basic research and some applied, an in Taiwan it actually develops specific products. Take a look.
Taiwan should subsidize R&D programs, not least because much of the boost would go toward scientists’ salaries.
Don’t mean to put words in the mouth of @OysterOmelet, but seems to be arguing for the creation of a kind of virtuous loop with respect to government-funded research. The more spent, the more scientists there are, the more scientists, the more they know which generates more reasons for investment, etc.
Oyster might come back and explain why a lower cost alternative (just boosting scientist salaries) would not result in such a loop - if that’s what’s what here.
A study by Obama’s chief economist found that government subsidies for R&D in USA did not increase R&D activity. Instead, the money all went to the salaries of scientists and engineers. But in Taiwan we want that, since salaries are so low. Please read the article for more discussion.
Not quite what the paper says, but the point is sorta made with that statement for the sake of argument. But, ok, d’uh? Sure, you have to pay overhead, material, etc, but what is research? It’s people figuring shit out. So yeah, the money goes to their salaries.
I don’t think the only reason for R&D subsidies is to somehow “create more R&D activities” but to allow ambitious R&D projects that would otherwise be too costly to be attempted.
Things like CMOS semiconductors, the Internet, memory foam, GPS, wifi, jet engine, lithium-ion battery, epi-pen, and more that the modern world use and depend on every day were created because they were funded by the government/military.