Should scientists be working out how to kill people?

June 12, 2008 4:57 AM

Is defence R&D more productive for economic development than non-defence R&D?

So I was talking with a fairly well-informed friend last night and he said that defence R&D is so productive in terms of commercial spinoffs, the internet, nuclear power, radar etc, that it is better for the economy than civilian R&D. Now this just seems ridiculous to me. Surely if you want civilian appllications you're best served by directly researching them. However my friend insisted that he had statistics to back up his claim, regarding the relative level of innovation created by Japan and Germany with their low levels of defence R&D spending (but high levels of civilian R&D), compared to the US and UK.
I didn't have anything to back up my argument beyond the fact that it seems intuitively correct. He is an economics teacher and has studied the subject with his class, so I deferred to him and am now in the process of researching the issue.
Now I don't know if his basic assertion is true as I haven't been able to find either his figures or anything to refute them. Strikes me though that Germany and Japan have been fairly innovative over the last 50 years (German engineering, Japanese hi-tech), so if anyone had any evidence to showed Germany and Japan were technological innovators that would be very welcome.
However I get the sense that rather than being an issue of defence vs. civilian, this is actually an issue of state provision vs. free markets. Japanese and German R&D spending, despite being high, mostly comes from the private sector. I found this link which shows this, here is a quote:

In fiscal 2003, R&D investment totaled 16.8 trillion yen,
of which 79.5% (13.36 trillion) came from the private sector and 20.2% (3.39 trillion) from the
public sector (Fig. 4). The private sector plays a greater role in R&D investment in Japan than in
major Western countries (Fig. 5). This is because Japanese investment in defense-related R&D is
quite small, while private-sector investment is quite strong.

Perhaps this accounts for the productivity of US/UK innovation, in that commerical R&D tends to be more short-termist, while governments can afford a long-term perspective. If this were true though, it would in no way support high-levels of defence spending, just a larger allocation of government funds to civilian research.

So comments from anyone who knows about this issue would be extremely welcome. I'd imagine that this is a fairly controversial area without any obvious answers, but I'm working from a fairly uninformed position so anything would be helpful.

Thanks in advance!

posted by greytape to technology (9 comments total)

It's pretty difficult to make definitive statements as to how R&D spending relates specifically to innovation. Different spending can influence innovation in different ways, either directly, indirectly ('underpinning' in the jargon) or not at all. The rate at which spendin leads to innovation can vary also, i.e. it can take variable amounts of time for benefits to accrue and then for the ongoing benefits to move back towards zero. Plus, assessing the links between spending in one area and benefits to that area in terms of inovation can only really be calculated using the judgement of expert practitioners as to impact, which makes assessment complex and not necessarily objective or accurate.

Paragraphs 49 onwards of this article notes the two sides of the argument you touch upon, i.e. that military R&D spending tends to leak out to help civilian innovation vs the argument that military R&D spend tends to crowd out civilian spending. It suggests a number of papers examining the comparative innovation performance of the US/UK and European states. It points out the example of poor industrial performance by the US/UK during the Cold War, noting some have suggested this indicates military spending is less fruitful than civilian spending. Unfortunately not all these articles are easily accessible.

Regarding your other point, I managed to dig this up. A 2006 document suggesting Germany and Japan were both more innovative than either the UK or US at that time. This paper also makes some relevant points and sums up some other studies which suggest the US has moved down the innovation rankings from 1st in 1995 to 6th in 2005.

To emphasise, this is an area where it is very difficult to be definitive.
posted by biffa at 5:50 AM on June 12

I think the arguments for military R&D spending are confounded by the relative success of projects during the second world war and the cold war in the United States. It is worth noting that the US was able to mobilize a substantial portion of its economy for the second world war, and continued to keep a significant percentage of the economy engaged in military work during the cold war. With such a single minded focus, it is no surprise that numerous side benefits were the result.

It is also worth noting that the UK managed to completely squander its advances in computation made via its second world war code breaking efforts. The US, on the other hand, effectively open sourced early computer design and quickly became the dominant player. Likewise, the USSR seemed to have spent a greater percentage of its economy on defense, but suffered compared with the US.

Finally, if you look at the market cap of Microsoft vs the five biggest defense contractors, you find that Microsoft alone is worth substantially more. It looks to me like the high tech civilian economy is well out of reach of government spending.

MSFT: 252B

BA: 55B
LMT: 41B
NOC: 24B
GD: 34B
RTN: 24B
Total: 178B
posted by b1tr0t at 6:26 AM on June 12

Ok, disclaimer - I'm an econometrician by education, not an economist, although while taking my first Masters I sat more economics classes than required as I was interested in the topic.

Benoit (1972) first claimed to identify a positive correlation between defense spending and economic growth for a large number of developing nations. I'm not sure if he or anyone else later applied his work to developed nations, but as the link shows his work was controversial and to some extent, not reproducible.

Regardless, in terms of economics defense seems to be treated as a distinct topic. The Feder-Ram model is used only in the analysis of defence spending, and this alone causes controversy amoung economists.


Wilkins (2004) used an augmented Feder-Ram model to look at defense spending for 85 countries from 1988 to 2002. His conclusion was particularly interesting, and seemed to identify issues with methodology (i.e. Feder-Ram) as well as data:

"Studies using defence expenditure data on an aggregated basis face the possibility of misleading results. Segregating the GDP, labour, capital and defence relationship down to an individual country level within a panel data model suggests the form of the relationship is not only a theoretically intractable one, but also one that does not receive uniform empirical support. It would seem the results of this paper parallel those of Chowdhury (1991) in that no consistent relationship across country is found. While a minority of countries do have a negative coefficient, for the most part it can be concluded that defence has a positive coefficient within the growth framework considered here and therefore would not be considered to have a detrimental effect on growth. This is a finding that can easily be hidden when using pooled cross section time series data."

So no demonstrative correlation or results. In other words more research needed.

Full citation: Wilkins, N., 2004, Defence Expenditure and Economic Growth: Evidence from a Panel of 85 Countries [.pdf]

Dunne, Smith & Willenbockel (2005) looked again at the Feder-Ram model in Models of Military Expenditure and Growth: A Critical Review.

The abstract to their research illustrates some of the controversy (bold is mine, and is intended to draw attention:

"This paper reviews some of the theoretical and econometric issues involved in estimating growth models that include military spending. While the mainstream growth literature has not found military expenditure to be a significant determinant of growth, much of the defence economics literature has found significant effects. The paper argues that this is largely the product of the particular specification, the Feder- Ram model, that has been used in the defence economics literature but not in the mainstream literature. The paper critically evaluates this model, detailing its problems and limitations and suggests that it should be avoided. It also critically evaluates two alternative theoretical approaches, the Augmented Solow and the Barro models, suggesting that they provide a more promising avenue for future research. It concludes with some general comments about modelling the links between military expenditure and growth."


Finally, Hartley (2006) wrote an interesting (albeit UK centric) paper reviewing the current literature as well as previous studies on the topic. An interesting excerpt:

"Sandler and Hartley report on 25 economic studies of the Benoit hypothesis from the period 1973 to 1993 with over 60% based on less developed countries. There were 8 studies of developed nations, including the USA and these showed all possible relationships between defence spending and growth ranging from positive to negative to no effects! In fact, of the 8 studies, only three showed a negative impact of defence spending (3 showed a positive impact and two gave no impact)"

Full citation: Hartley, K., 2006, Defence Spending and its Impact on the National Economy: A review of the literature and research issues [.pdf]

So this is a very controversial area amoung Economists. One of my professors at Business School was an active researcher in this sub field, so we were treated to several lectures by someone very interested in her topic; always a treat to be presented material by someone who is interested and passionate about their topic (its probably the only reason why I remember Feder-Ram at all...)
posted by Mutant at 6:39 AM on June 12

This article looks at the long-term consequences of military spending. The authors claim (emphatically) that it's a loser. They do not directly address the question of innovation, though.
posted by Kirth Gerson at 6:41 AM on June 12

Surely if you want civilian appllications you're best served by directly researching them.

What, are you some kind of communist? Give the business a tax break perhaps to stimulate research and jobs, but a government grant? ;)

You know I am not serious, but that is essentially why military spending works. There is a politically acceptable goal to the spending. The country is buying something, defense. The economic and technology benefits are just spill over, but are real. I would prefer that some of those dollars were reallocated into health care research rather than killing machines though. When I graduated from engineering school I vowed that I would not take a job building weapons. That may seem trite, but at the time at least it seemed like most of the really good job offers were in the defense industry. Since then the Cold War died and we drew back sharply on defense spending. Once GW got into office those gains were ruined. Hopefully, this fall will bring change.
posted by caddis at 6:59 AM on June 12

My experience as an engineer is that private sector R&D is actually r&D, and that public sector R&D is R&d. It's really hard for a corporations to fund something that might not be successful. Of course, this makes corporations timid, which makes many of their products unsuccessful. Kia surprizo, as we say in Esperantio.
posted by vilcxjo_BLANKA at 7:28 AM on June 12

I would say that there's more incentive to be successful in military research. At the basic level, it's about kill, or be killed. That has a tendency to motivate people to perform. In private-research situations, it's generally profit-based, and while that can be motivating, it is a bit different in practice.
posted by blue_beetle at 7:37 AM on June 12

I recently read The Shock of the Old by David Edgerton. He argues fairly persuasively that there's no relationship between any kind of research and development spending and economic growth on a national level.
See here:

Such a history would reveal, he says, that many of the fastest-growing countries of the 20th century, such as Japan and China, were not the most inventive. Indeed, most growth comes as a result of technology transfer, not of innovation.

Of course, it might still create economic growth on a global level, as ideas are rapidly copied. But since you can't find national correlations, I suspect that it's not possible to find out empirically whether military R&D is better than civilian or vice versa.
posted by TheophileEscargot at 7:39 AM on June 12

I think something like this effect occurs in that when the government pumps money into R&D through the DoD it's red-blooded patriotism but when the government pumps money into R&D through civilian agencies it's ivory tower communism, even if it's the same amount of money going to the same researchers for the same subject. A lot of stuff that gets the defense funding doesn't have any real need to be under the defense aegis. For example, I am doing some network security research, with the money coming vaguely from the Army, I think. It directly applies to networks both military and civilian (and I think will see more practical application in civilian terms) but when the military says "The military needs a secure network; let's pay some people to research it," they're a lot less likely to be questioned than if the NSF or whatever says "The people need a secure network; let's pay some people to research it."
posted by TheOnlyCoolTim at 7:44 AM on June 12