Military Spending on R&D Is a Boon for the Private Sector

There has been a clamor for the U.S. government to spend more on research and development. Economic theories such as those of Paul Romer, who won the Nobel prize in 2018, suggest that spending more on R&D would promote long-term economic growth. A growing number of economists also believe that basic research is a job that only government can do; because basic research is so hard to profit from directly, there’s a clear pipeline from government-funded discoveries to private-sector innovations. The history of postwar U.S. research spending clearly shows this pipeline in action. Key technologies from the internet to smartphones to solar power have depended crucially on government-funded breakthroughs.

But the pipeline is breaking down. Budget cuts have shrunk the government’s role as a driver of research spending: