A new NBER paper from Columbia University economist Frank Lichtenberg examines how pharmaceutical innovation correlates to fewer deaths among people with certain types of cancers. Fewer cancer patients died before the age of 75 if their particular type of cancer had experienced more medical innovation.
The basic message here is intuitive—new drugs and treatments save lives—but Lichtenberg does a good job of breaking down the costs and benefits. He estimates that medical innovation saved more than 100,000 years of aggregate life in Canada alone, at a cost of $2,730 per year based on the total spending for drugs to treat those forms of cancer.
Unfortunately, Lichtenberg does not factor in R&D costs for the discovery and development of these drugs. He does estimate the cost if the drugs had been brand name (versus the generics they are assumed to be), which comes out to $11,000. This is still significantly below estimates for the value of a year of life, and it is possible to assume that prices would be set by private companies high enough to recoup their research investments. This leaves only the question of public investments in R&D;
Policymakers around the world have increasingly come to realize that entrepreneurship, particularly high-growth entrepreneurship (HGE), is critical for economic development in nations at all levels of development. That is one reason the United Nations Foundation asked Michael Dell, founder and CEO of Dell Inc., to be the Global Advocate for Entrepreneurship and to work closely with the Foundation and its Global Entrepreneurs Council to help shape and advance a global entrepreneurship agenda.
To inform the Council’s thinking, Michael Dell led a meeting in Washington, DC, on December 2, 2014, hosted by 1776, a cutting-edge “accelerator” to help technology-based entrepreneurs translate their ideas into growing businesses. The meeting participants included tech-based entrepreneurs and policymakers, and I was asked to participate and serve as rapporteur.
Michael Dell opened up the roundtable with a discussion of proposed policy mechanisms to spur high growth entrepreneurship, including ensuring access to capital, technology, talent, and markets. The following is a summary of the themes and recommendations from the discussion.
The Nature of Technology-Enabled Entrepreneurship Opportunities
Policymakers around the world are interested in HGE because they understand that technology opportunities driving this type of entrepreneurship have exploded.
Earlier this year the European Commission released a substantial report on R&D tax credits throughout the EU and several other OECD countries including the United States and Japan. R&D tax credits have been widely adopted across the developed world since the United States introduced the Research and Experimentation tax credit in 1981: only two countries in the EU do not have tax policies intended to encourage R&D.
The report is a thorough meta-study looking at the existing economics literature and available data on R&D-focused tax policy, including the impact of R&D tax policies on R&D expenditure, innovation, employment, productivity, and other factors. It also covers the literature on how corporate tax policy can affect the location of R&D and patents. Finally, the report examines the details of various tax policies and benchmarking them based on what they determine to be best practices.
The report makes a number of facts clear. First, despite a broad range of findings, “the vast majority” of studies surveyed show that R&D tax incentives are effective, with the most recent (and rigorous) studies finding that a 10% in the user cost of R&D results in a
Each year, the Motion Picture Association of America (MPAA) hosts a large conference at the Newseum dedicated to highlighting what is new in creativity, content, and technology around the world. At the most recent confab, held on Friday, April 24, MPAA’s message focused on how creativity and innovation will play an even more integral role in the future than they do today. Indeed, the Creativity Conference is about exploring the critical intersection between technology and the arts, and their capacity to drive invention and economic growth across industries and regions. Bringing together leaders from the worlds of politics, media, business, and the arts, the Creativity Conference engages its audience in an open dialogue on the meaning of creativity, its economic impact across sectors, and the ways in which we can continue to protect and nurture American innovation and innovators.
At the conference, a group of leading, innovative women discussed the ways in which Hollywood and Washington, D.C. intersect. Rep. Rosa DeLauro (D – CT), Evan Ryan (Assistant Secretary of State for Educational and Cultural Affairs), Barbara Hall (Creator and Executive Producer, Madam Secretary) and Lori McCreary (President, Producers Guild of
Innovation is frequently underemphasized in the economics literature because it is qualitative by nature, and qualitative changes are hard to measure. A new NBER paper by three economists, Lakdawalla, Reif, and Malani, makes some progress toward a better measure of innovation, specifically innovation in health care. They show that by ignoring the way medical innovations help reduce risk, previous studies have tended to underestimate the true value of medical innovations—by as much as 30-80%.
To arrive at their estimates the authors use a new way of valuing risk. Our health is inherently risky, which is why we have health insurance for smoothing expenses out over time and between people. Innovation is also risky, which is why investors in startups often expect high returns and we often look to the government to fund basic research. But Lakdawalla, Reif, and Malani show that risks don’t always add up—sometimes they cancel out. Risks taken to innovate and create new health products and treatments can reduce health risks for people, because new innovations help keep us safer and healthier.
When risks taken in health innovation pay off, the reward they bring isn’t just the
A new report from Battelle based on methodology from the Academy of Radiology Research shows how federal R&D funding succeeds in producing patents. The report examines essentially all federal R&D, including not only the Department of Defense and the National Institutes of Health but also the Department of Energy, the National Science Foundation, NASA, and other agencies. It finds that, per patent, public-sector agencies provide a return comparable to private-sector ones—or even cheaper. Recent public sector budget cuts, therefore, can be expected to significantly hurt our scientific progress.
The agencies vary significantly in terms of how productive they are and how successful their patents are. Some agencies in particular, such as the National Institute of Biomedical Imaging and Bioengineering (NIBIB) have exceptional records for producing research that is widely useful: NIBIB is estimated to spur an additional $578.2 million, or 25 patents, for every $100 million in R&D expenditures. The DoD and NASA, on the other hand, are less efficient at producing patents at only around 2-3 patents per $100 million in R&D expenditures. (although, as the report notes, defense spending is more likely to be classified and thus not
It appears that the global club of those who do not adequately appreciate intellectual property (IP) has gotten a new member: Ecuador. In the past few years the IP environment inside that small South American nation has deteriorated quite significantly, especially with regard to the protection of pharmaceuticals and biologics. And as the situation continues to worsen, those of us around the world paying attention are probably all thinking the same thing: You’re ruining it for everyone else.
Indeed, Ecuador’s weakening life sciences IP situation is just one of a long line of countries doing so around the world, including Canada, India, Nigeria, the Philippines, and South Africa. Ecuador’s decision to weaken its environment for life sciences IP risks perpetuating this global contagion effect. For example, since 2010 the nation’s main IP agency (responsible for ensuring IP rights, including enforcement and promotion) the Ecuadorian Intellectual Property Institute, has granted nine compulsory licenses (CLs) with 12 applications still pending. Six of those nine CLs were issued in 2014 alone, including one for Pfizer’s kidney and gastrointestinal cancer medication, Sutent. According to the World Trade Organization’s Trade-Related Aspects of Intellectual Property Rights
The U.S. corporate tax system hasn’t had a major overhaul since the early 1980s, and it’s getting long in the tooth. One part that is particularly dated is the research and experimentation (R&E) tax credit provision. The new 2016 administration budget makes some important changes to the R&E credit. The credit was first implemented as a two-year trial run over 30 years ago in 1981, and has been renewed continually since then, eventually adding an updated “alternative simplified credit” (ASC) as the old credit became too unwieldy in many instances. Despite proven success as shown in many academic studies, however, the credit is continually forced to be renewed. The new administration proposal takes the obvious step of making the credit permanent, eliminates the outdated “traditional” credit making a stronger ASC the sole form of the credit, and incentivizes R&D in universities startups by increasing the amount of the credit that companies can claim for outside R&D expenditure.
While the R&E credit has evolved over the past three decades, both its core structure and its temporary span have stayed the same. It is clearly out of date: the law still
A new SSRN paper finds that research and development (R&D) helps manufacturers keep ahead of competition from imports. U.S. manufacturing firms in industries with strong import competition from China fared better 50 percent better when they had larger stocks of capital used for R&D. While this finding is intuitive, it provides an important piece of evidence that reiterates a critical point about the U.S. economy: international competitiveness is extremely important and smart R&D policy (including tax credits) is a key method of maintaining it.
The authors Johan Hombert and Adrien Matray use granular industry-level data on imports from China and show that these imports have a significant impact on the performance of U.S. manufacturing firms. They then examine whether this impact changes depending on how much R&D capital firms have. In order to make sure the R&D capital isn’t related to other factors, they use state-level changes in R&D credit policy during the 1980s.
Their results here show that firms that had access to cheaper R&D and were thus more likely to acquire more R&D capital had an easier time “climbing the quality ladder” and staying competitive in the face
Senator and likely presidential hopeful Marco Rubio (R-FL) appeared on last Tuesday’s The Daily Show with Jon Stewart, promoting his new book and weathering an endless stream of jokes about his home state of Florida. While the discussion covered a range of policy ground, we wanted to highlight one comment by Senator Rubio that showed an all too common misunderstanding of innovation and automation.
Rubio said, “The concern I have about the minimum wage increase is that we have been told by the CBO and independent analysts that it will cost certain jobs. And that happens when some businesses will decide that well, you’ve now made our employees more expensive than machines so we’re going to automate. So in 5-10 years it’s going to happen anyway but this will accelerate this process, when you go to a fast food restaurant it will not be a person taking your order, there will be a touchscreen there that you will order from and when you get your order it will be right. [uneasy laughter] But the point is, if you make that person now more expensive than that new technology, they’re going