Authors: (Bernard C. Beaudreau, Department of Economics, Universite Laval, Quebec, Canada)
Abstract: Responding to the productivity slowdown in the mid-1970s, Western countries invested trillions of dollars in R&D, the idea being that R&D is a key determinant of growth. In 2007, a total of $1.145 trillion was invested in R&D worldwide. Unfortunately, thirty-five years after the fact, growth rates have not returned to their post-WWII levels, which raises the obvious question, does R&D actually increase growth? This paper examines the science behind the policy. More precisely, it examines the theory of R&D-based growth and the evidence. It comes to the conclusion that the science that underlies R&D-based growth is surprisingly weak. For example, there is little theory behind the R&D-growth nexus. Similarly, there is little empirical evidence that R&D increases growth. Moreover, when examined from the point of view of the underlying physics, R&D-growth runs contrary to the very laws that govern material processes, a result that is consistent with the reported failure of R&D to restore growth levels.