How Much Does Federal R&D Pay Off?

How much does federally funded R&D benefit the economy? Sheila Campbell, Jaeger Nelson, Eli Schrag, Heidi Williams, and Caleb Wroblewski work through some ways of answering that question in “Estimating the Economic Effects of Federally Funded R&D” (Congressional Budget Office, Working Paper 2026-08, July 2026). (Full disclosure: Among her other roles, Williams is editor of the Journal of Economic Perspectives, and thus my boss.) The authors use two alternative approaches to estimate the value of federal R&D investment. The “capital stock” approach views R&D like it was an investment in additional physical capital, knowing that both physical capital and knowledge have a payoff over time and that they depreciate over time. The “R&D components approach” looks at how federal R&D expands the number and education level of scientists and researchers. The capital stock approach is “top down,” in the sense that it looks at total R&D spending. The R&D components approach is “bottom up,” in the…