Economists Report $5 Return on Every $1 R&D Investment, Warn Against Deep Federal Budget Cuts

A recent article in MIT Technology Review, highlighted by Alexander Berger on social media, features insights from economist Matt Clancy and other experts regarding the substantial returns on Research and Development (R&D) investments. The piece underscores that R&D is a highly effective long-term investment, with economists calculating significant economic benefits. Berger tweeted, > "Nice article on returns to R&D in MIT Tech Review, ft our own @mattsclancy."

The MIT Technology Review article, published on September 17, 2025, details findings from economists Benjamin Jones and Lawrence Summers, who estimate that a conservative $1 investment in R&D yields approximately $5 in additional GDP per person. This figure can be even higher when accounting for non-GDP benefits, such as advancements in healthcare. Jones emphasized that such a return makes R&D "a remarkably good investment."

Further research by Andrew Fieldhouse and Karel Mertens reveals that nondefense public R&D funding has been responsible for 20% to 25% of all private-sector productivity growth in the U.S. since World War II. Their analysis suggests that a decline in public R&D funding, particularly since the 1970s, contributed measurably to the nation's productivity slowdown. Arnaud Dyèvre's work also indicates that spillovers from public-funded R&D have three times more impact on productivity growth across industries than those from private R&D funding.

Matt Clancy, a senior program officer at Open Philanthropy, acknowledged the strong evidence for high R&D returns but noted ongoing questions about optimal funding levels and specific areas for investment. The article also highlights serious concerns over proposed 2026 federal budget cuts, including a 40% reduction for the National Institutes of Health and up to 67% for some National Science Foundation programs. Fieldhouse warned that such cuts would lead to a "deceleration in US productivity growth over the next seven to 10 years that will be measurable."

Federal R&D spending currently stands at its lowest rate in 70 years, accounting for only about 0.6% of GDP. To further explore these critical questions, Open Philanthropy and the Alfred P. Sloan Foundation have jointly announced a five-year "pop-up journal" dedicated to understanding and optimizing the return on research funding.