Wednesday November 15, 2017
Any researcher whose eyes glaze over at the phrase 'national accounting' should heed this tale. In the years since the financial crisis of 2008, Britain's science budget has been protected. While libraries shut, children's services shrank and nurses and teachers saw real wages fall, science spending has held steady. Why? Because successive finance ministers have been persuaded that cutting science, unlike cuts to other forms of public spending, would jeopardize the nation's future economic growth.
Notwithstanding the contested ethics for such a choice, Chancellor George Osborne, one of these ministers, was able to protect science spending partly because of a seemingly arcane rule change by the UN Statistical Commission, implemented in Britain in 2014. Research and development had been re-categorized as an investment rather than a cost, gifting science the golden ticket of future budget increases.
This is one tale told in Capitalism Without Capital. Economist Jonathan Haskel and UK government adviser Stian Westlake describe in an entertaining and engaging way why governments need to count innovation as an engine of profit. The authors also make the bigger point that there are many other hidden investments in an economy, from software code to new business processes. Unlike spending on science, these are not yet factored in by the spreadsheet-wielders who run offices for national statistics.
Less than a century old, national income accounting is rooted in the ability to value the 'stuff' that we can touch and feel. That is because much twentieth-century economic activity pivoted on industrial manufactured goods such as processed food, aircraft, cars, pharmaceuticals and weapons, all of which could be bought and sold for a price.