Exploring the Unknown - NASA's History Office

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SPACE AS AN INVESTMENT IN ECONOMIC GROWTH
In 1971 the National Aeronautics and Space Administration commissioned Midwest
Research Institute (MRI) to conduct a macroeconomic analysis to measure the extent of
the benefits of NASA R&D expenditures on growth in the U.S. economy. This research
was augmented with two case studies, synchronous communication satellites and space
crew support systems. The case studies detailed the substantive contributions and benefits
of these NASA-related technologies to NASA programs, the private sector, and the
American public in general. The study was well received and was used extensively by NASA
in the 1970s to depict its role in U.S. economic growth and technology transfer.
In the fall of 1987, NASA commissioned the National Academy of Public
Administration (NAPA), with MRI as a subcontractor, to conduct further research and to
evaluate NASA contributions in the 1948–1986 time frame. The objectives of this latest
study are to:
• Measure the impact of technological change on the economic growth of the
nation and characterize NASA’s contribution to the growth process.
• Identify linkages between the technology generated by selected NASA missions
and the broader economic benefits.
• Identify and characterize future benefits of selected NASA programs.
[2] • Identify and characterize the economic impact of continued investment in NASA
R&D programs.
This Executive Report presents MRI’s findings and conclusions.
A primary objective of the earlier study by MRI was to measure the impact of R&D
expenditures on the national economy. While R&D expenditures do have a nearly immediate
economic impact through employment and payroll, the primary economic effects of
R&D are felt over time. The 1971 study findings indicated that the average dollar spent
on R&D returns about $7 in technology-induced economic gain over an 18-year period
following the expenditure.
The approach MRI took in the 1971 study was based on methodologies developed by
Dr. Robert Solow. 2 Dr. Solow was honored in 1987 with a Nobel Prize for Economics for
his pioneering work in measuring total factor productivity. The approach MRI used,
though relatively new at the time, has stood up under critical review in the 17-year period
following the release of the report.
MRI’s current study has been designed to be similar in approach and content to the
1971 study. The 1988 study primarily uses Dr. Robert Solow’s approach in measuring the
impact of technology on economic growth, but it incorporates refinements developed by
other economists in recent years. 3 The 1971 study estimated economic impact during the
period of 1948 to 1968; the 1988 study covers not only the original period but extends the
estimates through 1986. The findings of the 1988 study, which incorporate essentially the
same qualifying assumptions as in 1971, are:
• R&D expenditures have been an excellent national investment.
• On the average, each dollar spent on R&D returns about $9 in technologyinduced
economic gain over an 18-year period following the expenditure.
2. Robert M. Solow, “Technical Change and the Aggregate Production Function,” The Review of
Economics and Statistics, August 1957.
3. Edward F. Denison, Why Growth Rates Differ: Postwar Experience in Nine Western Countries (Washington,
D.C.: Brookings Institution, 1967); Accounting for U.S. Economic Growth, 1929–1969 (Washington, D.C.: Brookings
Institution, 1974); Accounting for Slower Economic Growth: The United States in the 1970s (Washington, D.C.:
Brookings Institution, 1979); and Trends in American Economic Growth, 1929–1982 (Washington, D.C.: Brookings
Institution, 1985). Also, reviews and comments by Drs. Z. Griliches, J. Kendrick, E. Denison, and N. Terleckyj.