The federal deficit has ballooned in recent years, and even larger deficits are coming due to the expected growth of entitlement spending. There is little disagreement among members of both political parties that federal spending should be reduced. In such an environment it is crucial that the right criteria guide the cuts that will be made. Across-the-board cuts are not a thoughtful way to make choices.
The guiding principle is basic and obvious: We should cut federal government activities that can be performed at least as well by the private sector, and maintain, or even increase, productive federal activities that the private sector alone cannot handle effectively. There is legitimate disagreement about which activities belong in which category, but the great majority of economists have long agreed that the federal government should have an important role in the sponsorship of basic research. For-profit companies have weak incentives to invest in basic research partly because the results are not patentable, and partly because the culture of basic researchers, and the journals they publish in, makes the results of basic research available to all.
For these reasons the U.S. government has long played a leading role in supporting research in physics, chemistry, biology and medicine, and to a smaller extent in economics and other social sciences. It has also played a leading role in creating objective databases on which to make wise policy. This research and data have paid great dividends in helping to provide a better understanding of DNA, genetics and the human genome, and many other phenomena crucial to the modern world.
Indeed, the remarkable growth in life expectancy in the developed world in the past 60 years has been the result of the combined efforts of federally supported basic researchers at universities and elsewhere, and applied researchers in for-profit drug and biotech companies, and nonprofit institutes.
There have also been gains as the result of federal support of the social and behavioral sciences, specifically economic research. Yet recent actions by Congress have threatened to restrict funding for basic research that focuses on economics. We believe such actions are misplaced, and would have long-term adverse effects on the economy and public health. Nonpartisan, peer-reviewed social and behavioral research is crucial in providing factual guidance to both the private and public sectors.
Consider research related to economics in the field of health. Research funded by the National Institutes of Health (NIH) and conducted by Columbia University's Jeanne Brooks-Gunn, among others, has shown that socioeconomic conditions in the home, child-rearing practices, and other environmental influences have a critical impact on child health and development.
Federally funded research has also shown that throwing money at families, as we did in the failed War on Poverty of the 1960s, does not improve social mobility or create economic opportunity. Recall that it was government-sponsored research conducted by Johns Hopkins University's Robert Moffitt and others that helped provide the analysis behind welfare reform in the 1990s.
Continued government-sponsored research will no doubt result in similarly effective policies in a broad range of areas. Good data are essential to good policy but data alone are not enough. Research into the deeper causes of economic and social problems is critical to formulating wise policy.
Consider the soaring cost of health care in the U.S., in substantial part due to unhealthy behaviors. Programs to educate Americans about the benefits of healthy behaviors such as compliance with medical protocols, reduced smoking, regular physical exercise and healthy eating habits are underdeveloped and under-researched. For example, failure to take warfarin (a blood thinner) as prescribed puts millions of Americans at risk of a stroke. NIH-funded social-science researchers have developed a new approach, a lottery-based financial incentive that substantially improves patient compliance and thus reduces health-care costs. Giving people financial incentives to adhere to prescribed health protocols lowers the burden of illness on society.
Other federally funded research, most notably by MIT's Jonathan Gruber and Harvard's David Wise, has shown that creating the right menu of choices greatly influences retirement-planning decisions with important implications for the elderly's ability to pay for long-term health care. This and other social and behavioral research helps society better understand the sources of the problems faced by the elderly and to devise effective policies to assist them.
We also need to continue to invest in our "data infrastructure" to better understand major health-related social problems. For example, with social scientists in a central role, the National Institute on Aging is compiling data in the U.S. and around the world to monitor the health and well-being of the elderly over time. This will help us better understand the impact of aging societies and other long-term health changes (such as rising rates of obesity) on the broader economy and improve public policy accordingly.
We cannot expect the market alone to support basic economic and social research, including data collection, since they are public goods that are difficult to appropriate privately. In cutting out the considerable fat from the public diet we should not cut the muscle that has helped make our economy the largest and strongest in history.
Messrs. Becker and Heckman, Nobel laureates in economics in 1992 and 2000, respectively, are professors at the University of Chicago. Mr. Becker is also a senior fellow at Stanford University's Hoover Institution.
