EPC/Ecfin: Outcome and output of public R&D spending
The Economic Policy Committee of Ecofin refers to the use of patent quantity as an macroeconomic indicator for public spending. The formula is simplistic and known from DG industry papers: better R&D spending leads to more patents. The report titles: 'Restructuring public expenditure: challenges and achievements'. Misallocations of patent use result if the authorities intervene with incentives or patenting requirements instead of leaving patenting decisions to market actors. The political-economical implication of such macroeconomical analysis is 'patent inflation' by reduction of patent quality and widened scope. Public spending following a patent maximisation objective creates market pressure to apply patent law to further fields where the instrument is not economically justified -- such as software. The report adds special emphasis on patent policy given the subject of the paper. The quantity of patents is a questionable measure for R&D quality. Here the communication also mentions that "output" is not the same as "outcome" and demands "suitable evaluation methods...to provide policy-makers with a better understanding" of policy and empirical research.
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(3) Measuring the efficiency and effectiveness of public spending
The analysis of the quality of public finances is incomplete without addressing the efficiency and effectiveness of public expenditure, i.e. the achievement of priorities at minimum costs. This allows for analysing how specific inputs (e.g. expenditure on R&D) affect outputs (e.g. number of patents per million population) and final outcomes (i.e. increasing sectoral and overall productivity). Available empirical evidence on specific spending categories (in particular, impact assessments in the case of innovation and human capital formation) shows that spending inefficiencies can be high, thus suggesting room for improvement in the use of scarce public resources. This kind of assessment requires suitable evaluation methods and tools to provide policy-makers with a better understanding of the impact of their policies.
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Mr Joe GRICE, President of the Economic Policy Committee to Mr Karl-Heinz GRASSER, President of the (ECOFIN) Council
