Despite increased spending on research and development (R&D), the United States is producing fewer and fewer scientists. Paul Romer of Stanford University claims the structure of R&D spending focuses solely on demand and ignores supply. Thus, increases in R&D spending attract scientists from abroad or inflate the salaries of existing scientists. Romer found that:

• Of the PhDs in engineering and computer science, 35 percent to 40 percent were foreign-born.

• The fraction of 24-year-olds with science or engineering degrees stands at only 5.4 percent of the U.S. population, as opposed to 5.8 percent in Germany, 6.5 percent in Japan and Taiwan and 8.5 percent in Britain.

In his paper, Romer also blames the current higher educational structure for the lack of United States scientists.

• Educational institutions provide too little information about prospective benefits of being a scientists.

• Undergraduate institutions make getting an engineering degree harder, because they cannot expand their engineering departments due to university politics.

• Because of this, only half of aspiring engineers attain a degree.

• Graduate schools produce individuals who are trained mainly for employment in the academic world, not the private sector.

To increase the number of scientists produced by the United States, Romer suggests balancing R&D spending and subsidies to engineering departments. He estimates the net benefits of such an action to be an additional 0.5 percent in the annual growth rate. By the year 2050, this additional 0.5 percent could fund the cost of caring for the baby boomers during retirement.

Source: "Supplying Growth," Economic Intuition, summer 2000, Based on Paul M. Romer, "Should the Government Subsidize Supply or Demand in the Market for Scientists and Engineers?" National Bureau of Economic Research, Working Paper W7723.