The Costs and Benefits of Funding Military Research and Development Policy

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The Costs and Benefits of Funding Military Research and Development Policy

The central issues when evaluating the overall the United States research and development policy are the characteristics of a public good. A public good by definition is one that has a zero marginal cost of providing the good an additional person and from which individuals cannot be excluded. Research and development policy contributes to the level of knowledge and technology of the entire country. Knowledge, is in most cases, a public good under the aforementioned definition. Giving knowledge to an additional individual does not take away from the total amount of knowledge available, and exclusion from knowledge is often difficult to maintain.

A market failure is often associated with public goods, and knowledge is not an exception. Regarding knowledge, and specifically research and development, the market fails to provide this good at adequate levels. The government then steps in to attempt to correct this failure through its research and development funding policy. The following paper details the costs and benefits incurred through funding research and development specifically within the realm of national defense.

National defense is also a public good. The government provides national defense to correct the reality that if left uninfluenced, the market will not provide national defense at an adequate level. The U.S. government funds research and development in the area of defense at a much greater level than any other.


Major policy initiatives were undertaken during the Reagan and Bush administrations in order to research and develop technologies that would aid in the Cold War. This was the era of Reagan’s arms stockpiling that pushed the defense budget to nearly three times the amount it is today, maxing out at just over $800 billion. (Stiglitz, 332) Policymakers were concerned with creating weapons and technology that were more sophisticated than those of the Soviet Union. Programs such as the semiconductor research consortium, SEMATECH, the Defense department’s Technology Reinvestment Program (TRP) and the Advanced Technology Program (ATP) grew out of these years all of which took advantage of defense funding to establish dual-use technologies, that is technologies with specific uses to both the civilian market and the military. In 1986, the Federal Technology Transfer Act was established to allow federal laboratories to conduct cooperative research and development agreements (CRADAs) with private firms. The Reagan and Bush era policies supported high technology research and development that related to both the civilian market and to the military.
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