The Economic Impact of Genomics-and Research As a Whole

The Wall Street Journal reports an estimate of the economic impact of the Human Genome Project (italics mine):

Of the $3.8 billion federal funding for the human-genome project, $2.8 billion originated at the U.S. National Institutes of Health, and the rest at the Department of Energy.

That $3.8 billion, along with subsequent capital provided by the government and the private sector, generated a total return of roughly $49 billion in direct and indirect federal tax revenues over the last two decades or so. (The $3.8 billion is worth about $5.6 billion in constant 2010 dollars.)

Over the same period, those initial investments also helped to drive $796 billion in direct and indirect economic output and generate $244 billion in total personal income, according to Battelle's calculations....

Also included was the indirect economic impact--or ripple effects--of these activities by calculating the subsequent spending of suppliers, and what their employees spend in the overall economy.

In 2003, for example, the NIH and DOE together invested $437 million in the Human Genome Project. That directly led to $552.9 million in economic activity, the creation of 5,025 jobs and $51 million in federal tax revenue. When the ripple effect is included, the impact was greater: $1.65 billion of economic output, 12,422 jobs created, and $125.5 million in federal tax revenue.

This isn't a magical genomics effect either--the entire NIH budget has a stimulatory effect:

A separate report has found that spending by the National Institutes of Health directly and indirectly supported nearly 488,000 jobs and produced $68 billion in new economic activity in 2010.

The report, by economist Everett Ehrlich, notes the traditional role of the NIH in backing life-science research. About 83% of the agency's $30 billion annual budget goes to funding the work of non-NIH researchers.

Leaving aside the importance of the research for its own sake (and it really shouldn't be left aside at all), it shows how important the kind of macroeconomic stimulus one undertakes is. Depending on how the stimulus money is created, one can have different multiplier effects. A tax break that goes to a rich person who puts most of it in his bank account doesn't do much. But research money gets spent, purchasing lots of goods and services from people who, broadly, can be defined as middle class. And they in turn have to spend much of the money they earn, often on basic necessities, which in turn generates more economic activity. As Brad DeLong snarked (and read the full explanation over there):

John Cochrane does not know something that David Hume did--that the velocity of monetary circulation is an economic variable rather than a technological constant

I doubt spending $300 billion on NIH research would yield $680 billion in economic output--we simply don't have enough biologists and related personnel to handle that capacity. Nor would putting so many resources into biomedicine necessarily be the best use of our national resources. But when NIH grant approvals are at an all-time low, we certainly have slack capacity in this area. And even if additional spending lowered the cost multiplier somewhat, it would still be a good return-on-investment.

Not to mention all of the medical research too...