A joint Fermilab/SLAC publication
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The value of basic research

01/17/17

How can we measure the worth of scientific knowledge? Economic analysts give it a shot.

Before building any large piece of infrastructure, potential investors or representatives from funding agencies or governments have to decide whether it’s worth it. Teams of economists perform a cost-benefit analysis to help them determine how a project will affect a region and whether it makes sense to back and build it. 

But when it comes to building infrastructure for basic science, the process gets a little more complicated. It’s not so easy to pin an exact value on the benefits of something like the Large Hadron Collider.

“The main goal is priceless and therefore has no price attached,” says Stefano Forte, a professor of theoretical physics at the University of Milan and part of a team that developed a new method of economic analysis for fundamental science. “We give no value to discovering the Higgs boson in the past or supersymmetry or extra dimensions in the future, because we wouldn’t be able to say what the value of the discovery of extra dimensions is.”

Forte’s team was co-led by two economists, academic Massimo Florio, also of the University of Milan, and private business consultant Silvia Vignetti. They answered a 2012 call by the European Investment Bank’s University Sponsorship Program, which provides grants to university research centers, for assistance with this issue. The bank funded their research into a new way to evaluate proposed investments in science.

Before anyone can start evaluating any sort of impact, they have to define what they’re measuring. Generally, economic impact analyses are highly local, measuring exclusively money flowing in and out of a particular area. 

Because of the complicated nature of financing any project, the biggest difficulty for economists performing an analysis is usually coming up with an appropriate counterfactual: If the project isn’t built, what will happen? As Forte asks, “If you hadn’t spent the money there, where else would you have spent it, and are you sure that by spending it there rather than somewhere else you actually gain something?” 

Based on detailed information about where a scientific collaboration intends to spend their money, economists can take the first step in painting a picture of how that funding will affect the region. The next step is accounting for the secondary spending that this brings.

Companies are paid to do construction work for a scientific project, “and then it sort of cascades throughout the region,” says Jason Horwitz of Anderson Economic Group, which regularly performs economic analyses for universities and physics collaborations. “As they hire more people, the employees themselves are probably going to local grocery stores, going to local restaurants, they might go to a movie now and then—there’s just more local spending.”  

These first parts of the analysis account only for the tangible, concrete-and-steel process of building and maintaining an experiment, though. 

“If you build a bridge, the main benefit is from people who use the build—transportation of goods over the bridge and whatnot,” Forte says. But the benefit of constructing a telescope array or a huge laser interferometer is knowledge-formation, “which is measured in papers and publications, references and so on,” he says. 

One way researchers like Horwitz and Forte have begun to assign value to such projects is by measuring the effect of the project on the people who run it. Like attending university, working on a scientific collaboration gives you an education—and an education changes your earning capabilities. 

“Fundamental research has a huge added value in terms of human capital formation, even if you work there for two years and then you go and work in a company on Wall Street,” Forte says. Using the same methods used by universities, they found doing research at the LHC would raise students’ earning potential by about 11 percent over a 40-year career.

This method of measuring the value of scientific projects still has limitations. In it, the immeasurable, grander purpose of a fundamental science experiment is still assigned no value at all. When it comes down to it, Forte says, if all we cared about were a big construction project, technology spinoffs and the earning potential of students, we wouldn’t have fundamental physics research. 

“The actual purpose of this is not a big construction project,” Horwitz says. “It’s to do this great research which obviously has other benefits of its own, and we really don’t capture any of that.” Instead, his group appends qualitative explanations of the knowledge to be gained to their economic reports. 

Forte explains, “The fact that this kind of enterprise exists is comparable and evaluated in the same way as, say, the value of the panda not being extinct. If the panda is extinct, there is no one who’s actually going to lose money or make money—but many taxpayers would be willing to pay money for the panda not to be extinct.” 

Forte and his colleagues found a 90 percent chance of the LHC’s benefits exceeding its costs (by 2.9 billion euros, they estimate). But even in the 10 percent chance that its economics aren’t quite so Earth-shaking, its discoveries could change the way we understand our universe.