Economic Approaches To the Evaluation of Research

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Abstract
This article reviews the principal methods economists and benefitlcost analysts use in evaluating research. These methods usually involve computing impacts using market information, mone tizing the impacts, and then comparing the value of the impacts with the cost of research. Two principal measures are common in the literature: surplus measures (consumers' surplus, producers'surplus, and combinations thereof) and productivity measures (average or marginal contributions of research and development [R&D] at firm, industry, national, or international levels). Given known time streams of benefits and costs, internal rates of return to R&D investments are then computed The article notes both the standard technical difficulties with these approaches and the political and organizational difficulties in using them.