with monopoly money you just get the lowest common denominator and no way of finding a safehaven (without going abroad.. ask the argentinians!)

Think about the protection against inflation that that would provide! There would be a guaranteed, steady reduction in the money supply.

I propose uranium as currency. Talk about burning a hole in your pocket. :p

Well, I think my point was that it CAN imply that government R&D was displacing more productive private R&D, but you can’t assert that conclusively. In one of the regressions in Table 2.7 the availability of private credit had an insignificant effect on the accumulation of private capital. Would you propose that we can conclude that private credit is crowding out more productive public sources of credit? Of course we can’t assume that! It’s just as fallacious to assume that the absence of a significant effect on public R&D means that we would be better off without public R&D.

Like I said – I think there are major problems with this regression anyway. Why would you compare private R&D – which is presumably weighted towards applied research and development – with public R&D – which is weighted towards basic research – with a 1 year lag? It just doesn’t make sense. But beyond that, what you really need to do is include an interaction term: pubR&D*privR&D, and perhaps regress private R&D itself on public R&D.

If you’re right, Russ, and public R&D is crowding out more efficient private R&D, then this interaction should be negative, right? As the level of public R&D increases, the marginal effect of a unit increase in private R&D decreases. If, however, there are spillovers this interaction term will be positive. Doesn’t that seem like a reasonable way to arbitrate (obviously it doesn’t solve the lagged variable issue I raised).

The point is, you can’t just point to an insignificant effect and claim victory when there are alternative theories that also predict that you may not find a significant effect, given the regression that they provide. I understand nothing happens in economics without a context – but the point is there are rival contexts that have been but forward.

The point is, the money, whether commodity back or not, would be determined by market forces. It could be fiat or it could be fractionally backed or it could be 100% reserve, whatever it is, it would decided by the market.

On that note, though – what if there was no significant effect for private R&D? Would you conclude the opposite – that private investment is crowding out productive public investment? Crowding out is a very important effect – but a simply insignificant effect for a regression that only covered, what – 25 years or so? – doesn’t seem to be an indicator of crowding out. For that, I imagine you’d need to look at the interaction of public and private R&D over time and demonstrate that increased public R&D actually does crowd out private R&D – ie, some sort of significant negative effect of lagged public on private. And given the basic/applied research dynamic I’m not so confident you’d get the result you’re implying. Either way – it’s an empirical question that this particular regression in this particular report doesn’t speak to.

Am I the only one who shows that everyone made their post 9 years ago?