ECONOMIC APPROACHES TO THE EVALUATION OF RESEARCH

This article reviews the principal methods economists and benefit/cost analysts use in evaluating research. These methods usually involve co mputing impacts using market information, monetizing 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 (co nsumers' surplus, producers' surplus, and combinations thereof) and pr oductivity measures (average or marginal contributions of research and development [R&D] at firm, industry, national, or international level s). Given known time streams of benefits and costs, internal rates of return to R&D investments are then computed. The article notes both th e standard technical difficulties with these approaches and the politi cal and organizational difficulties in using them.