Question

To what extent does national economic success depend on research and development(R&D)?

Answer 1

With research and development(R&D), there is national economic success in the long run and not in the short run. When there is research and development, there would be improvement in the technology of a nation and with an improvement in technology, the standards of living of the people in the nation would improve in the long run. There are also new ideas which are generated to produce a good or a service more efficiently and this leads to lower cost of producing the goods and services. With lower cost of producing the goods and services, improvement in quality and greater quantity of producing the goods are also common. Hence, with reduced cost of production and greater quantity being produced, the producers can earn more profit in the economy and the consumers can also benefit from lower prices in the market and great quality being offered than before.

When firms and the nations engage in research and development, there is also positive externalities being generated in the form of knowledge spillovers to other firms and nations who can in the long run also improve there way of production and improve the standard of living of their people. With R&D, there is also an improvement in the total productivity of the laborers of the nation and they can produce more output in a shorter time period hence the Total Factor Productivity (TFP) improves.

Thus, we conclude that the national economic success depends to a large extent on research and development(R&D).