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On Optimal Social Investment in the Sciences and Humanities

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  • Franz Gehrels

Abstract

This essay examines the optimization of public, non-profit investment in the natural and social sciences and humanities, given that the individual project outcomes are spread over time and are uncertain. The more distant the results, the greater is the uncertainty, as measured by the success-or-failure variance. Diversification into many simultaneous projects reduces but does not eliminate this risk. By contrast, in a deterministic, no-risk model, there is no way to optimize undertakings in pure science other than to accept social or political consensus. The commonly-used planners’ discount rate of zero is shown in the Appendix to have the additional property of leading to the Golden Rule. Copyright International Atlantic Economic Society 2010

Suggested Citation

  • Franz Gehrels, 2010. "On Optimal Social Investment in the Sciences and Humanities," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 38(3), pages 325-330, September.
    • Handle: RePEc:kap:atlecj:v:38:y:2010:i:3:p:325-330
    DOI: 10.1007/s11293-010-9234-2
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    References listed on IDEAS

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    1. Robert E. Hall & Charles I. Jones, 1999. "Why do Some Countries Produce So Much More Output Per Worker than Others?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 114(1), pages 83-116.
    2. Jean‐Marie Viaene & Itzhak Zilcha, 2009. "Human Capital and Inequality Dynamics: The Role of Education Technology," Economica, London School of Economics and Political Science, vol. 76(304), pages 760-778, October.
    3. Eric A. Hanushek & Ludger Woessmann, 2008. "The Role of Cognitive Skills in Economic Development," Journal of Economic Literature, American Economic Association, vol. 46(3), pages 607-668, September.
    4. Robert J. Barro, 2001. "Human Capital and Growth," American Economic Review, American Economic Association, vol. 91(2), pages 12-17, May.
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    Cited by:

    1. Franz Gehrels, 2013. "United States and German Real Capital Formation and Social Investment in the Sciences and Humanities," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 41(3), pages 225-229, September.

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    More about this item

    Keywords

    Optimal; Investment; Sciences and Humanities; Uncertainty; D70; D80; E20; H50; O46;
    All these keywords.

    JEL classification:

    • D70 - Microeconomics - - Analysis of Collective Decision-Making - - - General
    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)
    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General

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