Jones, Benjamin F., and Lawrence H. Summers (eds), ‘A Calculation of the Social Returns to Innovation’, Innovation and Public Policy (Chicago, IL, 2022; online edn, Chicago Scholarship Online, 22 Sept. 2022), https://doi.org/10.7208/chicago/9780226805597.003.0002, accessed 8 Dec. 2023.

1. General Introduction to Social Returns to Innovation: The introduction highlights the significant rise in living standards in advanced economies over the last two centuries, with U.S. income per capita now 25 times higher than in 1820. This growth is attributed primarily to scientific and technological advances. However, measuring the social returns of these innovations is challenging due to the many spillover effects and the diffuse manner in which the benefits of research investments are realized.
2. Difference Between Private and Social Gains from Innovation: This section emphasizes that the social gain from a new idea can substantially differ from the private gain captured by the original innovator. Examples like electricity, the computer, and the Human Genome Project are cited to illustrate how private gains can be small compared to the broader productivity or health gains for society. The inherent spillovers in the innovation process include benefits to users, imitators, and future innovations.
3. Methodologies to Measure Social Returns: Various methodologies are discussed for understanding social returns on innovation, with a focus on formal R&D investment. This includes case studies of specific technologies, regression analyses on firm and industry R&D investments, and macroeconomic growth models. Despite methodological differences, these approaches generally conclude that social returns to R&D are substantial.
4. New Methodology Introduction and Rationale: This part introduces a new methodology for calculating social returns to innovation. It proposes examining the path of GDP to aggregate and net out complicated spillovers in the innovation process. It relies on modern growth theory, which equates the growth rate of GDP per person to the growth rate in total factor productivity, largely driven by investment in new ideas.
5. Analysis of Returns to Innovation and Adjustment Factors: The chapter presents an “R&D only” analysis and then considers factors that might adjust these returns. These include the slow diffusion of R&D benefits, the role of capital deepening, and productivity growth from non-R&D activities like new-venture creation or learning-by-doing. These factors might reduce the estimated social returns, but the returns still appear very high.
6. Potential Underestimation of Social Returns: This section discusses reasons why the high estimates of social returns might still be too low. Factors like inflation bias, health benefits from R&D, and international diffusion of innovation are considered. It suggests that these factors could further increase the already high estimates of social returns.
7. Distinction Between Average and Marginal Social Returns: The chapter differentiates between average and marginal social returns to innovation investments, focusing on the former. It discusses policy implications of these returns and presents specific estimates of marginal returns.
8. Conclusion and Future Research Directions: The conclusion provides a conservative estimate of the average social gain as about $5 in benefit per $1 invested, which could be higher with inflation bias or health benefits. It also points out the importance of international spillovers. The chapter calls for further research into specific innovative activities and sectors, particularly health, and the link between innovation returns and other investment dimensions.