On Research and Development Management in the Transition to a Market Economy

The optimal organization of research and development (R&D) in a market economy is one of the unsettled questions of economics. R&D has great externalities that make its support more complicated than most goods in which the contrasting of private benefits with private costs in a market system approximates the social welfare. Thus, the organization of R&D becomes a key issue in a transition to a market system of a former centrally planned economy. This is particularly so for the USSR, which has been a major source of science and technology. Recognizing its importance, Deputy Prime Minister Laverov approached the International Institute for Applied Systems Analysis (IIASA) to initiate collaborative work with the USSR State Committee for Science and Technology and the USSR Academy of Sciences on the topic of Research and Development Management in the Transition to a Market Economy in the autumn of 1990. Dr. Peter de Janosi, Director of IIASA, and Professor Merton J. Peck, Leader of the Economic Reform and Integration (ERI) Project (also IIASA), met the Deputy Prime Minister to discuss such a cooperation. The collaboration began with a meeting in November 1990 organized by IIASA with the support of the Committee for Systems Analysis of the USSR Academy of Sciences. This meeting explored the feasibility of creating an IIASA research activity on the impact of economic reform and transition upon the organization and management of science and technology in the USSR. An agreement was reached that IIASA would participate in an activity with the USSR State Committee for Science and Technology concerning R&D Management in the Transition to a Market Economy. This activity would be led by Professor Richard Levin from Yale University and Dr. Sergei Glaziev from the Central Economic and Mathematical Institute in Moscow. The second conference held on this topic, cosponsored by the USSR State Committee for Science and Technology and IIASA, and organized with the International Center for Research into Economic Transformations (Moscow), was an outgrowth of discussions with representatives of the USSR Academy of Sciences, the State Committee, and the Center in January 1991. IIASA was invited to arrange a meeting in which the numerous issues involved in the restructuring and organization of scientific and technological activities in the Soviet Union could be discussed in systematic ways. Soviet experts prepared papers dealing with the Soviet Union's present situation and reform plans regarding R&D management. These papers were presented at the Conference and commented on by a small group of economists, engineers, and R&D managers from the United States, Europe, and Japan. The Conference, held in Moscow in July 1991, provided an exceptional opportunity to review and discuss science policy in a economy making the difficult transition to a market system. The new data and ideas for changes in the Soviet science and technology sector were of great interest to experts from West and East. The discussions resulted in a commitment to longer term research on an extended list of topics. More about the future plans can be read in the corresponding section of this paper