For 42 years the U.S. National Science Foundation has been producing its biennial "Science and Engineering Indicators" report, and since 1998 it has included a chapter “Industry, Technology and the Global Marketplace.” The NSF report is seen by many as an unbiased source for where the United States stands in technology-based competitiveness. The media reports the findings and many in the economic and technology policy communities look to the report to assess how United States global technology-based competitiveness. So when the report concludes that, “The strong competitive position of the U.S. economy overall is tied to continued U.S. global leadership in many KTI [knowledge- and technology-intensive] industries,” and “The US has the highest KTI share of GDP of any large economy,” it is not unreasonable for official Washington to take this as a good housekeeping seal of approval that all is well and to view any calls of alarm regarding the state of U.S. tech-based competitiveness as the “boy crying wolf.”
But while the NSF report contains valuable information, its analysis of U.S. technology-based economic competitiveness is seriously flawed and misleading. There are a number of problems. First, the report relies on an overbroad definition of KTI industries, most of which are neither in global competition or technology-based. For example, the fact that the health care and financial services industries have grown much faster in the United States than in our competitor nations is seen by NSF as evidence of U.S. economic competitiveness, when in fact it is just the opposite. Second, the report conflates the absolute size of sectors with U.S. national competitiveness. Third, the report measures output using dollar denominated exchange rates which makes accurate international comparisons difficult. And fourth, the report fails to provide sufficient transparency for much of its key data, preventing outside analysts from knowing exactly what is included and excluded in the NSF analysis.When these first three limitations are controlled for the result is actually quite different than the official NSF findings. In fact, U.S. science and technology-based (S&T) competitiveness has declined significantly as other nations have put in place policies to make gains while the United States has not.
If the NSF is going to provide accurate and useful analysis of science and technology data related to U.S. competitiveness, it would be well served to significantly restructure the makeup and structure of the analysis in this key chapter to focus solely on science and technology-based, globally traded sectors. Doing so will provide policy makers with a more accurate assessment of the true competitive position of the U.S. S&T-based economy