The ARA Group, a division of KPMG Consulting LP, was asked by the National Research Council (NRC) to estimate the economic impacts of Canadian astronomy. This was done as background to the long range plan being developed by the Long Range Planning Panel (LRPP), which contains recommendations for an additional $147 million to support of NRC’s astronomy activities (mainly through its Herzberg Institute for Astrophysics, or HIA), research programs of the Natural Sciences and Engineering Research Council (NSERC), and the Canadian Space Agency (CSA).

Our firm carried out this assignment through a review of Canadian and international literature related to the economic impacts of astronomy and related fields, through a survey distributed to relevant Canadian university departments and institutions that carry out astronomy and astrophysics research and teaching, and through review of statistical and other information provided by HIA and NSERC.

Human Resources. Canada's astronomy investment creates direct procurement impacts through support to highly-qualified people (HQP). There are nearly 500 HQP currently supported by HIA and Canadian universities. This figure includes nearly 200 full and part-time government scientists, university faculty members, and research associates; it also includes roughly 200 graduate students and post-doctoral fellows.

Research Funding. Research funding from NSERC has been declining slowly over time, and in the most recent 98/99 year was about $4.4M, down from the eight-year average of about $5.6M. An additional $0.6M was for scholarship and fellowship support, bringing total NSERC astronomy/astrophysics support in 1998/99 to about $5.0M, down 22% from the eight-year average of $6.4M. CFI has made three astronomy/astrophysics-related grants to date. The funds for these have totalled about $2.7M from CFI. With industry and other partner cash and in-kind contributions, the total support is currently about $5.7M. The HIA’s present budget is roughly $8M from NRC for domestic operations, plus about $8M of external contributions for international commitments (CFHT and JCMT), for a total of $16M. Added to the NSERC research support, this sums to about $21M in annual astronomy support, excluding university salaries and the recent CFI injection.

Training impacts. The survey of Canadian university astronomy departments showed that about half their graduates remain in Canada in their first jobs. Data from the HIA were very similar. These figures represent the reality that many, if not most, astronomy positions are at international observatories. Many individuals who move abroad will probably eventually return to Canada, bringing additional experience and expertise with them. Nearly half of former NSERC post-doctoral fellowship holders who held their awards abroad intended to return to Canada for employment, and it is probably reasonable to expect a roughly similar proportion for astronomy professionals. Although roughly half of graduates remaining in Canada take up an academic post (in some cases these are additional studies such as Ph.D. or post-doctoral fellowships), the other half enter non-academic positions in industry and government. Thus there is a substantial transfer of astronomy-derived expertise to the private sector and (to a lesser extent) government from university departments.

The two main ways astronomy creates socioeconomic impacts are through: (1) opportunities for Canadian industry in building international observatories; and (2) application of instrumentation to industry, medicine, government, etc. Many concrete examples of both were found.

One Canadian company (AGRA-Coast; sales of $175M to date based on these opportunities) has developed the expertise to become a world leader in the construction of telescope enclosures, and has parlayed that expertise into other fields relying on similar technology (e.g., sophisticated amusement park rides). A number of other firms have also provided technology to these observatories and are expected to benefit in future projects.

The university survey showed that 15-25% of faculty members have recently made presentations and/or provided technical advice to Canadian industry, respectively,, and about 10% have engaged in contracting. Given that astronomy is quite fundamental research, these figures show more "practical" interactions than might be expected. Some Canadian university scientists and/or students have started companies based on astronomy instrumentation, including two world-leading data storage and software companies. Other examples include development of superconducting-insulator-superconducting technology that will be of use in telecommunications, new photonic devices, laser range scanners, fibre optic amplifiers, new optical designs, consultation to the petroleum industry, airport X-ray detectors and aircraft landing systems, solar system spacecraft ranging, geodetics, and remote sensing.

HIA’s Solar Flux Monitoring Program has carried out daily measurements of the Sun's radio emission for more than 50 years. Large emissions at times may cause serious damage to space- and earth-based telecommunications equipment. For example, two of Canada's Anik satellites were completely and permanently disabled by such an event in 1994, and large parts of Hydro Québec’s grid were taken out of operation for several days by solar activity in 1989. With suitable warning through HIA, satellite communications companies and utilities can protect investments worth hundreds of millions of dollars. HIA also works actively with about 10 firms, providing direct technical support (e.g., engineering design), strategic support (e.g., helping plan corporate R&D programs), infrastructure support (e.g., use of HIA facilities as test beds), and marketing support (e.g., informing companies of potential sales opportunities). Furthermore, HIA is working in a number of fields likely to be of future strategic importance.

Instrumentation technologies from astronomy have also provided advances in a number of medical fronts, since many diagnostic problems involve similar problems of separating out faint signals from noisy backgrounds. These applications include lower-dose X-ray machines, CAT scan and MRI devices, biomedical research devices, instrumentation critical for drug and vaccine development, more sensitive medical imaging devices (especially for soft tissues), X-ray microscopes, etc.

Returns to University Research in General. Investigations of the rate of economic return from investments in university research have invariably found high internal rates of return (ROR), typically ranging from 20-60% per annum, with higher numbers reflecting public RORs (e.g., returns to society as a whole) and lower numbers private RORs (i.e., returns to industry alone).

Returns to Highly-Related Fields. We found a dozen related reports, including studies of specific types of astronomy investments, impacts in closely-related fields, and impacts of targeted programs intended to generate industrial impacts. The general message is that expenditure for research in astronomy and astrophysics is very likely to be a good economic investment. The ratio of benefits to costs (B/C; defined here as total gross industry revenues plus cost savings, divided by total government research costs plus total costs for the industrial partners) is often about 1.0 to 2.0 in the various reports, with annual rates of return typically around 20% to 40%. The ratio of industrial revenues to research program costs alone (which are only a small proportion of the total costs of commercializing an innovation) can be much higher than this. This ratio can easily reach 10 or 20 to one. In these studies, all estimated impacts were lower bounds. Not included were impacts of innovations that haven’t been commercialized yet, "follow-on" impacts in other fields or for firms not directly associated with the research in question, impacts that cannot be valued in dollar terms (e.g., development of the Internet, impacts on health or the environment), benefits to users of the technologies, impacts of training students and post-doctoral fellows, impacts of improving the innovation system, or impacts of increasing general public interest in science.

"Best Estimate". Four cases represent situations close to those in the proposed long range plan:

(1) The evaluation of the HIA showed the institute has provided a per annum (non-discounted) partial B/C of roughly 0.6:1, and an annual ratio of industrial revenues to HIA research costs of about 1:1, from sales of just four firms. All revenues were highly-incremental. The benefits of HIA’s Solar Flux Monitoring Program were not quantified in this study, nor were benefits to other associated firms. Thus the B/C ratio certainly represents a lower bound estimate.

(2) A review of Canadian academic space physics showed it has provided a per annum (non-discounted) B/C of roughly 1.4:1 (using our definition of B/C ratio; the study reviewed employed a different definition), and a ratio of industrial revenues to research costs of about 22:1. This is a field closely associated with astronomy and astrophysics, one that employs many of the same types of instrumentation, and one that is actively supported by the CSA. The revenues were incremental and attributable to the NSERC investment. Only easily-identifiable benefits were quantified.

(3) Combining the two studies above, and adding additional revenues from astronomy-related industrial spin-offs cited by university respondents, yields an annual partial B/C of about 1.4:1, and annual gross industrial revenues of roughly 16 times the research investment in HIA plus NSERC space physics. This very roughly approximates the total industrial returns to Canadian astronomy investments. It is a lower bound, as revenues to all firms are not included, nor are social benefits.

(3) Australia’s experience. The earth stations antenna project estimated a B/C of about 2.0:1 based on the net present values of benefits and costs discounted and totalled over assumed product lifetimes. The R&D was incremental and the benefits attributable to it. This is similar to what might be expected from HIA’s involvement, plus any involvement of university industry liaison offices and/or IRAP in the Canadian plan. Possible benefits accruing to other firms using other astronomy technologies in other markets were not included in the B/C calculation, thus it is a lower bound.

Assumptions and Reliability. On the negative side, the B/C ratios quoted in several studies are very sensitive to the success or failure of just one or two firms. An obvious example is HIA¾ if Coast Steel hadn’t been able to exploit construction opportunities world-wide, the annual industrial revenues associated with HIA would drop by 75%. A typical finding (across many scientific fields and industry sectors) is that one project in perhaps 10 or 20 provides almost all the benefits, while the remainder either contribute only a little, or fail completely. Thus there is high risk.

On the positive side is the fact that the studies reviewed were rigorous and conservative in nature. Again taking HIA as an example, the HIA study only estimated the revenues accruing to four firms. Yet the Institute is working actively with at least five other firms, with some of them on more than one project. In addition, HIA is working on many strategic projects which may become commercially-significant in the future. But the actual and projected revenues for the other five firms or from future applications have not been included in the B/C ratio. Nor did the study include estimates of cost savings that have accrued to Canadian utilities and telecommunications industries as a result of the Solar Flux Monitoring Project. Similar comments pertain to the other reports discussed. On the whole we believe that, if anything, these estimates are conservative.

The analyses discussed above suggest that expecting annual rates of return in the order of 40% on additional Canadian investment on astronomy would be reasonable, and that a benefit/cost ratio to Canadian society as a whole (i.e., comparing benefits to the costs of both government and industry) of 2:1 is entirely feasible. The ratio of incremental industrial revenues compared to the additional government expenditures alone could easily be 10:1 or considerably higher.

Thus for a yearly research spending increase of just under $15M, one could (after some period of time) expect incremental gross industry revenues of roughly $150M per annum. If, for sake of argument, we assume this benefit stream begins five years into the 10-year plan, this will result in incremental gross Canadian revenues of roughly $750M over the first 10 years. Total gross Canadian industrial revenues roughly equal to double the combined joint investment of government and industry (including industry commercialization and production costs) are likely. That is, there will be a benefit/cost ratio of about 2:1 for Canada as a whole, using our definition of this ratio. We cannot say what the magnitude of total revenues might be, as the size of the future industrial investment is not yet known. These figures are very rough approximations, and probably represent lower bounds. There will undoubtedly be other industrial benefits which will never be explicitly quantified, plus other significant benefits which are impossible to value in dollar terms, such as benefits to end-users of the technologies, advances in medical technologies and treatments, new ways to monitor the environment, production of additional graduate students and post-doctoral fellows who bring their expertise to industry and government, improvements to Canada's innovation system, and applications whose nature is as yet unknown. The estimates assume a broad "portfolio" of programs and projects from which a few big winners will emerge, as well as active industrial involvement and technology transfer. We caution the reader that the estimates can only be compared to figures in other studies if the definitions and methodologies used are exactly equivalent.

The stimulation of economic activity generated from the construction and operation of major astronomical facilities is not restricted only to dome and telescope construction. The spin-offs reach very far into the structure of the economy. ARA’s small survey of astronomy departments carried out as background to this report revealed that¾ given that this is very much a "pure" research field¾ a surprisingly high proportion of faculty members have some sort of "practical" interaction with industry and/or government, as shown in Exhibit 4.1.

* Rounded figures for number of individuals having these interactions over the past 5 years.

Recent concrete examples discussed by survey respondents of the results of such interactions at Canadian universities show that the impacts can be very substantial:

• Two students from École Polytechnique started a small company, Matrox, in 1979 to produce electronic cards for storing numerical images at the Mt Mégantic Observatory (OMM). Today Matrox is a world leader and has annual sales of about $500M, and export sales in excess of $200M annually.
• In 1984, two researchers at OMM (the director and a computer science graduate) developed a digital system for computer display of astronomical images. The student subsequently went on to found the software company Softimage. This firm has grown into an world industry leader in professional visual content production, with tools for creating 3-D and 2-D animation, as well as for creating, editing and finishing video programs.
• The University of Alberta’s Department of Electrical and Computer Engineering, in collaboration with HIA and the Alberta Microelectronic Centre (now the stand-alone Alberta Microelectronic Corporation, or AMC), led to the development of prototype antenna/receiver modules using state-of-the-art superconducting-insulator-superconducting (SIS) technology. This is of use in astronomy, but also industry (through AMC) for use in various mm- and sub-mm engineering projects and other cryogenic SIS projects, for which AMC now has fabrication capability.
• The University of Lethbridge is currently involved in a project to rapidly measure the amount of water vapour along a given path through the atmosphere for phase correction of radio interferometer data. This may lead to a method of rapidly determining air density variations at airport runways, having the potential to be a powerful diagnostic tool for airline pilots, with an important safety angle. A second example is the gold coated nickel metal meshes which were developed for a spectrometer launched on the Infrared Space Observatory (an ESA mission). The university was part of a team that tested the optical performance of these meshes. Later these meshes were found to be ideal surfaces for rapidly growing skin for severe burn victims whose skin must be replaced within a critical period. The meshes have been used at major US burns institutes.
• The Institut National d'Optique (INO, Ste. Foy, Quebec) carries out extensive research and development in photonics, optics, electro-optics, and lasers (annual operations $18M), and has performed extensive astronomy-related work for CSA, the European Space Agency, and other contractors. They employ several astronomy-trained staff and their work includes laser range scanners, optical amplifiers, fibre optics, active, segmented, and diffractive optics. Its mission is to provide R&D assistance to high-technology companies, and their expertise would match many areas of the Long Term Plan.
• At the University of Victoria, recent research on the time ephemeris of the earth has refined (by roughly two orders of magnitude) the relationship between earth-based and solar-system based clocks. This has implications for solar system spacecraft ranging.
• Queens University has developed algebraic computing methods that have been used in the financial industry, and it has provided computing consulting to the petroleum industry.
• The University of Waterloo’s astronomical imaging techniques have been used in medical imaging and remote earth sensing research.
• York University spun out Stellar Optics Research International Corporation, which markets products and consulting in the area of black and white materials and surfaces. This company now supplies flat fielding screens to astronomers worldwide, and got its start as a result of two contracts, one related to providing advice on materials or surfaces suitable for flat field astronomy CCD images; and the other for advice on black surfaces suitable for the baffle of the Far-Ultraviolet Spectroscopic Explorer (FUSE). In addition, York astronomers have learned how to make ultra-precise spheres which will be used for the new international density standard, and astronomical software has been transferred to the private sector for applications in research and education.
• At CITA, faculty have been involved in developing microwave detectors for use on satellites. Although a theory institute (so direct applications are not generally in their line of work), some post-doctoral fellows have earned income providing images and animations of galaxy mergers to the entertainment industry.
• Canada's enormously successful RADARSAT project employed cleverly-implemented, aperture synthesis for coherent signals, a technique developed by radio astronomers for imaging the sky.

There are two types of HIA interaction with industry that provide significant benefits. First, HIA provides data and assistance to utilities and the telecommunications industry that potentially saves them very large sums of money. Second, HIA carries out direct technology transfer to firms for product and process development.

The Solar Flux Monitoring Program. This program has carried out daily measurements of the Sun's radio emission for more than 50 years. The returns to Canadian and international enterprises from this program are very large, because the Sun's radio flux is intimately connected with a wide range of near-space and terrestrial phenomena, many of which affect economic activity.

At the peak of activity (next expected around the year 2000), there are many events which eject large amounts of material from the Sun. Such Coronal Mass Ejections (CMEs) can destroy communications satellites and disrupt communications. For example, two of Canada's Anik satellites were completely and permanently disabled by such an event in 1994. CMEs can also take major electric-power grids out of operation for days at a time. A famous instance of this occurred to Hydro Québec at the last peak of solar activity in 1989: large parts of the grid were out of operation for several days.

The data from the simple measurement made at HIA are distributed worldwide and are used to warn of CME events. With suitable warning, satellite communications companies can put satellites in safe-hold, and power companies can reduce the sensitivity of their overload circuits, thereby protecting investments worth hundreds of millions of dollars.

The series of measurements of the underlying solar activity are also of commercial value. To give one example, the density of the upper atmosphere is dependent upon the Sun's activity, measured by the Solar radio flux, and the lifetime of communications satellites in Low Earth Orbit (LEOs) can be directly predicted from the flux measurement. This allows companies to predict the lifetime of their multi-million dollar investments in satellite equipment. The series is also of value in environmental studies, in particular Global Warming studies and Ozone Layer Depletion research. This work may eventually have economic consequences greater than anything else that Canadian astronomy does.

Technology transfer. NRC policies encourage entrepreneurship and assistance to Canadian industry. Among many commercially related activities in the past three years, HIA staff have:

• Worked with the Centre for Research in Earth and Space Technology (CRESTech, one of the Ontario Centres of Excellence), in collaboration with HIA, CSA, and NRCan, developed a version of a data acquisition and recording system in the so-called S2 format for the purpose of correlating Very Long Baseline Interferometry (VLBI) data from radio telescopes. CRESTech has made sales of approximately five dozen S2 recorder, formatter, and playback systems to about a dozen countries including the USA, Japan, Australia, India, and France with revenues of about $6M to date, equal to the S2 development costs. Sales are continuing, and association with the HIA data correlator facility, which is one of the four most advanced in the world, is an added strength.

• helped a small BC company (Globus Celluar Inc.) develop a cell phone antenna that is more energy-efficient and directs less radio emission into the user's head; if successful, the potential market is very large indeed.
• developed a new lens coating technique, applied to patent it, and have begun discussions with businesses for its widespread commercial potential.
• built and offered a "virtual antenna" test facility available to private industry.
• worked closely with COMDEV (Cambridge, ON) on several technical support issues for satellite instrumentation, notably the fine error sensors for the recently launched FUSE spacecraft supported in part by CSA with NASA.
• provided technical assistance to Bristol Aerospace on its LIDAR (space) telescope project, and worked closely with other firms developing space instrumentation including EMS-T (formerly CAL, Ottawa), Routes Inc., and MPB Technologies (Montreal).
• assisted AGRA-Coast on mm-wavelength antenna technical knowledge necessary for them to bid on the international ALMA project.
• has been actively pursuing a business development process to license data archiving and distribution software that can be used in library and commercial data management operations.

• worked with NRC's national library, CISTI, and the University of Victoria Mechanical Engineering department to establish a database of fuel cell R&D.

Confirming evidence of such impacts can be found in the international literature. The American decadal review of astronomy and astrophysics published by the National Academy of Sciences in 1991 lists at least a dozen other major applications of astronomical techniques in various areas of industry. These include image processing software in automobile and aircraft labs; communication antenna testing; low-noise components for communications industry; development of highly sensitive photographic films by Kodak; infrared-sensitive films for aerial reconnaissance; and X-ray baggage scanners for airports.

The 1999 US decadal review is in preparation, and demonstrates an accelerated pace of exploitation of astrophysical instrumentation. Some examples of recent practical applications driven by astronomy and astrophysics include:

• development of opthalmic instruments which can image the retina of an eye and measure an individual’s eye aberrations, possibly leading to low cost diagnosis of eye disease, and specification of parameters for either contact lenses which will provide "super-normal vision" or corrective eye surgery.
• better X-ray equipment (lower dosages, increased sensitivity, lower sample or tissue damage, ability to use single photons): applications include airport X-ray detectors, biomedical research devices, drug and vaccine development, medical imaging devices (breast cancer, osteoporosis, heart disease, etc), dental problems diagnosed through new X-ray charge coupled devices (CCDs) to replace dental X-ray film, X-ray microscopes (used in neonatalogy, out-patient surgery, third world clinics, etc.), development of X-ray lithography critical in microelectronic chip manufacture.
• better imaging equipment at UV and optical wavelengths: applications include industrial imaging (cooled silicon CCD arrays), remote sensing satellite imaging (e.g., weather, detecting power line failures), stereotactic breast biopsy instruments (better identification of tumour position is possible during biopsy, thus avoiding surgery),.
• Better infrared imaging equipment: applications include defence usage (e.g., night vision), semiconductors (identifying chip flaws), medical detectors and spectroscopes (e.g., diagnosis of cervical cancer and genetic diseases, tumour probes).
• Better communications at radio wavelengths (lower noise and interference, wider bandwidth): applications include low-noise maser and transistor amplifiers widely used in telecommunications, imaging to detect concealed weapons, aircraft landing systems (ability to see through fog and cloud).
• Better spectroscopy: applications include trace chemical analysis, advanced materials science research, low-dose biological testing, fusion research, nuclear non-proliferation assurance testing, atmospheric composition analysis (e.g., pollution, global warming, ozone depletion).
• Data and image analysis; applications include the IRAF software (e.g., underwater imaging, mapping atmospheric aerosols, breast cancer detection, genetic decoding), and AIPS software (medical imaging, as in CAT scans, MRIs), defence and police work.
• Precision timing: applications include satellite communications and positioning, tracking cellular phone calls (including 911 calls), geodetics, GPS handheld transmitters.
• Data analysis and computation; applications include: FORTH computer language (commercialized from NRAO work and now used in many sectors, including Federal Express delivery and tracking systems, automobile engine analyzers, etc.), fluid dynamics analysis, weather prediction, remote sensing, oil exploration, etc.

Because astronomy and astrophysics are such fundamental research fields, there are few examples of practical examples of the research results themselves. There are a few, however, (of a nature that is sometimes termed "spin-off research advances"). Most of these applications to date have been in the US defence program and are discussed in the US decadal reviews. They include using models of stellar atmospheres to discriminate rockets exhausts from other background sources, using stellar counts and spatial distributions for satellite pointing and calibration, and using galactic infrared maps to assist in rocket navigation.

In order to do this, we reviewed studies which are as close as possible to the research proposed in the LRPP report. As one might expect, it was not possible to find studies which exactly matched the Canadian plan (i.e., research done by both government and university scientists, facilities built jointly with other international partners, a mixture of both earth- and space-based projects, etc.). Even finding studies focused strictly on astronomy and astrophysics was difficult.

However, we were successful in finding a dozen reports that investigated fields or facilities that were fairly close to those in the Canadian long range plan. These include specific types of astronomy/astrophysics investments or applications (e.g., earth stations for telecommunications), impacts in closely related fields (e.g., high-energy physics, general physics, and space sciences), and impacts of various "targeted" programs that are intended to generate industrial impacts (e.g., the Canadian Networks of Centres of Excellence). While the methodologies employed and the results obtained differ substantially from study to study, the general message seems quite clear: Expenditure for research, even fundamental research, in astronomy and astrophysics is very likely to be a good economic investment. A summary of the studies reviewed, and their general conclusions, is found in Exhibit 5.2. (Note that we’ve included all the relevant studies we could find, not just the "good news" ones.)

Table Notes:

1. The partial B/C ratio is defined here as B/C = (total revenues + cost savings from "big winner" projects) divided by (total research program costs + costs of implementing the projects studied). That is, commercialization costs to industry partners are included. Comparing benefits to total research program costs makes this a very conservative measure.
2. The report used a different method for calculating B/C ratios (it includes TRIUMF spending within Canada as a benefit). We have adjusted their figures to make them consistent with our definition. To do so, we assumed an industry profit margin of 50% for these high-tech companies (i.e., costs were estimated as revenues divided by 1.5). A higher assumed profit margin would raise the B/C ratio.
3. The report uses a different method for calculating B/C ratios (it calculates total revenues dived by total NSERC costs alone; i.e., it does not include industry commercialization costs). We have adjusted it to roughly correspond to B/C = (total revenues + cost savings) / (total partner + NSERC costs). We used an assumed 50% industry profit margin.
4. We assumed company profit margins of 50%; actual margins are unknown.

The ratio of benefits to costs (B/C, defined here as total gross industry revenues plus cost savings, divided by total government research costs plus costs for the industrial partners) is in the order 1.0 to 2.0 for 7 of the 11 reports reviewed for which we know the methodologies employed, with annual rates of return frequently around 20% to 40%. This is roughly consistent with the results for university research in general discussed in the previous section. Furthermore, the ratio of industrial revenues to research program costs alone (which are of course only a small proportion of the total costs of commercializing an innovation) can be much higher than this. Where we have the data, the latter ratio is also shown in the table; this ratio can easily reach 10 or 20 to one or more.

Note that a B/C ratio of 1.0 means that the investment overall is "breaking even" (taking into account all Canadian investment, both for research and from industry). Why would we consider the possibility of breaking even to be a positive outcome? Because in all of the studies above, only easily-identifiable, easily-quantifiable benefits of known applications are counted. Often, the resulting innovations simply haven’t been developed or commercialized yet, and thus benefits can’t be estimated. In other instances, "follow-on" impacts in other fields or for firms other than those directly associated with the research in question are unknown, and thus not counted. In other cases, important existing impacts (such as the acknowledged contribution of high energy physics and astrophysics research to the development of the Internet and the World Wide Web) are simply ignored because they can’t be valued. Similarly, impacts that may become critically important in the future, but can’t be valued (such as our increasing ability to track comets and asteroids that may in future strike the Earth), are also ignored. Equally uncounted are most benefits in areas such as health or the environment, as these are usually impossible to quantify in dollar terms. Another important set of benefits not included in these reports are "end-user benefits"¾ those achieved by the buyers or users of the technologies developed by the associated companies, or by the Canadian public in general. And finally, most of the reports above did not attempt in any way to quantify the impacts of training undergraduate and graduate students and post-doctoral fellows, nor of improving the Canadian innovation system, nor of increasing general public interest in science. Thus the B/C ratios shown in the table should be regarded as absolute minimums.

What figure is the most reasonable for estimating the return on investment in astronomy and astrophysics? Should Canada expect B/C ratios of 1.0, 2.0, higher, lower? What should we expect from the construction phase of international facilities? What from their operation and from the results of commercializing astronomy instrumentation? These questions are not easy to answer. However, there are four cases which represent situations very close to those in the proposed long range plan:

HIA: Providing a per annum (non-discounted) partial B/C of roughly 0.6, and a per annum ratio of industrial revenues to HIA research costs of about 1:1 (from four firms alone), the benefits represent those arising from construction impacts (in this case through contracts to one Canadian firm in particular), as well as impacts related to application of instrumentation technology, from just four firms. All revenues were highly-incremental to either the expertise provided by HIA, or their active assistance to the firm, or both. The strength of HIA is this area is twofold. First, there are a number of applications currently underway and the senior staff understand the importance of technology transfer. Thus although most of the benefits from HIA have resulted from the revenues associated with one firm, there are other opportunities currently under development that may be equally successful. Second, HIA engages in not just formal technology transfer, but has in the past assisted industry proactively through a variety of means that are very important and will undoubtedly be supported in future, including:

• Technical support¾ provision of engineering design, technical advice, review of R&D results, etc. This has in some cases led to dramatic improvements to the firms’ corporate R&D and engineering expertise that has been used in other areas.

• Strategic support¾ assistance with planning the company’s R&D programs and intended commercial applications.
• Infrastructure support¾ use of HIA facilities and staff to test new products and designs.
• Marketing support¾ proactively informing companies of potential technical and sales opportunities, providing references, helping make connections with key individuals, acting as a "seal of approval" when involved with the technical design, etc. Some of this happens indirectly, as when a firm becomes known to an HIA international partner through a joint project.

Note that substantial benefits of HIA’s Solar Flux Monitoring Program to utilities and the telecommunications industry were not quantified in this study. Thus the B/C ratio certainly represents a lower bound estimate.

Canadian space physics: Providing a per annum (non-discounted) B/C of roughly 1.4, and a ratio of industrial revenues to research costs of about 32:1, this is a field closely associated with astronomy and astrophysics, one that employs many of the same types of instrumentation (which provide the bulk of industrial applications), and one that is actively supported by the CSA, which will be actively involved in long-range astronomy activities. Because the bulk of revenues counted were from start-up companies founded by holders and former holders of NSERC physics research grants, it can be assumed that the revenues are incremental and attributable to the NSERC investment.

Combined HIA, Canadian space physics, and Canadian academic astronomy combined: If we combine the industrial revenues in the two studies above, and add the revenues from other astronomy spin-off firms found in our survey of Canadian astronomy departments, we arrive at a figure that very roughly approximates the combined known returns to Canadian astronomy and astrophysics. The annual partial B/C is very roughly about 1.4:1, and the annual ratio of industrial revenues to government research costs (total domestic and international HIA costs, plus the costs of NSERC space physics grants) is about 16:1. These are lower bound figures, as they only includes revenues of known industrial applications, and even there we have not included revenues from some large firms cited by Canadian universities as being astronomy-based. No social benefits are included (e.g., in medicine.)

Australia’s experience: The earth stations antenna project estimated a B/C of about 2.0 based on the net present values of benefits and costs discounted and totalled over assumed product lifetimes. This case represents a situation in which a firm recognized a substantial export market opportunity and pursued it with the active involvement of the government astronomy research partner. The R&D was incremental and the benefits attributable to it. This is similar to what might be expected from HIA’s involvement, plus any involvement of university industry liaison offices and/or IRAP in the Canadian long-range plan. The study is of the "big winner" type, in that possible benefits accruing to other firms using other astronomy technologies in other markets are not included in the B/C calculation. Thus in one way it represents very much of a lower bound figure, but on the other hand it is obviously highly-sensitive to the success of this single product in a single market. It is probably closest in nature to the possible impacts arising from the construction phase of large international facilities, although the extent to which similar opportunities will arise in future is of course unknown. Another earlier Australian study not associated with earth stations arrived at a similar B/C ratio of about 2.0, although unfortunately we could not obtain the study to check the methodology. We assume that the methodology is equivalent to ours (as was the case for the earth stations work), and that this latter study represented benefits from astronomy research and observatory operations, as opposed to the construction phase.

We wish to alert the reader about making comparisons between the estimated B/C ratio of 2.0 which we expect from astronomy, and "similar" figures found in other reports. At some point Cabinet may have to decide among several proposals which claim to create economic wealth. An obvious way to do so is to compare the anticipated B/C ratios of each proposal. Unfortunately, only if exactly the same analytic methodology is used, can estimates of B/C ratios, rates of return, and net present values from different reports be compared.

In our case, we have specified our methodology in the table notes earlier, and we have adjusted the figures found in other reports to make all figures roughly equivalent. These figures are often quite different from those in the original report! For example, the review of the impacts of NSERC’s investment in physics was carefully and thoroughly done, and we have confidence in the results. However, the author quotes returns on space physics investment of about 32 to 1 for "primary economic activity", and 3 to 5 times that for "total impact". This does not represent a mistake in the author’s methodology, but merely reflects that his calculation is based only on NSERC’s investment¾ it doesn’t include estimates of Canadian industry commercialization and production costs as ours do. When we estimate the latter for our purposes, it reduces the B/C to about 1.4 to 1. Other reports (not quoted here) make fundamental mistakes in their calculations, most of which greatly increase the B/C ratios quoted. The end result is that we urge the reader, if comparing our figures to those from another report, to ensure they are truly comparable.

The analyses discussed above suggest to us that expecting annual rates of return in the order of 40% on additional Canadian investment on astronomy would be reasonable, and that a benefit/cost ratio to Canadian society as a whole (i.e., comparing benefits to the costs of both government and industry) of 2:1 is entirely feasible. The ratio of incremental industrial revenues compared to the additional government expenditures alone could easily be 10 to 1 or considerably higher.

Thus for a yearly research spending increase of just under $15M, one could (after some period of time) expect incremental gross industry revenues of roughly $150M per annum. If, for sake of argument, we assume this benefit stream begins five years into the 10-year plan, this will result in incremental gross Canadian revenues of roughly $750M over the first 10 years. Total gross Canadian industrial revenues roughly equal to double the combined joint investment of government and industry (including industry commercialization and production costs) are likely. That is, there will be a benefit/cost ratio of 2:1 for Canada as a whole, using our definition of this ratio. We cannot say what the magnitude of total revenues might be, as the size of the future industrial investment is not yet known.

These figures are very rough approximations, and probably represent lower bounds. There will undoubtedly be other industrial benefits which will never be explicitly quantified, plus significant benefits which are impossible to value in dollar terms, such as benefits to end-users of the technologies, advances in medical technologies and treatments, new ways to monitor the environment, production of additional graduate students and post-doctoral fellows who bring their expertise to industry and government, improvements to Canada's innovation system, and applications whose nature is as yet unknown.

These estimates have been provided through an independent and objective review of the plan. However, they assume a broad "portfolio" of programs and projects from which a few big winners will emerge, as well as active industrial involvement and technology transfer. Remember that the estimates can only be compared to figures in other studies if the definitions and methodologies used are exactly equivalent.