ABSTRACTThere is a substantial economic literature on the allocation of R&D resorces. This paper reviews the relevant parts of this literature, paying particular attention to those studies which have estimated the social value of research. An important issue is whther government should allocate research resources, since the market may be able to do so; the potential reasons for market failure are reviewed, together with the case for government intervention in the market for research. Finally, the contribution which economic concepts can make to the decision making process is reviewed.