In the Journal of Economic Perspectives, Tyler Cowen and Alex Tabarrok question whether NSF funds are allocated efficiently. They write:

First, a key question is not whether NSF funding is justified relative to laissez-faire, but rather, what is the marginal value of NSF funding given already existing government and nongovernment support for economic research? Second, we consider whether NSF funding might more productively be shifted in various directions that remain within the legal and traditional purview of the NSF. Such alternative focuses might include data availability, prizes rather than grants, broader dissemination of economic insights, and more. …

Public goods theory tells us that the National Science Foundation should support activities that are especially hard to support through traditional university, philanthropic, and private-sector sources. This insight suggests a simple test: to the extent that the NSF allocates funds to genuine public goods as opposed to subsidies on the margin, we ought to see a large difference in the kinds of projects the NSF supports compared to what the “market” sector supports. But what stands out from lists of prominent NSF grants … is how similar they look to lists of “good” research produced by today’s status quo.