In Germany there are several research institutes for empirical economic and social research which are in major part financed by the government. From an economic point of view, it is not obvious to finance such institutes by the state. This paper examines the economic rationale for such public funding by means of the “theory of market failure” and „Public Choice Theory“. One major result is that those institutes produce a public good (basic information which is important for public discussion in a democracy), making public funding necessary. But public funding does not imply the production of this information by the state itself. Competition between several institutes is meaningful. The second major result is that contrary to the organization of statistical bureaus in almost all states, such competition is also useful for the production of statistical data. A third result shows that due to the asymmetric nature of information on the quality of scientific outcomes, an academic evaluation of production of statistical data and research is necessary, not only for pure academic work, but also for applied work in a market setting.