Prizes stimulate innovation better than grants:

BACK in the 1700s, prizes were a fairly common way to reward innovation. Most famously, the British Parliament offered the £20,000 longitude prize to anyone who figured out how to pinpoint location on the open sea. Dava Sobel’s best-selling 1995 book “Longitude” told the story of the competition that ensued, and Mr. Hastings mentioned the longitude prize as a model at that meeting back in March.

Eventually, though, prizes began to be replaced by grants that awarded money upfront. Some of this was for good reason. As science became more advanced, scientists often needed to buy expensive equipment and hire a staff before having any chance of making a discovery.

The internet is changing the economics of innovation and discovery.  Science is no longer expensive like it once was, it is within the realm of dedicated and educated hobbyists.  Robin Hanson, who the article discusses, is everywhere you find interesting information economics problems.

Categories: Business and Economics, Incentive Centered Design, Information Asymmetries, Information Economics, Information Markets, Matching Mechanisms, Science, Social Software, Strategy, Technology, Users as Partners