Innovation prizes and innovative objectives

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Popular economics writer Tim Harford blogged a welcome column on innovation prizes on 2015-12-01 (alternately behind paywall). It’s a nice explainer, packing in history from the 1700s and current initiatives, and covering some of the benefits and challenges of prizes relative to patents and up-front-grants.

Unfortunately the column includes this irresponsible line:

Inventing something new is for suckers; smart people sit back and rip off the idea later.

That is a common sentiment, but deserves scare quotes or the equivalent contextualization. It can be “smart” (I’ll assume meaning something that a rational economic actor would do) to invent without the financial incentive of an up-front grant or potential of collecting freedom infringing rents or a prize: inventor can gain deeper, earlier knowledge, reputation (each of these 3 can be leveraged for financial gain) as well as internal reward (e.g., fun, curiosity, fulfillment). (I really ought have a literature review handy covering all this; pointers most welcome!)

More interesting:

But there is a danger of expecting too much from prizes. If we are to scrap patents entirely, prizes would be far too narrow a replacement. (Who would have sponsored a prize “for inventing the internet”? Not all innovations exist to solve precooked problems such as finding longitude.)

Let’s get the non-interesting part out of the way: how in the world did “inventing the internet” come into Harford’s brain as an example or get past his editors as an example of an innovation stimulated by patents? The internet was developed by academia (pre-enclosure) and military institutions.

But narrowness is a challenge for prizes, for the obvious thing to do is to set up narrow prizes targeting specific pre-imagined innovations. With such bounds perhaps “innovations” merits scare quotes. To counter this tendency, I’d hope that really visionary prize funders target broad, non-manipulable, and non-financialized goals (as previously mentioned under “outcome bonds”).

Admittedly a tall order, requiring more vision or coordination than seen so far. My short term wish is for idea explainers and popularizers such as Harford to up their game: write about the challenges prizes face, but also how they might be overcome.