Reward the invention, not the feasibility study
Summarised from an old but still very relevant article by James Hudson in Inc. (USA), monitored for the Institute by Roger Knights.
Instead of encouraging technological breakthroughs by rewarding performance, governments discourage them with a grants structure that rewards inaction. What are we doing about nuclear safety? Studying it. What are we doing about solar energy? Holding conferences. What are we doing about dirt smokestacks? Reassessing.
The answer to the question: 'what should we do about the whole mess in Research & Development?' is: start giving out prizes.
Instead of bestowing grants for study and research, the government should announce prizes. Prizes for finishing, not for thinking about finishing. Prizes for getting something to work - for building it, testing it, breaking it, swearing at it, and fixing it till it runs. How about, let's say, a $1-billion prize for the first large, reliably functioning coal liquefaction plant?
'Instead of bestowing grants for study and research, the government should announce prizes. Prizes for finishing. Prizes for getting something to work'
Prizes for successful technology would go straight into the pockets of the inventors and investors, appealing shamelessly to their prurient desire to get rich. Government would withdraw most of its funding for R&D. If the prize for actual completion of a project were fat enough, industry would put up the R&D money. And it would be a lot more selective about choosing the ideas that are most likely to work (that is, the ideas that are worthwhile) because if the idea didn't work, industry would take the loss.
'But above all, you fear a breakthrough more than a failure. If you make a breakthrough, there's no need for further study, so your grants stop'
Sounds mad, you say? It wouldn't if you'd been doing what I've been doing lately, which is evaluating proposals for Department of Energy R&D funding. How different government R&D is from commercial research! In commercial work there is a single test of performance - does the result sell? If it does, the R&D effort wins its prize: the profits. In government research, the only test of performance is the ability to get grants. Once you're funded to study, you get the same amount of money whether you solve the problem or not. You have to meet rigid programme requirements, surrendering the freewheeling laboratory latitude to test things on instinct. But above all, you fear a breakthrough more than a failure. If you make a breakthrough, there's no need for further study, so your grants stop.
This is not to suggest that scientists everywhere are deliberately knocking over test tubes to stall their work. It is to state that our current system inspires only process, not performance. There is in the strictest sense nothing to be gained by solving a problem. There's no goal, no thrill of achievement and no personal profit. You don't even get a patent if you devise something, because the results of government-funded R&D are public property. Of course, this isn't much of a problem, because government-funded work seldom produces anything worth patenting.
For instance, why not establish a $2-million prize for the first decent tyres-to-energy project? It wouldn't be too hard to set the criteria. Let's say that, to win, the process would have to convert 500 tons of tyres to usable energy, work in two places (to prove the system had wide applications, or 'transferability') run for a year, and show an operating profit after audit. Hard, but far from impossible. And here's the key that would make it attractive to investors financing the competitors: the results of all the R&D would be proprietary, not public. So you'd get to keep the patents. If the winning system is profitable, the patents could be worth a lot. You might require the winner to license whatever technology he or she develops, so all could share it - but it would be a licence with royalties, to insure that the winner gets the greatest profit.
'Just be glad the government didn't decide to fund research into man-powered flight. We'd still be gluing feathers to our arms'
Isn't this a wonderful idea? I certainly think so. But I won't be surprised if it sits around for five to ten years (Ed: this was first published in 1980), until somebody junior enough for it to affect is senior enough to influence some money. Then, there will be five years of paper studies into the feasibility (I'd be happy to get one of the contracts!), going on and on about response of the market, environmental impact, government staff impact, methods for setting prizes and performance requirements, what colour the blueprints should be, and so on. And ten years later, there may be a demonstration involving parallel projects, with one working toward a prize and the other direct-funded. Given government lag times, that would be pretty dynamic action. So I'll see you again in 25 years. In the meantime, just be glad the government didn't decide to fund research into man-powered flight. We'd still be gluing feathers to our arms.
Prizes for vaccines
Summarised from an article by Walter Williams, entitled 'Government-funded disasters', from an unspecified source (July 26th 2000), monitored for the Institute by Roger Knights.
In a similar vein to James Hudson's polemic above, Walter Williams draws attention to recent US government-funded disasters, particularly research into vaccines that has failed to produce any useful results. Drawing on an article by Rachel Glennester and Michael Kremer, entitled 'A Better Way to Spur Medical Research and Development', he proposes government-funded prizes for vaccines. Prizes provide strong incentives, because researchers only get the money if their research succeeds.
Once the vaccine has been developed, patents could be bought out by governments with lump-sum payments, or the government (or foundation) could commit to purchasing a certain quantity of the vaccine at a certain price once it has been successfully developed. Either way, the researchers would only receive the financial benefits when the product is delivered. No longer would recipients of government funding have an incentive to delay progress or to be overly optimistic. As Walter Williams puts it, "One need not be a rocket scientist to figure out which method is more likely to deliver the goods."
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