Monday, March 5, 2012

Prizes as Incentives

We've covered the use of prizes as an incentive mechanism several times before, but NPR has an interesting piece on this today. I like this example of competition based procurement policy (NPR):
Napoleon offered 12,000 francs to improve upon the prevailing food preservation methods of the time. Not surprisingly, the purpose was to better feed his army "when an invaded country was not able or inclined to sell or provide food". Fifteen years later, confectioner Nicolas Fran├žois Appert claimed the prize. He devised a method involving heating, boiling and sealing food in airtight glass jars — the same basic technology still used to can foods.
Let that sink in for a minute. "Fifteen years later, confectioner Nicolas Fran├žois Appert claimed the prize." 15 years! The X-prize, arguably a more complicated challenge, was initiated in 1996 and claimed in 2004 (< 10 years.) There is a persuasive argument that we are in a period of great stagnation and that it is increasing difficult to create new inventions and to bring them to market, as we have already picked the "low-hanging fruit" as Tyler Cowen says. These dark projections of the future are one possible path, but stagnation, as I'll discuss in an upcoming series of posts, is not the only trend currently shaping our economy.

The NPR piece is based on a recent NYT article, which itself is based in part on a report by Knowledge Ecology International that catalogs historical examples of prizes. The report is here.

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