These are the two essential advantages of prizes. They pay for nothing but performance, and they ensure that anyone with a good idea — not just the usual experts — can take a crack at a tough problem. [...]
Just look at how both political parties have so far tried to deal with global warming. They have handed out grants and subsidies for various alternative energy sources like ethanol, even though nobody knows what the best sources will ultimately be. A much smarter approach would be to mandate that the economy use less carbon. This would effectively set up a multibillion-dollar prize — in the form of new customers — for whichever companies came up with efficient energy sources.
Robin Hanson’s 1998 paper (PDF) on the history of prizes.
Addendum: Tyler Cowen tells me he helped a bit the NYT writer for this story.
Prizes versus Grants
http://www.overcomingbias.com/2007/01/prizes_versus_g.html
Or, one might use prediction markets to allocate a portion of resources before, and prizes to allocate resources after the fact.
Perhaps, one might bet, or make claims, as to what they will accomplish. Markets and other mechanisms are used to determine the amount of resources they get, as well as what the prize amount should be, if they are sucessful. Persons or organizations who make poor claims, perform poor research, don’t get (much) money, and this information is used to develop a reputation system for all those seeking scientific research funding.
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