Posted by Jonathan Adler:
Energy Prizes Instead of Subsidies:
http://volokh.com/archives/archive_2007_09_23-2007_09_29.shtml#1190669534
It is "energy week" at NRO. My first contribution to this series of
articles on energy policy is [1]this article arguing that
government-sponsored prizes for energy innovation would be more
effective than traditional subsidies at encouraging the development of
low-carbon-emission energy technologies.
Direct government subsidies are a particularly poor way to
encourage innovation. Perhaps it should be possible to direct
research and development funds toward the most promising and
valuable technological endeavors, but this rarely happens in
practice. Government subsidies tend to be dispersed on political
criteria, rewarding large, politically connected incumbent firms,
rather than innovative upstarts. Failing industrial dinosaurs with
lobbyists on the payroll are in much better position to snatch up
government goodies than revolutionary thinkers toiling in garages
or private labs.
Offering substantial financial rewards for those who develop
particular innovations or solve specific problems is a far better
way to spur technological innovation and practical scientific
research. As the patent system demonstrates, the hope of a large
financial windfall is a powerful inducement for innovation, and can
encourage many different people with different strategies or
insights to tackle a given problem. If climate change is an urgent
threat, and the private sector underfunds climate-related research
and development, government funding of prizes along the Virgin
Earth model could yield substantial returns.
Over at The Corner, [2]Iain Murray makes the point that it is no
accident politicians prefer subsidies to prizes, as subsidies
facilitate patronage in a fashion that prizes do not. This is one
reason that government-sponsored prizes are relatively rare, and a
reason why replacing existing subsidies is politically difficult.
References
1.
http://energy.nationalreview.com/post/?q=YTQwNzY2ZGRhMGM5MGQ0NjdmMTlhNjVjZDdkZTY4NjE=
2.
http://corner.nationalreview.com/post/?q=Yzg0MThlYzFlMDA1MjY0NGM2NjlhOGM2ODQ0YzhiNjk=
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