McCain’s $300 million prize

I notice that Jonathan Adler at the National Review, a superb writer, has a far different take on McCain’s science fair prize than I do.

Speaking Monday at Fresno State University in California, Sen. John McCain put forward what may be the most promising and important energy-policy proposal of the campaign: a $300 million prize for the development of advanced battery technology.

If this is the most “promising and important energy-policy proposal” we can expect from the Republican campaign, I fear McCain has wasted an opportunity to grab the energy issue. Whatever the actual merits of a $300 million prize are, this proposal, at the very least, sounds gimmicky.

Adler compares the battery prize to similar 18th and 19th century English efforts in navigation — Don Boudreaux had mentioned these to me, as well. More recently, he points to the “The X-Prize Foundation offered the “Ansari X-Prize,” a $10 million reward for the development of a reusable, manned spacecraft, which was awarded in 2004.” (James Pethokoukis at U.S. News and World Report also points to this prize.)

But a reusable manned spaceship has only a narrow purpose and few consumers benefit from its invention in any obvious way. Without a market for a manned spaceship, such a prize (which seems, in effect, to be a bidding process) also seems necessary in persuading a private company to take the risk. In that context, outsourcing a government venture to a private enterprise is fine idea.

The next generation of battery, though, has multiple purposes and billions of potential consumers. A prize will do nothing to speed innovation as companies are already racing to meet the demand of the market.

I also noticed that Adler had written a piece supporting prizes over front-end subsidies last year. And the idea, in the context he lays it out here, makes a lot of sense.

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.

Absolutely. The difference between a patent system and McCain’s idea, however, is that McCain has prescribed a very specific outcome using a very specific method, rather than allowing the best technology or the most innovative research to win out.

(cross-posted on Post-Ed Blog.)