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You Get What You Pay For
A common refrain among politicians and researchers is a call for government to "invest" more money in research and development. Whether the issue is cancer, AIDS, or fossil fuel "alternative energy", governments around the world spend billions in their respective citizens' tax dollars on research. But what are we paying for?
I'm no expert in the grant process, but typically the research funds are available in the form of grants. To receive more grants, the recipient researchers need to show promising results. To keep the money flowing, the incentive seems to be to show progress toward solving the particular problem at hand, rather than actually solving the problem. In short, we seem to be paying for process, rather than results. There seems to be a disincentive to have a final answer, because then there's no chance for another grant.
As an analogy, consider if shipping were based only on the miles traveled and had no component for actually getting the product delivered on time. Transportation businesses would have an incentive to have their drivers take a longer route, increasing the number of miles logged, regardless of whether or not the product was delivered. A payment based on the outcome of a successful delivery, however, gives the company every incentive to achieve the objective, and to do so in the most efficient method possible — especially if a rival shipping company is in competition for the next delivery. Similarly, oil companies aren't paid based on drilling, but rather on actually finding oil. And so on.
How does this apply to government funding of research and the development of cancer cures, AIDS vaccines, or "green" energy? Instead of funding the process of researching these problems, the government would possibly be better served by funding results. Instead of funding a bureaucracy to read through grant applications (and of course fend off well-connected applicants and their friends in government), we could set up objective results criteria and award a prize for successful outcome. Businesses, universities, and other entities could then decide for themselves the most efficient and effective methods for obtaining the successful outcomes, and would do so on their own dime rather than that of taxpayers. Not only would this increase efficiency, utilize the sharpening power of competition, and unleash entrepreneurial acumen, it would remove the risk from the government — taxpayers wouldn't be paying for failures.
Further, awarding prizes based on objective success criteria would widen the base of potential winners. Anyone in the world could compete for the prizes, and the law of averages would say that the more people involved in searching for an answer, the wider the talent pool, the greater the probability of finding it.
The prize could be awarded either directly or indirectly. A directly-offered prize would be in the form of a direct payment to the winning technology — say the government offers to pay $20 billion to the first company that demonstrates it is able to produce a vehicle on a commercial scale that gets, say, 100 miles per gallon or better (or perhaps doesn't even use gasoline at all) and demonstrates commercial viability by selling at least 50,000 units. Obviously, the criteria would be more well-defined, but I would advocate keeping them as simple as possible to allow for the greatest amount of innovation and creativity. Likewise, objective criteria could be developed for cancer, obesity, food production, etc.
One example of such a philosophy is the Orteig Prize, which was offered in 1919 for the first nonstop flight from New York to Paris; the prize was ultimately won by Charles Lindbergh and spurred large-scale investment in aviation. Microsoft co-founder and multibillionaire Paul Allen updated this concept with his funding of SpaceShipOne in pursuit of a $10 million "X Prize" for suborbital space flight. Future X Prizes are planned in education, genomics, exploration, and yes, energy and the environment.
Another method for awarding the prize would be a more indirect payment. Instead of a cash prize, the award could be a tax holiday for the winner. Returning to the previous example, the manufacturer able to prove commercial viability for the 100-mpg vehicle would then have a tax holiday on its sale for, say 5 or 10 years. This would be a variation of the "enterprise zones" that have been used successfully on small scales to incentivize inner-city investment. Given that at least one of the presumed candidates for the Presidency is advocating a large increase in capital gains taxes and corporate income taxes, this more indirect form of award could become even more valuable.
Whether awarded directly or indirectly, the fact would remain that, as mentioned above, the taxpayer would not be paying for some nebulously defined "progress" towards a particular goal, but rather successful completion. If we really do get what we pay for, it seems like we deserve to pay for actual, not imagined, success.
I'm no expert in the grant process, but typically the research funds are available in the form of grants. To receive more grants, the recipient researchers need to show promising results. To keep the money flowing, the incentive seems to be to show progress toward solving the particular problem at hand, rather than actually solving the problem. In short, we seem to be paying for process, rather than results. There seems to be a disincentive to have a final answer, because then there's no chance for another grant.
As an analogy, consider if shipping were based only on the miles traveled and had no component for actually getting the product delivered on time. Transportation businesses would have an incentive to have their drivers take a longer route, increasing the number of miles logged, regardless of whether or not the product was delivered. A payment based on the outcome of a successful delivery, however, gives the company every incentive to achieve the objective, and to do so in the most efficient method possible — especially if a rival shipping company is in competition for the next delivery. Similarly, oil companies aren't paid based on drilling, but rather on actually finding oil. And so on.
How does this apply to government funding of research and the development of cancer cures, AIDS vaccines, or "green" energy? Instead of funding the process of researching these problems, the government would possibly be better served by funding results. Instead of funding a bureaucracy to read through grant applications (and of course fend off well-connected applicants and their friends in government), we could set up objective results criteria and award a prize for successful outcome. Businesses, universities, and other entities could then decide for themselves the most efficient and effective methods for obtaining the successful outcomes, and would do so on their own dime rather than that of taxpayers. Not only would this increase efficiency, utilize the sharpening power of competition, and unleash entrepreneurial acumen, it would remove the risk from the government — taxpayers wouldn't be paying for failures.
Further, awarding prizes based on objective success criteria would widen the base of potential winners. Anyone in the world could compete for the prizes, and the law of averages would say that the more people involved in searching for an answer, the wider the talent pool, the greater the probability of finding it.
The prize could be awarded either directly or indirectly. A directly-offered prize would be in the form of a direct payment to the winning technology — say the government offers to pay $20 billion to the first company that demonstrates it is able to produce a vehicle on a commercial scale that gets, say, 100 miles per gallon or better (or perhaps doesn't even use gasoline at all) and demonstrates commercial viability by selling at least 50,000 units. Obviously, the criteria would be more well-defined, but I would advocate keeping them as simple as possible to allow for the greatest amount of innovation and creativity. Likewise, objective criteria could be developed for cancer, obesity, food production, etc.
One example of such a philosophy is the Orteig Prize, which was offered in 1919 for the first nonstop flight from New York to Paris; the prize was ultimately won by Charles Lindbergh and spurred large-scale investment in aviation. Microsoft co-founder and multibillionaire Paul Allen updated this concept with his funding of SpaceShipOne in pursuit of a $10 million "X Prize" for suborbital space flight. Future X Prizes are planned in education, genomics, exploration, and yes, energy and the environment.
Another method for awarding the prize would be a more indirect payment. Instead of a cash prize, the award could be a tax holiday for the winner. Returning to the previous example, the manufacturer able to prove commercial viability for the 100-mpg vehicle would then have a tax holiday on its sale for, say 5 or 10 years. This would be a variation of the "enterprise zones" that have been used successfully on small scales to incentivize inner-city investment. Given that at least one of the presumed candidates for the Presidency is advocating a large increase in capital gains taxes and corporate income taxes, this more indirect form of award could become even more valuable.
Whether awarded directly or indirectly, the fact would remain that, as mentioned above, the taxpayer would not be paying for some nebulously defined "progress" towards a particular goal, but rather successful completion. If we really do get what we pay for, it seems like we deserve to pay for actual, not imagined, success.
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