The $1 Billion Victory Prize
The Dewey Foundation is offering a $1 billion prize "To the first person(s) that solves any of these Problems:
- Develop a cure for breast cancer
- Develop a cure for diabetes.
- Reduce greenhouse emissions from petroleum powered automobiles by 95% without increasing the cost of a normal car more than 5%.
- Achieve 150 miles per gallon of gasoline in a 3,000 lb. car, using EPA standards; without increasing the cost of a normal car more than 10%.
I think it would be better to instead offer a $250 million prize in each of the four categories. Consider a small firm that thinks it can be the first to achieve (4). A firm that works on (4) will likely know about other firms working on this objective and so might reasonably calculate that it can indeed be the first to achieve (4). This firm, however, will probably have no idea about how close other people are to solving (1) or (2). As a result, even if this firm is confident that by spending, say, $100 million it can achieve (4) the risk of another firm accomplishing (1) or (2) might make the firm afraid of spending the $100 million.
In general, though, I think that it's often far better to offer prizes to people who solve a problem than it is to pay people to research how to solve a problem. (See part of the last chapter of my textbook to lean why I hold this view.)
