Dispatches from the Creation Wars

McCain’s Battery Prize

John McCain has managed to flounder around and stumble on a good idea:

The presumed Republican nominee is proposing a $300 million government prize to whoever can develop an automobile battery that far surpasses existing technology…

McCain said such a device should deliver power at 30 percent of current costs and have “the size, capacity, cost and power to leapfrog the commercially available plug-in hybrids or electric cars.”

This is actually a good idea. Offering such prizes is far better than offering subsidies for such research and development, for multiple reasons. We already give subsidies and tax breaks to certain companies for doing this kind of research, but that is a very inefficient and wasteful way of doing things. And there are lots of reasons why offering prizes is a better and more productive idea.

First, subsidies will tend to go to those companies who are the most powerful and well connected, not necessarily to the ones that are the most innovative. Second, they tend to go to companies that have a conflict of interest (like giving subsidies to oil companies for the development of alternative fuels). Third, the subsidies do not guarantee in any way that the companies receiving the subsidy will actually achieve any particular goal. Offering prizes, on the other hand, overcomes those problems. Any company or individual is eligible to get the prize, which is only paid out if a specific goal is achieved.

Offering prizes for scientific achievement has a long history of spurring the development of new technologies. The Defense Department, particularly through the Defense Advanced Research Projects Agency (DARPA) uses them routinely to spur competition among companies for the achievement of specific goals. They currently have a prize offered for the development of “wearable power” – portable power systems that can be worn by soldiers.

When Charles Lindbergh made the first transatlantic flight in 1927, it was done to win the Orteig Prize of $25,000. That inspired the current Ansari X Prize for suborbital commercial spaceflights. Such prizes don’t necessarily have to be offered by the government, but the government already offers a wide variety of R & D subsidies that would be much more likely to achieve their goals if they were given as prizes on the back end rather than subsidies on the front end.


  1. #1 James Hanley
    June 29, 2008

    Don Boudreaux at Cafehayek.com disagrees with you. He calls it a silly proposal, and thinks it suggests industries aren’t already working hard on the problem.

    I tend to view it more like the X prize. Maybe it will provide the extra incentive needed, and in a country loaded with government waste, $300 million is small potatos, and goes toward a good goal.

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