In 2007, Hillary Clinton and John Edwards, among others, each suggested prize systems for medical and environmental inventions. Last month, presumptive Republican presidential candidate John McCain called for the government to offer a $300 million prize "for the development of a battery package that has the size, capacity, cost and power" to supplement or even supplant the need for fossil fuels. Presumptive Democratic candidate Barack Obama derided the proposal, calling it a "gimmick."

"On one level," the New York Times said of the recent exchange of words, "the rhetoric was a replay of the old standoff between Big Government and the virtues of entrepreneurship."

This debate (along with the argument that industry involvement compromises scientific integrity) has been going on for quite some time, and Slate recently revisited the issue: "Should the government start handing out prizes for science breakthroughs?"

After all, government research establishments are very capable of reaching the major goals. And as one of their measures to promote innovation, governments have indeed periodically awarded prizes in recognition of original technical achievements as well as solutions to predefined scientific or technological problems.

The New York Times said the recent McCain-Obama exchange "also raised deeper questions, like how best can the government finance and direct basic research without stifling something as mercurial as the spirit of invention."

According to award supporters, the bureaucratic red tape that typically comes with government research programs can hamper the maverick entrepreneurs and garage tinkerers.

"In 1714, Britain offered £20,000 (roughly equivalent to £2.5 million, or $5 million, today) for a way for mariners to determine their longitude," according to the Wall Street Journal. "Sir Isaac Newton was convinced the solution lay in astronomy.

"He was wrong," the Journal continued. "John Harrison, a working-class joiner with little formal education, built a clock that did the job."

Hence the allure of so-called prize philanthropy. Not only does it require little overhead (prizes are generally awarded only for success), with development costs often picked up by super-rich backers (such as 2004 Ansari X Prize winner Burt Rutan being backed by Microsoft billionaire Paul Allen) — above all, it comes "unburdened by preconceptions" that often are present in the government-research system, which often limits its search for breakthroughs to experts in the field.

"'Prize philanthropy' is useful for breaking a bottleneck where government bureaucracy and markets are stuck,' Thomas Vander Ark, who left conventional philanthropy at the Bill & Melinda Gates Foundation to run the X Prize Foundation, told the Wall Street Journal.

The X PRIZE Foundation, a nonprofit institute that designs and oversees public competitions for humanity-impacting issues, is perhaps the most prominent prize provider. It has set up competitions that award cash purses in fields of space exploration and technology, genomics and progressive automotive, among others.

Other of the foundation's prize suites currently in development include those in energy and the environment, cancer treatment, education and oceanography.

The New York Times reported last month:

The X Prize Foundation took as its model the 1919 Orteig Prize — $25,000 for the first nonstop flight between New York and Paris offered by a hotelier who figured it would be good for business. The purse was claimed eight years later by Charles Lindbergh, and the publicity jump-started American aviation.

Last year, former U.S. Vice President Al Gore and the British billionaire Richard Branson announced a $25 million prize for development of technology to reduce greenhouse gases.

Now a collection of voices is emanating the call for the government offering cash prizes for inventions instead of "handing out patent monopolies," as Centennial Challenges program. And DARPA's Grand Challenge has pitted robotic cars against each other in a race to develop a vehicle that can navigate without a human driver or remote control.

In May 2008, the U.S. Dept. of Energy announced the Bright Tomorrow Lighting (L Prize) competition, which will award cash prizes and other inducements for the development of solid-state lighting to replace standard incandescent and fluorescent bulbs. It's sort of like the Google Lunar X Prize with taxpayer money instead of private money.

For the most part, it has been government and nonprofit foundations awarding the prizes, as they hope to spur advances that benefit some larger good. Now the concept is being applied to the business world, with creative companies looking to capitalize on the wisdom of the masses.

In 2006, for one example, online movie-rental store Netflix announced that it would award $1 million to anyone who improves on the company's recommendation algorithm by 10 percent. Increasingly, venture capitalists are considering contest that offer competing engineers and entrepreneurs cash prizes if they can develop breakthroughs in various industries.

Last year, Google announced the Android Developer Challenge, which will provide $10 million to developers who build mobile applications for Android, "the first complete, open and free mobile platform." This challenge is designed to support the developer community and spark innovation on the Android platform by awarding cash prizes ranging from $25,000 to $275,000 to developers whose applications are picked by a panel of judges.

InnoCentive, a company spun off seven years ago by drug maker Eli Lilly, allows for "seekers" (companies and nonprofits) to pose scientific problems to the world and for "solvers" (anybody) to submit their innovative ideas to these challenges. Those who provide the best solution receive an award ranging from $5,000 to $1,000,000.

We face innumerable challenges on a truly global scale today. But it's no longer up to the elite thinkers to tackle these challenges — and cash in on their solutions.

Do you think contests that offer cash prizes are a good way to stimulate innovation? Let us know in the comments section below.

Resources

Eureka! Where Do I Cash the Check?
by George Johnson
The New York Times, June 29, 2008

Invent a Drug, Win $1 Million
by Catherine Rampell
Slate, Jan. 23, 2008

Prizes for Solutions to Problems Play Valuable Role in Innovation
by David Wessel
The Wall Street Journal, Jan. 25, 2007

Intellectual Property Regime Stifles Science and Innovation, Nobel Laureates Say
by Dugie Standeford
Intellectual Property Watch, July 7, 2008

Prizes, Not Patents
by Joseph E. Stiglitz
Project Syndicate, 2007

Innovation Inducement Prizes at the National Science Foundation
Board on Science, Technology, and Economic Policy, 2007

Gore, Branson Set Greenhouse Gas-Reduction Prize
by Alex Morales and Elliott Gotkine
Bloomberg News, Feb. 9, 2007

U.S. Department of Energy Announces Bright Tomorrow Lighting Prize Competition
Dept. of Energy, May 29, 2008

Obama Calls McCain Idea a "Gimmick"
by David Shepardson
Detroit News, June 25, 2008

The Rise of Crowdsourcing
by Jeff Howe
Wired, June 2006