I am fanatically in favor of prizes to solve problems, especially when compared to subsidies.
The most famous example is probably John Harrison's success in measuring latitude, spurred on by a prize of £20,000 authorized by the Latitude Act of 1714. He did it, the bureaucrats tried to screw him, he prevailed just before he died at age 83.
Bureaucrats prefer subsidies because the favoritism they allow confers power.
Here's the GE story via the San Francisco Chronicle:
GE seeks ideas for smart-grid projects
GE and four venture capital firms announced an unusual, $200 million partnership Tuesday to find breakthrough smartgrid ideas - from small, startup companies or solo inventors - and speed those concepts to market.
General Electric and its partners will solicit ideas for improving the electricity grid, evaluate each proposal's potential and decide which ones to finance. Ideas with the most promise could eventually become GE products or products sold in collaboration with GE.
The company already has a large and growing presence in the alternative energy business, selling wind turbines as well as smart meters to measure home electricity use. In the last five years, GE invested $5 billion in its "ecomagination" program to develop more green-tech products, and plans to double that investment in the next five years. As it announced its new partnership on Tuesday, GE also introduced a charging station for electric cars as well as a device to monitor home energy use.
The partnership will give GE access to new technology while offering engineers or entrepreneurs a chance to develop, build and sell their creations on a global scale.
"It puts GE, I think, right where we want to be, in a leadership space, with a lot of partners," said Chief Executive Officer Jeffrey Immelt, announcing the partnership Tuesday in San Francisco. "We're not going to invent every great idea, but no one does commercialization better than we do."
Dubbed the "GE Ecomagination Challenge: Powering the Grid," the partnership includes four of the clean-tech world's most prominent venture capital firms: Emerald Technology Ventures, Foundation Capital, Kleiner Perkins Caufield & Byers and RockPort Capital Partners. Chris Anderson, editor in chief of Wired magazine, also helped organize the project and will serve on a panel that judges proposals.,,,MORE
Back in 2007 David Leonhardt wrote a piece for the New York Times that one critic described as "near-excellent":
You Want Innovation? Offer a Prize
Besides the fact that both are considered great movies, “The Wizard of Oz” and “Silence of the Lambs” don’t have much in common. One is the story of a girl from Kansas who’s transported to a magical land where animals dance and sing, and the other is about a serial killer who eats his victims. You wouldn’t necessarily expect people to have similar reactions to the two movies.
But it turns out that, for whatever reason, they usually do. Those who love one tend to love the other, and those who think one is overrated generally think the other one is, too.
This odd little fact comes from an enormous database of movie ratings collected by Netflix, the online movie rental store. On its Web site, customers can give any movie 1 to 5 stars, and the company then uses these ratings — 1.6 billion of them — to find connections like the one between “Oz” and “Silence of the Lambs.”
The system, called Cinematch, allows Netflix’s Web site to bombard users with recommendations of movies they are likely to enjoy. Netflix executives hope Cinematch will give them a leg up as digital downloading allows dozens of other companies to sell movies over the Internet.
So on the Ides of March last year, Reed Hastings, the company’s chief executive, and three other executives were meeting at their Silicon Valley headquarters to talk about making the system better. They had just finished discussing one failed effort — a promising algorithm designed by a hotshot computer scientist from Stanford (since lured to Google) — when Mr. Hastings threw out an idea.
“We should run a prize,” he said, an open competition challenging people to come up with a better version of Cinematch.
One of the other executives asked how much the company should offer, recalled James Bennett, the vice president who oversees Cinematch.
“A million dollars,” Mr. Hastings said.
With that, Netflix unwittingly started down the path of proving that today’s economy doesn’t have nearly enough prizes....MORE