Patents aren’t perfect, but they are a much better functioning system compared to a reward system.

In the real world, of course, neither a prize or reward system nor a system of intellectual property rights will perfectly calibrate incentives and lead private parties to undertake all investments in the creation of inventions and works that have a positive social return. A critical virtue of intellectual property systems is that they minimize governmental discretion in assessing the value of works. But the need to determine when to grant intellectual property rights and to adjudicate the propriety of and infringement of such rights dictates a considerable governmental role. Thus, the effectiveness of a patent office and the courts are critical to assessing how existing intellectual property systems compare to prize or reward systems. To the extent that intellectual property systems do constrain administrative and judicial discretion with rules, the question becomes to what extent the rules successfully align creator incentives with social welfare. In principle, the ultimate comparison of prize systems with intellectual property systems is an empirical one. This chapter will provide some historical context, but there is little empirical data, particularly on the prize or reward system side of the ledger. And even to the extent some experimentation with prize or reward systems has occurred, the heterogeneity of such systems counsels restraint in attributing the virtues or vices of any one such system to all of them. Of course, it is also important not to compare some hypothetical ideal prize or reward system against a functioning intellectual property system. After all, there are many competing proposals to improve patent and copyright law, and even if there were broad scholarly agreement about the design of an ideal system, political considerations may make suboptimal intellectual property inevitable—and would likely mean the same for a prize or reward system