Prizes require the government to pick winners rather than the market – that reduces innovation
Daniel F. Spulber, 2015 - Elinor Hobbs Distinguished Professor of International Business and Professor of Strategy at the Kellogg School of Management at Northwestern. “Public Prizes versus Market Prices: Should Contents Replace Patents,” 97 J. PAT. & TRADEMARK OFF. SOC'y 690 (2015). Hein Online, Accessed via University of Michigan //DH
Second, I emphasize that government prizes, in contrast to the market for inventions, cannot achieve an efficient allocation of technology. A public prize system with government diffusion of technology can do little to promote efficient commercialization and innovation. Public prizes require planners to choose the best technology in advance, and government diffusion of technology eliminates many of the benefits of competition. Government contests and the selection of winners reflect the specific priorities of public policy makers rather than economic benefits of invention and innovation. In contrast, prices in the market for inventions are generated by competition and coordination that selects the best inventions and innovations. Patents, along with copyrights, trademarks, trade secrets and other IP, support invention, commercialization, and innovation by providing the foundation of the market for inventions.22 Competitive pressures among inventors and among producers increase incentives to invent.23 Inventions and innovations are not exogenous forces but instead are the results of economic decisions and transactions among many participants in the market for inventions. As Friedrich Hayek points out, competition is a discovery procedure because it helps inventors and producers discover the best inventions and innovations. 24