Prizes lead to complete governmental control of the economy --- collapses economies

Public commercialization and innovation would generate insurmountable problems of economic planning. Exercising command and control over economic activity has led to significant problems in socialist economies. The collapse of socialist economies such as the Soviet Union provides sufficient evidence that even the operation of traditional technologies by governments is not feasible. The diffusion of new technologies and management of innovation generally are beyond the scope of government administration.

Governments are not very good at commercializing and diffusing inventions. The failure of government diffusion of technology is illustrated by the major benefits that resulted from the Bayh-Dole Act. The Bayh-Dole Act illustrates how markets diffuse innovations and governments do not. The U.S. government provides research grants to universities, non-profit organizations, and small businesses. However, the incentives for invention provided by such grants are accompanied by markets for invention, which provide additional incentives for commercialization and innovation. This was recognized by the Bayh-Dole Act, which permits organizations that receive federal government funding to own inventions rather than transferring ownership to the government.34

Prior to the Bayh-Dole Act, government ownership of inventions resulted in minimal commercialization or diffusion of innovations. About 5% of the 28,000 patents owned by the government were commercialized, and private ownership in contrast generated significant commercializing of inventions though patent licensing by universities.35 In the first 25 years following the Act, university patent licensing generated 4,350 new products and 6,000 new firms (Bayh et al., 2009, p. 3). The Bayh-Dole Act resulted in high levels of entrepreneurship by scientists and spurred the rise of university technology transfer offices (TTOs) (see Aldridge and Audretsch, 2011, and the references therein).36 According to the Association of University Technology Managers reports that there were about 40,000 active technology licenses and options in 2012 (AUTM, 2013).

Government subsidies are not close substitutes for market incentives for innovation. The National Science Board (2014) estimates that federal agencies provided over $132 billion for R&D. Wright et al. (2014, p. 298) find that even though corporations provide just over 5% of US university research funding, “corporate-sponsored research is surprisingly valuable for further innovation. Data collected over 20 years at nine campuses and three national laboratories administered by the University of California show that corporate-sponsored inventions are licensed and cited more often than federally sponsored ones.”