Markets get constrained, driving up costs and killing efficiency – IP key
Spulber 14 (Daniel F. Spulber has a PhD in economics from Northwestern University and previously ranked 6th among economics in the United States, “Prices versus Prizes: Patents, Public Policy, and the Market for Inventions,” “Northwestern University School of Law: Law and Economics Series • NO. 14-15,” URL: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2488095, August 28, 2014)//NTG
The prize system lacks all of the key features of the patent system – exclusion, transferability, disclosure, certification, standardization, and divisibility. Without these fundamental elements a market for inventions would be highly constrained and less efficient. Demsetz (1969) identifies IP rights as critical for reducing transaction costs in markets for invention. Epstein (2010) emphasizes the importance of IP property rights in disseminating protected information.
Replacing patents with prizes would be analogous to replacing corporate securities with prizes for investors. Such investment prizes would not finance corporations because they would provide neither return of principle nor return on principle. Invention prizes would not stimulate invention and innovation because they would not provide economic returns for inventors, innovators or investors in complementary assets. Just as investment prizes could not replace financial markets, so invention prizes cannot replace the market for inventions.