Thursday, October 20, 2011

Is this a shift in incentive prizes?

"The Wolfson economics prize invites the submission of ideas for the orderly exit of one or more members of the euro zone. The one-off award is worth £250,000 ($390,000), making it second only to a Nobel in value for an economics prize." - from the Economist.com Daily Chart accessed Oct. 19th 2011.

To my mind, the appeal of incentive prizes is that they draw attention to stumbling blocks in humanity's quest for knowledge. In 1714 the British government offered a prize to whoever could find a practical means to measure longitude at sea, which they eventually awarded in 1773. Charles Lindbergh claimed a prize of $25000 for crossing the Atlantic in 1927. The X-prize incentives private rockets to explore space. These prizes were awarded for projects that self-evidently knocked over barriers to progress.

Last I heard, the jury of experts was still out on the question of whether the orderly departure of certain countries from the Eurozone would advance progress. In the meantime, this prize encourages the public to design the most efficacious means of execution.

I do not know enough about the European Monetary Union to suggest its appropriate next step. But I am interested in judgment and decision making and my prediction is that the addition of this prize to the debate space will shift its centre of gravity. Once people hear the answer to the question 'how?' the logical next step is to think about 'when'? By that point, it simply doesn't occur to people to ask the question 'why?'

I was prompted to think more deeply about this topic when I learnt that the Wolfson Prize is sponsored by Policy Exchange, a British Euroskeptic think-thank.

3 comments:

Liam Delaney said...

Interesting post Dave. The use of prizes in this fashion to shape debate has a lot of interesting things associated with it. In terms of judgment, I think the idea of a 250k lump sum captures a lot more attention than, say, if the same group hired two people who were both being paid 125 grand a year to research the topic. For some reason the prize is more salient. As you point out, asking people "how" without asking "whether we should" also helps to define the debate perhaps in the direction desired by the funders.

Mark McG said...

James Randi has offered $1,000,000 for proof of the paranormal. No winners as of yet, maybe this will be similar. See http://www.randi.org/site/.

An example from Ireland is the reward of £10,000 for information on planning corruption, and we know where that got us. http://www.thepost.ie/archives/2002/1006/man-with-a-plan-98267528.html .

Martin Ryan said...

While the economics of monetary union is beyond the main focus of this blog; and we are where we are now (re the euro); I thought it interesting to point out that the jury of experts was still out on the question of whether Ireland should join the euro, before the currency project began. Or rather, most Irish experts (at least university economists) were against the idea of Ireland being part of the monetary union. This was noted by Kevin O'Rourke on the Irish Economy blog. In fact, the UCD economics department spoke out strongly against joining the euro in the late 90's:

Kevin O'Rourke: It wasn’t just Americans who were skeptical!

I'm just offering a local perspective though Dave; and your observation is still totally valid. I wonder would other people's perception of this competition change if they knew who the sponsor was. Wolfson has admitted that "coming from a non-eurozone country... soliciting ways to break up the currency bloc could be received badly."

FT: Prize announced for painless euro death plan