Berkeley takes a cue from Stiglitz

Stiglitz asserts that a more effective regime to foster innovation would be government prize funds. I agree that prize funds would be a great incentive for researchers to find the "big" discoveries. Yet, like many others (Epstein) I believe that the big problem in R&D is high initial costs of production. If the government had a guaranteed fund to cover the high initial costs of drug research, the government could then work with the drug companies to offer medicines at cost to developing countries and slightly above to developed countries. The drug companies would not be able to price gouge because the high initial costs would have been reduced to zero. Also, the fund could have conditions (half or no payments for minor improvements in existing research) to ensure that companies actually produce worthwhile drugs rather than rehashes of old ones. However, it appears that Stiglitz is right. Prize funds are probably better at stimulating researchers and innovators than excessively strong IP laws or guaranteed funds. The University of California-Berkeley seems to be taking his message to heart. Over $100,000 in award prizes were given to students. Take a look for yourself.