Now That's American!

John McCain recently proposed offering a $300 million prize for anyone who could develop cutting edge battery technology for vehicles:

The presumed Republican nominee is proposing a $300 million government prize to whoever can develop an automobile battery that far surpasses existing technology. The bounty would equate to $1 for every man, woman and child in the country, "a small price to pay for helping to break the back of our oil dependency," McCain said in remarks prepared for delivery Monday at Fresno State University in California.

McCain said such a device should deliver power at 30 percent of current costs and have "the size, capacity, cost and power to leapfrog the commercially available plug-in hybrids or electric cars."

While I'm not convinced that we desperately need to move away from petroleum-based engines, I'm certainly not opposed to alternative forms of energy.  I've always said that I'd be happy to buy a car that ran on electricity, water, or whatever...as long as it met or exceeded the performance of a gas engine without costing more.  I'm all about choices, and if an electric car muscles a gas car out of the market, so be it.  I have no problem with that.

The key is the method of getting there.  Government regulation and mandate?  No thank you.  Free market development and incentives?  Absolutely.

This idea of a massive financial prize for innovation is precisely what needs to happen, and I believe it's the one thing that can actually tap into the only resources that might possibly produce such an electric car: entrepreneurship and technological innovation through private enterprise.  It's a perfectly acceptable way to drive progress, and it's worked throughout history, as expressed by Jonathan H. Adler at NRO:

Past and present experience shows that prizes are a powerful way to encourage investment in technological innovation. The British empire used prizes to spur innovation in navigation. While governments rarely use prizes anymore (because politicians prefer to give out goodies themselves), private foundations have gotten into the act. The X-Prize Foundation offered the "Ansari X-Prize," a $10 million reward for the development of a reusable, manned spacecraft, which was awarded in 2004. The winning inventors fulfilled the X-Prize qualifications and proved spaceflight can be more economical than NASA. The $10 million prize also spurred an estimated $100 million in private research on spaceflight technologies. Just imagine how much private research a $300 million prize could unleash.

Bingo!  Here are some more details and explanation from Adler on why this works so much better than government intervention (i.e. subsidies):

Government-sponsored prizes for innovation are based upon the same principle as the patent system: Encourage innovation by rewarding inventors and entrepreneurs with the promise of super-competitive returns. A patent provides such a reward by giving the innovator a temporary monopoly for his invention. A prize goes one step further by placing a bounty on a particular type of innovation, increasing incentives for potential investors.

Another virtue of government prizes is that tax-payer dollars only get spent if the prize goals are met. Traditional subsidies, on the other hand, are paid out up front. Doled out in accord with politically determined criteria, and often awarded to the most politically connected firms, traditional subsidies often fail to generate anything approaching a positive economic return.

This is the American way: identify a problem, set a goal, turn entrepreneurs loose, achieve goal.  It's always been that way, and that's what has allowed the United States to vault its way into world leadership in technology and innovation.  It's what drives the market and provides higher quality and lower costs simultaneously.  It will continue to be the American way as long as it's allowed to work.  Kudos to McCain for proposing it.

There's my two cents.