1) X-Prizes

X-Prizes have massive economic leverage compared to direct donation, especially when anyone, including for-profit companies, can qualify for the prize.

One source of X-prize leverage arises from the fact that it makes projects that are just below a ROI threshold above that threshold. A large mass of inframarginal projects suddenly becomes supermarginal.

Another source of X-prize leverage comes from being able to roll forward the prize if the previous prize isn’t attained. For example, suppose one prize rewards the team that prolongs mouse lifespan to 10 years by 2040. If that goal isn’t achieved, then the prize pool can be rolled forward and grown for the next prize, like prolonging lemur lifespan to 20 years by 2060. This lets the prize pool create strong incentives multiple times.

Yet another source of X-prize leverage arises from incentivizing results instead of effort. This lets the researchers themselves, who are experts in the domain, decide which route to take to get the result. This reduces the deadweight loss of grant writing and funding being misallocated by low-expertise donors.

Beyond the monetary value of the prize, there’s the social and publicity value of the prize. Prizes attract attention which garners contestants more talent and other funding, multiplying the leverage.

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