Stiglitz on Prizes

Joe Stiglitz says that prizes are better than patents at encouraging medical research. He makes some good points, but remember that prizes have to be financed, presumably with taxes. The distortionary effects of higher tax rates could be worse than the distortionary effect of the temporary monopolies created by the patent system.

Another question is whether we can trust prize committees to make the right decisions. As winner of the John Bates Clark Award and the Nobel Prize, Joe is probably more sanguine about this than I am.