Assume you have $1.4 million dollars that you want to give away. Your goal is to spur the development of new technology, but just not any innovation–something that you want people to invent. Which technology would you choose?
The people at the X Prize Foundation actually had to make that decision.
Funded by Wendy Schmidt, wife of Google former CEO Eric Schmidt, their goal was to “…inspire a new generation of oil cleanup technologies that enable a more rapid pace of cleanup…” The winner was Elastec, a small Illinois firm that figured out how to accelerate the speed of removing oil from water from the usual 1,000 gallons of oil per minute to 5,000. Here you can see the oil skimmer recovery equipment that they developed for the competition. According to NPR, the firm is already receiving orders from around the world.
Our bottom line? We need to encourage the innovation that fuels economic growth. The question, though, is how much the incentives should come from government.
The Economic Lesson
Economists can use production possibilities graphs to illustrate economic growth. On production possibilities graphs, a bowed out curve is drawn which illustrates that country’s maximum production capability. Shifting that curve to the right displays the additional productive capability created by the invention.
An Economic Question: If you could fund an innovation contest, what type of invention would you target?