If you hadn’t heard, Google and the X-Prize Foundation announced a new competition a month or two back:
http://www.googlelunarxprize.org/
The first private group to put a robotic rover on the moon and drive it around wins $20,000,000. Pretty cool.
Past prizes offered by the X-Prize Foundation have resulted in amazing feats of innovation. In the Ansari X-Prize competition, for instance, Scaled Composites (the winner) engaged in the first privately-funded human spaceflight. During the course of a few short years, highly-motivated individuals transformed the space industry; private human spaceflight had been the exclusive province of a few dozen government employees, but because of the Ansari X-Prize, ordinary blokes are now only a few years away from being able to experience space first-hand.
These prizes are an efficient and effective way harnessing the creative, entrepreneurial spirit of the best and brightest the world has to offer. Whatever NASA might have accomplished during its existence, what more might have been accomplished if NASA’s budgets from every year were directed to these sorts of prizes rather than to a giant, creaking bureaucracy?
Why not rely on prizes to accomplish other goals? For instance, the U.S. government currently spends tens of billions of dollars every year on medical R&D to cure cancer and various diseases. Do you think that, if this money was instead divided up into prize purses for various development milestones (e.g., the first party to develop a cure for pancreatic cancer that meets specified requirements and standards receives a prize of $X), more diseases would be cured, or fewer? The U.S. government spends over half a trillion dollars on its military every year. What if the U.S. government took just ten percent of that (still over $50 billion!) and, instead of spending it on adventures in Afghanistan and Iraq, offered it to whoever hands over Osama bin Laden, dead or alive? Do you think someone close to bin Laden would rat him out for that much money? Me too.
Prizes like these are what courts refer to as “unilateral contracts.” Unilateral contracts are contracts where only one party is obligated to perform. Google offered to pay a prize to the first person to drive around on the moon, and so it is obligated to pay the prize when the condition is met – but nobody else is obligated to do a damn thing.
Courts tend to disfavor unilateral contracts, deeming them to be unfair – and sometimes sticking the offeror with liability that, by the terms of its promise, it did not expect to have. Why are unilateral contracts viewed with suspicion? Pure paternalism: “these poor people worked so hard, but all of the time, energy, and money they expended was wasted! We can’t let them go home empty-handed!”
Never mind the fact that the performing parties know full-well and ahead of time that there was a risk involved. Never mind the fact that, if the performing party doesn’t like this risk, he or she can attempt to negotiate some type of security – or walk away from the offer altogether.
Courts should stop second-guessing our ability to look out for ourselves – doing so only discourages free people from self-organizing to solve problems in ways far more effective and efficient than can be done by central planners. And most importantly, prizes – unlike government bureaucracies – don’t depend on institutionalized theft (i.e., taxation).
