Prestige and Profit

The Royal Society of Arts offered honorary and cash awards for creativity. The society initially was averse to patents and prohibited the award of prizes for patented inventions. Inventors of items that were valuable in the marketplace typically chose to obtain patents and to bypass the prize system. Owing to such adverse selection, prizes were negatively related to subsequent areas of important technological discovery. The society acknowledged that its efforts had been “futile” because of its hostility to patents and switched from offering inducement prizes toward lobbying for reforms to strengthen the patent system. The findings suggest some skepticism is warranted about claims that elites and non-market-oriented institutions generated technological innovation and long-term economic development.