What they are and why they matter: a pull mechanisms reading list.
Supply-and-demand stories make economics sound simple: Someone has a need, someone else has a product to meet that need, and the problem is solved by the marketplace. And when products already exist, that model often works. But for new innovations that don’t yet exist, the market often needs help. Traditionally, “push mechanisms” like grants and policies fill that void; in the private sector, corporate R&D and venture capital help close the gap. Of course, pushing isn’t always sufficient. When it’s too early, too risky, or too hard — or when push mechanisms won’t deliver an innovation fast enough — “pull mechanisms” can accelerate innovation by delivering the right incentives at the right time to generate the best ideas and solutions.
Pull mechanisms — including incentive prizes — are nothing new. For hundreds of years, governments have used prize competitions to accelerate scientific discovery and emerging technologies. In the 18th century, Britain offered a significant prize purse for advancements in seafaring navigation; now we have longitude. And in 1795, Napoleon offered 12,000 francs for a new invention that would preserve food; now we have canned goods.
In recent decades, scholars and policymakers have been advocating for pull mechanisms with incentives commensurate with the effort required to reduce risk and bring especially urgent and potentially valuable innovations to market. Advance market commitments (AMCs), or advance purchase agreements, are essentially purchase orders for products that don’t yet exist; they can help advance and scale innovations with a high social value. For instance, many people who need vaccines and therapeutics the most don’t have the money to pay for expensive drugs. In the early 2000s, the first advance market commitment brought pneumococcal vaccines to low-income countries and saved an estimated 700,000 lives.
During the coronavirus pandemic, the U.S. government used pull mechanisms to accelerate COVID-19 tests and vaccines; that success story has spurred fresh interest in using AMCs and other market-shaping tools to solve some of the world’s most important problems. More recently, the University of Chicago’s Market Shaping Accelerator Innovation Challenge 2023 sought to identify areas where a pull mechanism would help spur innovation in biosecurity, pandemic preparedness, and climate change.
To truly realize the potential of pull mechanisms, leaders will need to understand what they are, how to use them — and how to get them funded. This reading list curates a selection of resources that answer important questions about pull mechanisms and offer a vision for the future.
The Case for More Pull Financing. (Center for Global Development, 2023) Pull mechanisms can deliver pull financing and other incentives in many forms. This policy brief offers an overview of what pull financing is, when it should be used, and where different types of mechanisms have demonstrated impact.
New Directions in Market Design. (University of Chicago Press, preliminary draft) This book-in-progress is the output of a 2023 National Bureau of Economic Research conference; draft chapters on market shaping — including when to use push and pull mechanisms — for energy, the environment, education, and healthcare are available for download and preview.
How to Use Challenge Prizes. (Statecraft, 2023) “Offering someone a prize to complete a task is a straightforward form of incentive. Offering them a prize to invent something that doesn’t yet exist is a little more complicated.” This interview with open innovation expert Cristin Dorgelo offers an inside look at the 21st-century push for prizes and challenges within the federal government.
Why We Didn’t Get a Malaria Vaccine Sooner. (Works in Progress, 2023) The slow pace of development for a malaria vaccine is a tragic example of how lack of alignment in financial incentives and urgency hampered the fight against a disease that causes 600,000 deaths a year. Taking lessons from history, this long-form article explains how advanced market commitments could be used to stimulate investment and overcome barriers to solve today’s global health challenges.
How Advance Market Commitments and Contracts for Difference Can Help Create a Market for Green Industrial Products. (World Resources Institute, 2023) Emerging technologies have the potential to decarbonize the industrial sector but often lack the financing needed to commercialize. This resource considers how AMCs and contracts for difference — contracts that pay the difference between a predetermined price of a product under development and the market price of that product when it’s ready for sale — can work together to accelerate climate adaptation.
Procurement as an Instrument of Policy: Novel Approaches to Climate Challenges. (Federation of American Scientists, 2022) This article summarizes a roundtable that brought together climate and procurement experts to discuss how the federal government can use strategic purchasing to overcome market failure and help scale innovative climate change solutions.
Advancing Learning Technology through Pull Mechanisms. (National Archives, 2014) The White House Office of Science and Technology Policy issued a request for information, inviting the public to share ideas for using pull mechanisms to accelerate the development, rigorous evaluation, and widespread adoption of high-impact learning technologies. The archived RFI outlines opportunities in K-12 education and includes a succinct overview of pull mechanisms. (Shortly after comments closed, Ed Prizes launched.)
Power Tools for Progress. (National Archives, 2011) When serving as the Deputy Director for Policy in the White House Office of Science and Technology Policy, Tom Kalil gave a speech on how foundation investments in advance market commitments, as well as prizes and challenges, created new “tools” and also informed government policy.
