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March 19, 2010; New York Times | Instead of grants, a growing number of public-spirited wealthy people are offering philanthropic support for notable causes and ideas in the form of prizes. The New York Times reports that some $375 million in prize money is available each year.  Along with the growth in numbers and sizes of awards, these prizes are shifting from recognizing “past accomplishments”‘ to providing cash to be applied to support future accomplishments.

Former entrepreneurs turned philanthropists are particularly attracted to these kinds prizes. “There’s an increasing recognition that setting up prizes is a good way to spur innovation and bring about the outcomes they want,” said Tom Riley, vice president of the Philanthropy Roundable. “Fortunately, money is a great tool to bring about the outcomes you want.”

An example is the Kravis Prize, set up five years ago and offering $250,000 to nonprofit groups around the world whose recognition might help them expand their outstanding work.  This year’s winner, Pratham, educates children in rural India. The money is being awarded to the group with some hope that this attention will garner more money that will enable Pratham to serve even more children.

Prizes versus traditional grant awards do have their unique set of challenges, according to some observers. Some fret about the cost of promoting a prize so that it draws enough worthy entries. “If you give a prize and no one knows about it, it’s a waste,” said Melissa A. Berman, president and chief executive of Rockefeller Philanthropy Advisors. “Getting it known costs money.” Others worry that prizes might create expectations that can’t be delivered.

That’s why philanthropic prize advocates suggest the better the defined the better they are. The Times describes the X Prize as the “best-known new example” of an incentive award program for achieving a specific goal. It awarded $10 million in 2004 for the design of a new spacecraft. Maybe we need a prize to determine the best philanthropy prize.—Bruce Trachtenberg