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Yesterday, the Design Council and the Department of Health announced the winners of a competition to improve the lives of people with dementia. The five different projects will receive, in total, £360,000 with estimated savings to the NHS of £500m.

Bargain? Yes. State subsidisation is important in the early stages of any new technology as costs are usually too high for commercial ventures. In the past, new technologies would usually be subsidised through the execution of war or, in the example of steam ships, expanding the influence and power of the state. There are lots of people, predominantly on the right, who argue that the state should not pick winners or losers as it undermines competition.

Competition does occur in subsidisation. The competition of contracts, for example, help launch the steam ship age and hurried its acceptance as a dominant technology, and launched the successful business of P&O.

However, subsidies should have an end point otherwise the subsidised industries end up losing the innovation that they were lauded in having when the subsidisation started – example, Royal Mail. They end up being bloated, monopolistic and, usually, inefficient.

The ideal way to carry out subsidisation is perhaps to look at nature for inspiration. Intensive subsidisation in the embryonic stage, with weaning off state support once they are at a stage to go it alone and survive or die as the market dictates.

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