Using prizes to drive science

One of the many derivatives of the XPrize that continue to pay off (NYTimes via Instapundit):

An international competition to pave the way for a new generation of rescue robots was dominated by a team of Japanese roboticists who were students in the laboratory of a pioneer in the design of intelligent humanoid machines.

What's astounding is that the actual prizes aren't large compared to the innovation that is unleashed or the budgets at any state or province. What I'd love to see is a province or state that slowly reduces its grants in favor of tangible high profile scientific advances (it's an intervention that least disrupts private innovation).