carson on patents
25 Mar 2006A few days ago, Kevin Carson posted a pretty good evisceration of this post, among others, by Ron Bailey (who is quickly becoming the Hit&Run contributor I agree least with). A good part, posted without comment:
The one thing we can’t spend it [higher incomes –chris] on is cheaper health care, because the government patent system that Bailey loves so much outlaws competition in the supply of so much of it. (And as for the “higher incomes” that “we” allegedly have, Bailey must have a mouse in his pocket. Average hourly pay for nonsupervisory production workers hasn’t gotten any higher in thirty years. But I’m glad those CEOs have the burden of choosing between bigger McMansions and more gold-plated medical services.)
The title of his piece suggests that if we think healthcare prices are too high, we should consume less of them. But there’s a term for a market in which the seller sets the price without competition, and the only restraint on him is the consumer’s choice of how much to buy at that price: monopoly.
His defense of the amount of money spent on health care in terms of its value to us is rather lame. A lot of things are valuable to us, but when the supplier of them is able to price them according to how badly we want them, you know something fishy is going on. My life is valuable to me, and in certain hypothetical circumstances I’d pay a lot of money to keep it. But when somebody says “Your money or your life,” you can be pretty sure there is a gun involved. In this case, the gun is the patent system and the licensing cartels.
Wage growth for the middle class has been shunted into benefits. So income has been stagnant, but total compensation has risen.
It’s interesting to compare the obvious and manifest problems of the patent system with the genuinely and unavoidably staggering difficulty and expense of modern drug development, as described at e.g. In the Pipeline. If the drug companies are exploiting their patents to the hilt, with consequent massive distortions of the practice of medicine, and still barely staying afloat, maybe the system has reached a dead end.
Carson’s “money or your life” metaphor is misplaced, though. The pharmaceutical companies aren’t holding the gun, they’re holding the kevlar. Diseases aren’t cooked up in secret laboratories as part of a complicated blackmail scheme. If they shrug their shoulders and quit the business–which they have an absolute moral right to do–you still get shot. There is a profound difference between “injuring someone” and “failing to spend tens of thousands of years of work and billions of dollars in order to be in a position to prevent someone from being injured”. Blurring the distinction is irresponsible and dishonest, although regrettably common in discussions like this.