by Laurent GUERBY
Wed Sep 20th, 2006 at 05:07:49 PM EST
From Marginal Revolution, Joseph Stiglitz writes on New Scientist (article in PDF):
Innovation is at the heart of the success of a modern economy. the question is how best to promote it. the developed world has carefully crafted laws which give innovators an exclusive right to their innovations and the profits that flow from them. But at what price? there is a growing sentiment that something is wrong with the system governing intellectual property (IP). the fear is that a focus on profits for rich corporations amounts to a death sentence for the very poor in the developing world. So are there better ways of promoting innovation? Intellectual property is different from other property rights, which are designed to promote the efficient use of economic resources. Patents give the grantee exclusive rights to an innovation - a monopoly - and the profits this generates provide an incentive to innovate. Recent years have seen a strengthening of IP rights: for instance, the scope of what can be patented has been expanded, and developing countries have been forced to enact and enforce IP laws. the changes have been promoted especially by the pharmaceutical and entertainment industries, and by some in the software industry who argue that the changes will enhance innovation. [...]
[...] Patents are not the only way of stimulating innovation. a prize fund for medical research would be one alternative. Paid for by industrialised nations, it would provide large prizes for cures and vaccines for diseases such as aIDS and malaria that affect hundreds of millions of people. Me-too drugs that do no better than existing ones would get a small prize at best. the medicines could then be provided at cost. In any system, someone has to pay for research. In the current system, those unfortunate enough to have the disease are forced to pay the price, whether they are rich or poor. and that means the very poor in the developing world are condemned to death. the alternative of awarding prizes would be more efficient and more equitable. It would provide strong incentives for research but without the inefficiencies associated with monopolisation. this is not a new idea - in the UK for instance, the Royal Society of arts has long advocated the use of prizes. But it is, perhaps, an idea whose time has come.
My (usual) comment on Marginal Revolution:
Henry, do you need government sponsored monopolies to encourage entrepreneurs to make and sell, say, pizzas? Oranges? Bottled water?
So, no once the formula is there, you don't need government incentive to mass-produce and sell drugs, as all products (on markets where the government does not screw the free markets with government sponsored monopolies), entrepreneur will compete to provide them at the lowest possible cost meeting regulations, and take appropriate really free market leveled margins. As Mike said.
Now the question is how to get the formulaes in the first place, and prizes might well be vastly more economically efficient than cumbersome and corruption generating "intellectual property".
To quote someone who cannot be accused of favoring non free markets:
Just to illustrate how great out ignorance of the optimum forms of delimitation of various rights remains - despite our confidence in the indispensability of the general institution of several property - a few remarks about one particuilar form of property may be made. [...]
The difference between these and other kinds of property rights is this: while ownership of material goods guides the user of scarce means to their most important uses, in the case of immaterial goods such as literary productions and technological inventions the ability to produce them is also limited, yet once they have come into existence, they can be indefinitely multiplied and can be made scarce only by law in order to create an inducement to produce such ideas. Yet it is not obvious that such forced scarcity is the most effective way to stimulate the human creative process. I doubt whether there exists a single great work of literature which we would not possess had the author been unable to obtain an exclusive copyright for it; it seems to me that the case for copyright must rest almost entirely on the circumstance that such exceedingly useful works as encyclopaedias, dictionaries, textbooks and other works of reference could not be produced if, once they existed, they could freely be reproduced.
Similarly, recurrent re-examinations of the problem have not demonstrated that the obtainability of patents of invention actually enhances the flow of new technical knowledge rather than leading to wasteful concentration of research on problems whose solution in the near future can be foreseen and where, in consequence of the law, anyone who hits upon a solution a moment before the next gains the right to its exclusive use for a prolonged period.
The Fatal Conceit: The Errors of Socialism, 1988 (p. 35) Friedrich von Hayek